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Daily Real Estate News | September 7, 2006
Delinquency Rate Soars on Home Equity Loans
Never in the history of the United States have so many home owners hocked so much of their biggest asset, hoping that rising prices would let them outrun their debt forever.
The resulting picture isn’t pretty. Last week, Moody's Investors Service reported that the delinquency rate in the home equity loan market rose 11 percent for the quarter ended in April from the same period a year earlier.
According to Moody's, delinquent loans now represent nearly 7 percent of the total existing pool of home equity loans.
"This is the 11th consecutive month that the home equity delinquency growth rate has risen," Moody's Ben Garber said.
The really bad news is that the more people who can’t pay their mortgages or home equity loans, the more likely it is that home prices will fall as they rush to sell the properties and get out of a bad situation.
"The home price drop-off has been aggravated by the rising inability of current and potential homeowners to fulfill loan obligations,” Garber says. "The rising rates of these delinquencies portend a period of nominal home price deflation, the extent of which will determine whether or not the U.S. economy will be able to experience a soft landing."
Source: The Dallas Morning News, Danielle DiMartino (09/06/06)
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