If You Don't Have a Job, How Will You Pay the Mortgage

Ilyce Glink

Each week, I receive dozens of letters from readers. The vast majority of them are in trouble financially, mostly because they've lost their job and can't pay their bills.

I get the sense from reading these e-mails that each of these homeowners wishes desperately he or she could rely on a paycheck each week. The anguish comes through as they describe their dearest wish: to get caught up with their mortgage payments and continue living their lives.

As we pick through the rubble of this recession, it's easy to stumble on the idea that it's over and done with. The big banks on Wall Street are reporting record profits and setting aside astounding numbers to pay bonuses that are three times as big as the median home price.

The stock market reached 10,000 in mid-October, up more 50 percent from the low in early March. It's less frightening to see stock market down 25 percent from its all-time high than down 47 percent.

But then there are the persistent monthly job losses that make me wonder how those who are unemployed or underemployed and are behind in their mortgages will make up the difference.

Although net job losses were slightly down (in a recent week), more than 200,000 jobs are still being lost in this country every month. It's a crazy number, and it is profoundly affecting the real estate market.

It's easy to see why RealtyTrac's Rick Sharga says the record number of foreclosure filings in the third quarter of 2009 is employment-driven. If you don't have a job, you'll use every scrap of money you have to stay current on your bills while you desperately hunt for employment. You'll use your unemployment benefits to pay for your mortgage, and when it's a choice between food and mortgage, you'll go delinquent. If you're delinquent long enough, the lender will start foreclosure proceedings.

The national unemployment rate is expected to rise above 10 percent and then stay above 9 percent for a while. But in plenty of cities and states, the official unemployment rate passed 10 percent a long time ago. The unofficial rate of unemployment is far higher.

When it comes to foreclosure, the problem isn't just the 7.2 million jobs that have been lost during this great recession. There are millions of Americans who took a huge pay cut to keep their companies going. Unpaid furloughs and 10 to 25 percent pay cuts mean tens of millions of Americans are having a much harder time paying their bills -- and their mortgages are at risk as well.

It's unlikely their employers will automatically bump their salaries back to where they were before the collapse of the economy. So, they'll have less to spend going forward.

On the expense side, this week's news is about how consumer prices rose more than expected last month, and about how milk prices are about to soar. We're paying $75 for a barrel of oil versus $150 per barrel last summer, but I just paid over $3 per gallon for gasoline on a recent trip to California.

You'd think a few pennies here or there wouldn't matter much -- but they do to most Americans.

The hangover from this recession isn't going away any time soon.

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Real Estate | Unemployment and Foreclosure: If You Don't Have a Job, How Will You Pay the Mortgage