Translation: They're not paying their mortgages.
Another 4 percent have been delinquent for so long that they're now in the foreclosure process.
Yes, the process is flawed because the banks clearly aren't equipped to handle the numbers.
Yes, there may be some loans that could have been saved, but the vast majority can't.
Still lawmakers want to freeze all foreclosures to make sure all of them are fair because, as Speaker Pelosi writes, "People in our districts are hurting."
The question is, how much would a foreclosure freeze hurt the greater housing market?
I asked some mortgage mavens and got the following responses:
Josh Rosner, Graham-Fisher: With REO sales being a large part of supply we would see home prices artificially and unsustainably rise, foreclosure volumes paint a false picture of stability and investors in MBS would be further harmed as their losses grow. Once the moratorium ended prices would fall and foreclosures would skyrocket. But, it would paint a prettier picture than reality heading into mid-term elections.
Guy Cecala, Inside Mortgage Finance: Instead of having a ton of mortgage borrowers who haven’t made any payments in at least a year, we would have a ton who haven’t made a payment in a year-and-half. Keep in mind we will have new problem loans entering the system throughout any moratorium whether we acknowledge them or not. Do we seriously believe that a foreclosure moratorium can change the outcome of potentially 5 million or more homeowners losing their homes over the next two years? Ultimately, if we don’t do something to handle distressed properties more efficiently (and faster), the housing market is going to remain stuck in limbo with no recovery in sight.