Looming Threat of More Foreclosures
In 2006, the housing boom in the US began to cool down and increasing foreclosure news has dominated the media ever since. Homeowners began to lose their homes or are threatened with foreclosures because they have failed to keep up with the payments on their mortgage.
Many of the foreclosed homes are tied to neighborhoods where subprime martgages were widespread. MS Foreclosure for example. Decreasing home values also contributed to the increase in number of these foreclosures. Add to that the fact that local government spending has also been cut way back because this decrease in home values has also resulted in a decrease in property taxes and their annual budgets.
There were 3 different foreclosure signs that were observed by people involved in the market. The first sign was the massive bailout of home owners that came. 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. Most of them even have good credit ratings. Unemployment is now forecast to impact about 60 percent of all of the mortgage defaults. Unfortunately, this means that even more foreclosure news will be heard through the rest of 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 4 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 7 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 new Obama administration has announced a plan to try and help as many as four million homeowners via a billion dollar spending bill. Unfortunately it may take months before anything ever comes of the plan and for many that will be too late. Until then, we should brace ourselves for more foreclosure news that is looming in the neighborhood.
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