Third Wave of Foreclosures Looms

Welcome to what economists are calling the third wave of foreclosures. The New York Times reports that, with unemployment slated to rise into double digits from its current 8.9 percent, foreclosures among homebuyers with decent financial histories and prime mortgages are also going to rise. Mortgage defaults based on unemployment are expected to rise from 29 percent last year to 60 percent this year, according to Economy.com, and the number of delinquent prime mortgages increased by 473,000 to more than 1.5 million from November to February. Each foreclosure costs lenders $50,000, so additional foreclosures represent a serious financial risk. An Obama administration plan to spend $75 billion to incentivize mortgage servicing companies to go easy on troubled homeowners appears to be a drop in the bucket. A Treasury spokeswoman said the number of loans modified was between 10,000 and 55,000.