By BECKY GILLETTE
MBJ Contributing Writer
4becky@cox.net
Mississippi is at the top of a list that is troubling news for the state economy. The Magnolia State currently ranks number one in the country in the rate of mortgage payments that are past due.
In the fourth quarter of 2007, Mississippi had 11.07% of loans with installments past due, nearly double the national average of 6.31%. The next highest was Michigan with a delinquency rate of 8.97. Wyoming, North Dakota and Oregon had the lowest rates at about 3%.
Marianne Hill, senior economist for the Mississippi Institutions of Higher Learning, says delinquency rates in Mississippi are high largely for the same reason they are rising in most of the country: Borrowers in the subprime mortgage market are not able to meet the higher payments as their adjustable rates rise.
Sign of a recession?
Is this more evidence of a recession in the economy? A recession refers to a decrease in economic output and employment. Hill says the housing sector is an important part of the economy, and nationally, according to many economists, the downturn in the construction and purchase of homes has led to a recession.
“This can only be confirmed after the data comes in, but there is general agreement that the data will show at least a brief recession in the first half of 2008,” Hill says. “Due to the high levels of construction activity related to Katrina, the slowdown in construction employment here still leaves us with more construction activity than before 2005.
Although Mississippi had the highest delinquency rates, it didn’t have the highest foreclosure rates. The highest foreclosure rates were seen in Nevada, Florida and California. There are other states with higher rates of seriously delinquent mortgages and with a higher start rates of new foreclosures. However, Mississippi is among the top 11 in both categories.
Considering Katrina
A two-year moratorium on home foreclosures that went into effect in the southern part of the state after Hurricane Katrina expired in October. Hill says since the fourth quarter data for 2007 appears to be based on data available at the start of the quarter, which means that the full effect of the end of the moratorium has not yet been felt.
Mississippi Banking Commissioner John Allison says it will take a while after the lifting of the Katrina moratorium before foreclosures make it through the legal process.
“I had one commercial banker tell me because there are a lot of foreclosures out there, the attorneys who handle it are backlogged,” Allison says. “So, getting a foreclosure through the process is taking a while longer.”
There is concern the insurance issue could be causing people to lose their homes on the Mississippi Gulf Coast. Allison says many people can’t afford the insurance to rebuild, and can’t get a mortgage financing without insurance. Insurance on a $135,000 house might cost in the range of $400 to $500 per month.
Another issue he thinks is at play is that with real estate values going up, some people took equity out of their house to pay off bills. Now the credit cards are maxed out again, and the homeowner can’t afford to make payments.
“It isn’t just one thing we can hang our hats on,” Allison says. “Part of it is financial literacy, managing money. There are the disaster areas. And there were people taking out subprime loans not understanding what they were getting into. There are all kinds of exotic products in the market.”
But, Allison is optimistic the situation will be resolved.
“Real estate is resilient,” he says. “It does bounce back. Hopefully people are in it for the long run. They will get their values back and everything should be okay.”
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