That would be more mortgage problems

If you want to believe the economy has hit bottom, don’t read any further.


OK, don't blame me.


Delinquencies and foreclosures set another record during the second quarter, as more homeowners lost their jobs. And, unfortunately, the evidence suggests that conditions are deteriorating on average.

More than 13 percent of American homeowners with a mortgage have fallen behind on their payments or are in foreclosure.

As shocking as that number is, the new bad news for the economy is that the mortgage meltdown has morphed into a new area—those borrowers previously considered safe.

The record-high numbers released Thursday by the Mortgage Bankers Association are being driven by borrowers with traditional fixed-rate mortgages, rather than the shady subprime loans with adjustable rates that kicked off the mortgage crisis. As of June, more than 4 percent of all borrowers were in foreclosure, while about 9 percent had missed at least one payment.

Loan delinquencies among borrowers with prime, fixed-rate mortgages grew from the first quarter to the second in all 50 states, with the biggest jumps in Wisconsin, Illinois, Utah and West Virginia.

And as America has so painfully found out this year, housing and unemployment problems can spread into many sectors of the economy.

Toxic Loans Topping 5 Percent May Push 150 Banks to Point of No Return.

So far this year, 72 lenders have failed, the most since 1992. But many more collapses lie ahead as increased loan defaults crush bank bottom lines. The Federal Deposit Insurance Corp’s (FDIC) confidential list of “problem banks,” stood at 305 during the first quarter. If these banks go, the FDIC will be snuffed out and taxpayers will be hit with another massive bill.

Banks with nonperformers above 5 percent had combined deposits of $193 billion. That’s almost 15 times the size of the FDIC’s deposit insurance fund at the end of the first quarter.

Like it or not, America is entering uncharted territory. The banking sector is the heart and core of America’s economy. It contains the pillars supporting the entire Anglo-Saxon economic model. And bad loans are tearing apart the banks. The outlook is grim. A second banking crisis could be on the way.