Ongoing Threat of More Home Foreclosures
In 2006, the housing boom in the US began to cool down and increasing foreclosure news is constantly heard from media networks. Many of today’s homeowner’s (maybe as much as 10% of them) simply cannot keep up with their payments.
Many of the foreclosed homes are tied to neighborhoods where subprime martgages were widespread. MS Foreclosures are just one example. Unfortunately this has led to a decrease in home values as well which just adds fuel to the fire. Additionally, state and most local governments were forced to cut back on their spending because the drop in the value of these properties sharply decreased their tax bases.
There were 3 different foreclosure signs that were observed by people involved in the market. First was the bailing out of property owners due to the plummeting prices of real estate. The secondary sign involved previous borrowers with expired introductory interest rates resulting to keeping up with a higher rate and the third one, which is currently beginning to build up, are the people holding prime mortgages and who have lost their jobs due to the economic meltdown and are now unable to pay on their mortgages. In fact, many of these people even have above average or good credit ratings (not for long though). It is expected that unemployment would contribute to almost 60 percent of mortgage defaults. Basically, more foreclosure news is expected to arrive this year.
According to an analysis made by New York Times in February 2009 (data provided by First American Core Logic), the number of prime mortgages that have delinquent payments exceeded 1.5 million with loans totaling to $224 billion. In that same month, the delinquencies on the even worse off subprime mortgages were as high as 1.65 million. In all, a total of $717 billion worth of loans were recorded in February – this is an increase of 60 percent from last year. These foreclosures spelled catastrophe for Wall Street due to the mortgage bonds that they are securitizing. These also lead to bank loses of hundreds of billions. (Note: Search on ‘forecloser‘ as well because it is a very common miss-spelling of foreclosure and is prevalent in the foreclosure news posts.)
The Obama administration announced in February that they will be spending $75 billion to save as much as four million homeowners from foreclosures through mortgage incentives and reduced payments. The effects of this plan are expected to be felt in the next coming months. Until then, we should brace ourselves for more foreclosure news that is looming in the neighborhood.
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