Specifically, the national average on 60 day delinquencies for car loans is .81%, while the 90 day delinquency average for credit cards is 1.10%. Although these are relatively small percentages in this current economic situation, the most staggering number is the delinquency on mortgages at 6.25%, almost six times higher than the other loans.

Not surprisingly, the states that have been hardest hit with foreclosures, bankruptcies, and unemployment also have the most delinquencies. Nevada, which boasts the highest number of personal bankruptcy filings in the country, also has the largest number of mortgage delinquencies at 14.53%. The credit card and auto delinquencies are also higher than the national average, at 1.98% and 1.16% respectively. Florida is not far behind, with its mortgage delinquency rate at 13.34%. Florida, however, has better statistics for its auto and credit card delinquencies, at .99% and 1.47%, respectively.

Why is this trend in the way people make payments occurring? According to the Director of Consulting and Strategy for TransUnion, “Consumers recognize that their credit cards are their primary purchasing vehicles in this economy.” Using this logic, it appears that people, who are unemployed, want to maintain a good relationship with their credit card companies as they find themselves using these same cards for everyday necessities, such as food, paying utilities, clothing, and gas. Additionally, people find that they need their cars to go to jobs or to interviews for a job, and as such, do not want to have their vehicle repossessed. Individuals, in these situations, cannot afford to have these cards or cars taken away, as they provide for their basic needs. Their homes, however, do not hold the same weight.

Aside from individuals needing to use their credit cards and vehicles, they are also reluctant to pay their mortgages on time because of the lack of equity in their homes. People can see the value in their credit cards, paying for food, and their cars, getting to them work, but they cannot see value in a home, in which they owe 20% more than what the home is currently worth. Instead, individuals would rather have a home foreclosed on and continue to keep food on the table. Additionally, more and more individuals care less about a foreclosure remaining on their credit report for seven years. They simply rationalize that they will not own a house for a couple of years and rent instead. Until the housing markets rebounds for a number of consecutive months and unemployment reverses, it is likely that this trend will continue and even increase. It is not hard to understand, however, as people without jobs simply want to take care of their family, food, clothing, etc., and credit cards supply them with that opportunity.

Because there is generally no financial aid for homeowners facing foreclosure, many mortgagees are unable to defend their homes from bank actions.  Chapter 13 bankruptcy can stop a foreclosure, but it ought not be a homeowner's only recourse.

Mortgage modification programs, loudly touted by mortgage industry lobbyists fighting legislation in Congress that would allow bankruptcy judges to modify the terms of a mortgage in a bankruptcy, have done little to stem the tide of foreclosures.  Time notes that the Boston-based National Consumer Law Center reported that many large banks and other mortgage servicers have decided it's cheaper to foreclose than to offer more affordable loan terms.

Because foreclosure in Florida requires court involvement, it is always in your best interest to seek legal counsel to discuss your options. Consumer firms like Clark & Washington offer no-cost consultations, while firms that specialize in foreclosure defense may charge a nominal fee. Either way, do not assume that you have no choices and do not wait until the last minute before acting.

It is unclear exactly how the Fed's policy will be implemented, or when regulations and procedures will be published.    Further, according to the AP story, the amount of mortgage securities in question, valued at up to $74 billion, pales in comparison to the $1.75 trillion in outstanding risky loans, according to trade publication Inside Mortgage Finance.

It will be interesting to see if the Federal Reserve policy has any signfiicant impact on the foreclosure or bankruptcy rate.

Needless to say, advocates for the mortgage industry are not happy about this prospect.  They envision a situation in which homeowners turn to bankruptcy to rewrite unfavorable mortgage loan terms and they fear a slippery slope in which the mortgage securities market becomes unstable because of a lack of certainty regarding the value of a mortgage backed security.

As a bankruptcy law firm, we see many situations in which the onerous terms of a mortgage note limit the scope of relief that a debtor can obtain.  Further, bankruptcy loan term modifications are commonplace in automobile, furniture, jewelry and other commerical loans, without causing havoc in those industries.

Despite the limited scope of this relief, President Bush has stated that he will not sign any change to the bankruptcy law that would give bankruptcty judges the power to modify mortgage loans.  We will keep an eye on this very controversial topic and report any significant developments.