Foreclosure Crisis: Stealth Stimulus for Defaulters

I've said before all this free housing expenses add to the personal consumption bubble.  This adds to the economy possibly misleading actual and sustainable consumer spending

While delays in the foreclosure process are costing bond holders and mortgage servicers, defaulting homeowners living in–or even renting out–their homes are getting a pretty tidy subsidy, writes the WSJ’s Mark Whitehouse in today’s paper. That subsidy is worth about $2.6 billion a month, according to a WSJ analysis. That’s .25% of U.S. personal income, roughly equivalent to the benefit top earners receive from Bush-era tax breaks.

Will any of that money find its way back into the economy, as a stealth stimulus? It’s hard to say, writes Mr. Whitehouse. Some defaulters save their mortgage payments in the hopes that a mortgage modification will finally come through, others who have lost their jobs just need the money to keep on going–for food, car payments and the like.

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