13.16% of all residential mortgages are in trouble.

With about 51 million houses with mortgages in the country, that means 6.71 million bad mortgages out there.

With the number of people out of work still rising, the problem is likely to continue to get worse for quite a while according to an article on the investing blog site Seeking Alpha.  At the end of the second quarter, 4.3% of all residential mortgages were in some part of the foreclosure process, up from 3.85% at the end of the first quarter and 2.75% a year ago. In addition, on a seasonally adjusted basis, 9.24% of all mortgages were delinquent (behind by at least one payment), up from 9.12% at the end of March, and just 6.41% at the end of June 2008.

Both were records since the Mortgage Bankers Association (MBA) started keeping track back in 1972. On a non-seasonally-adjusted basis, the delinquency rate was not quite as bad at 8.86%, but still a record.

The chief economist for the MBA expects that foreclosures will not peak until the end of 2010.  I suspect he might be a little bit on the optimistic side, but that projection is reasonable. If someone is also in a house where the value of the house is less than the amount of the mortgage, the probability that they will continue to pay the mortgage falls rapidly.

If they are also out of work while they are underwater, then continuing to pay their mortgage is simply not an economically rational thing to do.  Far better to simply live rent- and mortgage-free until the sheriff shows up at the door. Given the overwhelming case-load, that can often be well over a year (though it varies greatly by location).

What should you do if you cant pay your mortgage?

If you are having trouble and need help to pay your mortgage, you first need to contact your loan servicer. This is the company that you make your monthly payments to, not always the same place you got your mortgage home loan. Have your loan number and property address ready when you call, along with any other important documentation you may have. When you call, you will need to give them a brief explanation of your current circumstances, recent income documents (such as pay stubs; benefit statements from Social Security, Disability, Retirement, or Public Assistance and unemployment benefits), and bank statements and tax returns for past 2 years. If you are self-employed, have your tax returns or a year-to-date Profit and Loss statement available for reference.  To see all your options, read our article on What To Do If You Need Help To Pay Your Mortgage.

Tagged as: Foreclosure, home loan, Mortgage

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