Income problems cited in home loan defaults

04.26.09
By Nicholas Storie

Unemployment, salary freezes and other income woes are clearly among the effects of the recession that are having the most profound impact on American families.

With less money available, many households have to choose between paying the mortgage, the bills or credit card debt.

In a report presented to Congress earlier this week, the Federal Housing Finance Agency revealed that 34 percent of borrowers who defaulted on a Fannie Mae or Freddie Mac home loan said a drop in income was partly to blame.

Meanwhile, nearly 20 percent said that debt had played a role in their inability to pay their mortgage, while 8 percent cited unemployment directly.

Illness in the family was mentioned as a reason by 6.5 percent of those who defaulted on a home loan, while marital difficulties were cited by 3.5 percent.

Fannie Mae and Freddie Mac modified approximately 24,000 home loans during the fourth quarter of 2008, according to the report, which sought to update Congress on the progress of the FHFA's homeowner assistance efforts. This figure represented a 76 percent increase over the previous three months.

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Many households have to choose between paying the mortgage, the bills or credit card debt.