ave seen the light at the end of the mortgage banking recession tunnel. [/b]Unfortunately, that light belongs to an oncoming train. Last month, the national unemployment rate hit 9.5%, which is a 26-year high. The Federal Reserve has forecast that number will inch into the double-digit range later this year. Parts of the country are already experiencing their own double-digit unemployment rates, and there is no near-term sign of abatement. Of course, the unemployment figures don't take into account those who are remaining on their jobs after swallowing a variety of cuts to their salaries and benefits. The statistics also don't take into account people who are scraping by on part-time or freelance assignments. These people may be working, but they are taking home less money and taking on more expenses, such as healthcare. The disastrous spike in unemployment figures will have a harsh impact on the health of mortgage banking. As more people lose their jobs, two key problems are going to emerge. First, we can expect to see an increase in home sales and foreclosures. This should not come as a surprise, since this decade has been remarkable for its acute lack of new job creation. Following the last recession in the 2001-2002 period, the national economy re-emerged without a new wave of well-paying jobs. The lucky ones among the newly unemployed will be able to sell their homes, which is no mean feat in today's housing market. However, it is easy to presume that many of the newly unemployed will be forced to go into foreclosure if they are unable to secure new employment that meets or exceeds their previous earning power. The second problem from this situation will be a slowdown in new-home purchasing. Clearly, people who have lost their jobs are in no position to buy houses. However, job security has become an elusive commodity, and it is not hard to imagine that people who are worried about the fate of their livelihoods will not be in the market for a six-figure house. These concerns will echo points I raised in the new August edition of [b][i]Secondary Marketing Executive[/b][/i], where two new studies showed the dream of homeownership being replaced with the nightmare of recession reality. I cited a recent study by the National Foundation for Credit Counseling, which found that one-third of American adults believed they would never be able to afford a home, and a Center for Housing Policy study that charted how people living in more than 200 metropolitan areas and working in 60 different professions considered themselves unable to consider homeownership. Ironically, one class of workers that was completely shut out of the home market was the one that comprises the home construction trades: laborers, carpenters, equipment operators and long-haul truckers. It would be impractical to imagine that the housing and mortgage banking industries can recover while unemployment lingers in the double-digit range and the existing job market percolates with fear and uncertainty. It doesn't matter how deeply interest rates are cut or how much of a buyer's market exists today – if people are afraid of losing their jobs or if they are already in the unemployment office, the last place they are going to visit is a lender's office. What can the industry do about the state of unemployment? At the moment, not very much. After all, the financial services industry was among the first to begin massive layoffs at the start of the current crisis – we are part of the problem. What we can do, however, is be realistic about what is happening around us and respond accordingly. I am sympathetic to the servicers who will have to deal with this new wave of financially distressed homeowners – this will not be a fun assignment, and I hope that some sort of fair arrangement can be made in view of the extraordinary economic situation that the country is facing. What is your view on this subject? Feel free to e-mail me or leave your comments on this page – I am interested in hearing what the members of the industry think about this. – Phil Hall, editor, [b][i]Secondary Marketing Executive[/i][/b]. [i] (Please address all comments regarding this opinion column to hallp@sme-online.co
