Mortgage delinquencies have risen in nearly all US congressional districts from the levels of the last election, highlighting the political pressure on US policymakers as they gather in Washington on Tuesday to tackle the housing crisis, reports FT. In the average congressional district, serious mortgage delinquency rates – defined as borrowers more than three months behind on their payments – are 9.4 per cent, compared to 3.3 per cent at the time of the election in 2008, according to a study by Deutsche Bank.
The intensifying mortgage problem has many complex inputs, at the forefront is the business cycle itself and government encouragement of many to buy homes they couldn't afford. Another factor that certainly plays a role is the government promise to pay some mortgages if you fall far enough behind. Encourage people to fall behind in their mortgages and that is likely what they will do.
Here a key requirement for the government to step in and pay your mortgage:
....eligible borrowers must:
1) Be at least three months delinquent in their payments...
Pay somebody to be three months delinquent on their mortgage payment and that is exactly what they might do.
This is all further evidence of how government actions extend the duration of a downturn and prevent the economy form readjusting away from Fed induced easy money distortions in the economy. If someone is not capable of making outsized mortgage payments, then that person belongs in bankruptcy court and relieved of his debt obligations, which will free him to find a housing he can afford. Such person will feel better, without the dread huge monthly mortgage payment, and the economy can move on. Temporarily paying a person's mortgage only prolongs the agony for the person and the economy.
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