As Unemployment Grows, So Do Foreclosures

The country's growing unemployment is overtaking subprime mortgages as the main driver of foreclosures, according to bankers and economists, threatening to send even higher the number of borrowers who will lose their homes and making the foreclosure crisis far more complicated to unwind.

Economists estimate that 1.8 million borrowers will lose their homes this year, up from 1.4 million last year, according to Moody's Economy.com. And the government, which has already committed billions of dollars to foreclosure-prevention efforts, has found it far more difficult to help people who have lost their paychecks than those whose mortgage payments became unaffordable because of an interest-rate increase. _WaPovia_News Alert

Unemployment is growing, and it is driving the steady rise in home foreclosures across the US. What started as a financial crisis driven largely by defaulting subprime mortgages, is turning into something deeper and much harder to repair.

Last year, about 40 percent of borrowers who sought help at NeighborWorks, a large housing counseling group, cited unemployment or a pay cut as a primary reason for their delinquency. Now it is about 65 percent. The number citing a subprime loan fell significantly.

"Rising unemployment, for the sake of this downturn, has magnified things considerably," said John Snyder, manager of foreclosure programs for NeighborWorks. "It's less about the payment adjustment."

When a subprime borrower becomes delinquent because of a hefty payment increase, the fix often involves lowering the interest rate to its original level. Unemployment poses a more difficult challenge, industry officials and consumer advocates said. During extended periods of joblessness, the borrower accrues large late fees that drive up monthly payments. And a new job often comes with lower pay, making it more difficult to catch up. _WaPo

Wags will try to dispel worry by telling you that "unemployment lags the stock market in a recovery." What they say is generally true -- unless, of course, it is unemployment itself which is driving the recession. In that case, it may be the stock market that lags unemployment -- on the way down.

Banks and financial institutions across much of the US are already in trouble, sucking up hundreds of billions of dollars of US government hijacked funds. And that sucking noise? It could be getting louder soon.

We are seeing what happens when investors and speculators use stimulus and bailout money to try to artificially jump-start markets -- and secondarily the economy. The great "recovery" appears to be fizzling out, for now. As ever more funds and resources are diverted from the private sector to the politically connected sectors (Obama supporters), the sucking sound keeps getting louder. And jobs continue being lost.

When a country is ruled by clowns and incompetent fools, the fundamentals of a sound economy are forgotten and ignored. A healthy economy is healthy from bottom to top. Artificial bubbles of the type Obama has been attempting to inflate, look good on paper if you can pull them off, but tend to suck wealth from the middle class and convey it to political insiders on the way to the upper class.