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4.4 Million Squatters?

Charles Smith at Seeking Alpha has an interesting post estimating that the number of people living in their homes but not paying their mortgages — people delinquent on their mortgages, people in foreclosure, strategic defaulters and others — might be as high as 4.4 million. He uses FDIC and Foresight Analytics data to extrapolate:

14 percent of the approximately 52 million residential mortgages outstanding in the U.S. were delinquent in the first quarter. This amounts to 7.3 million mortgages. Only 5.5 percent were on nonaccrual status, however. This amounts to 2.9 million mortgages. Nonaccrual means the lender is no longer posting income on the loan. Depending on the length of time the loan has failed to accrue, foreclosure proceedings may have already begun (with eviction to follow at some point), but not necessarily. Assuming that all loans on nonaccrual status represent vacant properties, it means at least 4.4 million (7.3 – 2.9 = 4.4) are occupied by people who are not paying for them, for whatever reason. This number has increased by 3 million since the end of 2007.

I’ll note that if we presume that each household contains around 2.5 people (I don’t know whether households in foreclosure tend to be bigger or smaller than others), that works out to 11 million people. Other “squatter” estimates are similarly big. Moody’s Economy.com has guessed that 6 million people continue to live in their homes during delinquency or foreclosure, and a further 1 million are undergoing mortgage modification. Regardless of the exact count, it underscores the severity of the ongoing foreclosure crisis and the parlous state of the housing market — as well as the need for Congress to press for principal reduction.

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