Key Insights: The Mortgage Foreclosure Pipeline - Looking for a Turning Point
Keybridge examines the implications of an overburdened mortgage foreclosure "pipeline" on U.S. economic growth prospects.
In recent weeks, several major lending institutions have indefinitely suspended mortgage foreclosure activities amid concerns regarding documentation review and approval practices. The moratorium announcements are symptomatic of a mortgage foreclosure "pipeline" that has grown well beyond the bounds of both historical experience and institutional capacity. Although the foreclosure rate peaked in early 2009, analysis of the foreclosure pipeline indicates that the crisis has not yet reached a turning point. Rather, it has simply reached terminal velocity. The evolution of the foreclosure crises in the near term will be driven by a handful of factors, some of which will place additional pressure on the pipeline and some of which will relieve that pressure. In the absence of meaningful mortgage modifications that provide distressed families with enough breathing room for the housing market and broader economy to recover, foreclosure rates are likely to remain elevated in the near term — generating significant headwinds for the U.S. economy in 2011.
Washington DC 20007