Tuesday, February 06, 2007

More Middle Class Squeeze

Families Feel the Pressure as Mortgage Delinquency Rates Rise

By Christian E. Weller

December 14, 2006

America’s middle class is already burdened by a trifecta of economic pressures: the labor market is slowing, household debt burdens are reaching new record highs, and interest rates have been creeping higher for most of this year. Now comes a distressing new report from the Mortgage Bankers Association, which reported yesterday that delinquencies on mortgages rose sharply in the third quarter of 2006.

Delinquency and default rates on loans and personal bankruptcy rates are still at comparatively low levels—only 4.7 percent of all loans in the third quarter—but they have been rising rapidly over the course of this year. Other measures of financial distress are also pointing one way for American families—up. With all pieces of the trifecta staying in place, rising delinquency rates on mortgages may be the beginning of a trend toward more middle class financial insecurity.

The data on bankruptcy rates also show a worrisome trend over the course of 2006. Bankruptcy rates dropped precipitously in 2006 in the wake of large filings in 2005 just before the new bankruptcy law went into effect. However, from the first quarter of 2006 to the second quarter, the annualized personal bankruptcy rate, measured as bankruptcy cases relative to the U.S. population, grew from 1.2 in 1,000 to 2.0 in 1,000—an increase of 33.7 percent. The bankruptcy rate in the third quarter stood at 2.2 in 1,000, an additional increase of 9.6 percent in that quarter alone.

Middle class families are caught between low income growth, a high debt burden, and rising interest rates—and for the moment, these ingredients are here to stay. The most recent third quarter delinquency, default, and bankruptcy figures show that the dangers to middle class economic security are not theoretical concepts. They are a harsh reality for a growing share of middle class families.

Click on the title for the rest of the article.

For a discussion on what all of this means, see Mish's Delinquency Footnote #12


Teri said...

Meanwhile, the Dems, those champions of the middle class are concerned with how big a jet Pelosi can get (http://www.washingtontimes.com/national/20070207-123706-5963r.htm)

Teri said...

Let me try that link again It's here:

OkieLawyer said...


Josh Marshall over at Talking Points Memo is covering the Pelosi story quite a bit. Here is an entry where he deals with the Washington Times in particular.

Here is another entry.

And another.

And yet another one.

(Rant on)Personally, this is almost a non-issue with me. I think we have much bigger problems to worry about. I am worried that there is an attempt to create a sideshow to turn the public's attention from the real problems facing the country: Iraq, health care, debt and its related market issues. Housing prices have become inflated, the middle class has virtually no financial security, they are having to borrow at high-interest rates to pay for health care, the companies (and now government municipalities) that employ them are threatening to file bankruptcy and shirk their obligations for health care and pensions and virtual loan shark finance companies are popping up everywhere. There is an expectation that many people will start losing their homes due to the fact that they can't afford their inflated mortgage payments; and we are debating a plane ride?

I am just as opposed to government waste as anyone, but the scale of this scandal in comparison to what we saw in the last Congress is puny by comparison.

I do understand your point, and I somewhat share it. And I don't want you to feel that I am attacking you. I really appreciate all the comments you have posted -- including this one. But I am not going to get sidetracked over what plane Nancy Pelosi is going to take home -- especially if a lot of it is tied to security requirements due to her being the Speaker of the House. My real problem is with the tabloidization of the American press. We need more reporting on the pressing issues I have been blogging about.(/Rant off)