Foreclosures Caused by Unemployment
As the unemployment rate goes up, increasing numbers of American homeowners who used to have good credit are unable to meet their mortgage payments, creating a wave of new foreclosures and defaults. Although the collapse of the nation’s real estate market began with defaults on subprime loans, it is in fact the much more popular prime loans that are currently dragging down the market.
Economists are now predicting that the unemployment rate will continue to rise over the coming year, reaching even as high as the double digits from where it currently is, around 9%. Rates this high would likely exacerbate the situation banks are facing with losses, and add pressure to the economy as a whole. 
Foreclosures, in that case, are only going to get worse. This “third wave” of foreclosures, separate from the first two spikes of the economic crisis, features foreclosures on homeowners who are modest borrowers and whose loans originally fit their income just fine. Last year, only 29% of foreclosures were caused by unemployment- this year, it’s likely to be 60%.
A couple who took a thirty-year, fixed-rate mortgage (the standard for residential real estate) and originally had no trouble making their payments is not falling further and further behind because of unemployment.
Families in situations such as these would be well advised to try to ‘cut a deal’ with their lender and go for a loan modification.
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