A recent article on the USA Today website reported that American homeowners have managed to trim $100 billion off of mortgage debts over the past year.
Apparently, there are a number of contributing factors to the reduction of the US’s yearly mortgage debt, such as refinancing of mortgages, lower interest rates and homeowners choosing to default so they can reduce the amount they owe.
The amount of mortgage debt shaved in the last year, $100 billion, is equal to the amount that the US government pays in unemployment benefits every year.
Mortgage interest payments have also been trimmed down to just $67 billion annually, says the Bureau of Economic Analysis (BEA), which amounts to a reduction of almost 11% since 2008. The total amount of mortgage debt also hit its peak this year; $11 trillion, which has since been slashed down to only $10.3 trillion.
According to Micheal Frantantoni, a Mortgage Bankers Association economist, “Homeowners are bringing their debts down by putting cash on the table, which allows them to qualify for the lowest rates.”
“This is a big change from what we saw in the housing bubble, when buyers were taking out mortgages that left them with money to spare.”
Still, while the US overall is seeing its mortgage debt situation improving, things are not looking so bright for many American homeowners. Nearly 9% of borrowers still face huge problems meeting their mortgage debts and cannot meet payments, while another 4.6% remain threatened with foreclosure.