Mortgage Delinquencies Rise, Health Care Costs Rise

Yesterday I passed on the terrible news that the jobless rate rose to it’s highest level in 5 years. But, that is only one part of the economy. Other indicators that the economy is not so good, is the number of foreclosures, which rose 9% in the second quarter.

The share of mortgage borrowers who fell behind on their payments or lapsed into foreclosure climbed to a record 9 percent in the second quarter as problems spread to borrowers with good credit, the Mortgage Bankers Association reported yesterday.

The pain is concentrated in a few states, most notably California and Florida, which account for one in five outstanding mortgages. About 39 percent of all new foreclosures in the quarter took place in those two states, which had some of the frothiest markets during the housing boom. Most other states saw little change in new foreclosure filings, and a few — Texas, Massachusetts and Maryland — experienced improvements, according to Jay Brinkmann, the group’s chief economist.

Now, not all of those foreclosures are subprime mortgages.

As for new foreclosures, 36 percent were subprime loans and 23 percent were prime. For prime borrowers, the biggest problems surfaced among adjustable-rate loans with low teaser rates that later spiked. In some cases, borrowers paid only interest on those loans or they could pick the size of their monthly payment.

Meanwhile, it appears that Fannie Mae and Freddie Mac may be nationalized.

The government has formulated a plan to put troubled mortgage giants Fannie Mae and Freddie Mac under federal control, dismiss their top executives and prop them up financially, federal officials told the two companies yesterday, according to three sources familiar with the conversations.

Under the plan, which could prompt one of the most sweeping government interventions in financial markets in U.S. history, federal officials would place the firms under a conservatorship, a legal status giving the government the option and time to restructure and revive the companies, the sources said. The value of the companies’ common stock would be diluted but not wiped out, while the holdings of other securities, including company debt and preferred shares might be protected by the government.

Instead of giving each company a big capital infusion upfront, the government could make quarterly injections as the companies’ losses warrant, the sources said. This would be an attempt to minimize the initial cost of the rescue.

Which could be a good thing, and one of the more progressive steps our government could make. But, that depends on the manner in which the government bail-out is structured, as Chris notes, it will probably be acorporate-welfare-bailout.

Finally, earlier this week, a story I missed at the time, does not inspire confidence in the health care industry, and is another nail in the proverbial coffin that is everything that is wrong with employer-driven health care insurance — employers will be passing on higher costs to employees.

Get ready for another hike in copays and deductibles. A survey being released Thursday by the Mercer consulting firm found 59 percent of companies intend to keep down rising health care costs in 2009 by raising workers’ deductibles, copays or out-of-pocket spending limits.

On average, health care costs will go up by an estimated 5.7 percent next year for both workers and their employers, the study found. That repeats this year’s 5.7 percent hike and a 6.1 percent jump in 2007.

When Bush, and the then the GOP echo machine, said that each person should be held responsible for determining their health care, it never meant don’t go to the doctor because you can’t afford to.

The one thing I need to note is that all of these things that have seriously impacted people’s lives all come from the GOP’s mismanagement, and the deluded notion that free markets promote competition. As these reports show under GOP leadership, more people are hurt.