Mario Burgos

Clear thinking and straight talk from the top of a mountain.

Monday, April 05, 2010

Is the Worst Behind Us?

On April Fools Day I received an email newsletter from David Murphy of Salestraq, which unfortunately wasn't an April Fools joke. In it, he tells anecdotes of people he knows who have not paid their mortgage for 11 months and yet have not been foreclosed by their financial institutions. That's pretty scary in that it means there is potentially a second shoe yet to fall.

And, the link he provides to the dynamic TransUnion Data Map seems to confirm that the worse is not yet behind us. It shows the national average 60-Day mortgage delinquency rate at 6.89%.  But, if you factor in many people are not being foreclosed that are significantly beyond this, it is not unreasonable to expect this to get much worse before it gets better.

The other thing that jumps out at anyone looking at the TransUnion map is that credit card defaults are much, much lower with the 90-Day Delinquency rate at 1.21%.  That really doesn't make sense when you think about it. So, where does this leave us?

Well, we already know that the state, despite its recent special session to deal with budget shortfalls, is still in trouble:


Revenue collections for the current budget year are running $76 million below what had been anticipated, according to the Legislative Finance Committee.       

That spells potential trouble for public schools, colleges, courts and state agencies, although it could be July or August before it's clear if weak revenues will force more budget reductions.   

If revenues fall short for the fiscal year ending in June, then New Mexico's cash reserves must make up the difference to balance the budget.
Those reserves are the state's financial safety net. 

Now, consider that mortgage foreclosures mean less property tax revenue collected, and if unsecured debt defaults increases it means less consumer spending and lower GRT. On top of all this consider that unemployment in the state continues to increase, and I hate be all doom  and gloom, but I don't see how this means the worse is behind us.

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