One Million Homes Now in Foreclosure

[lyngraphics]

http://www.foxbusiness.com/story/update--mortgage-foreclosures-reach-record-high/

[sherrimae]

That sounds like a big number, but according to a friend of ours who works in the business, only about 1% of all homes are in foreclosure.

[Glory]

It's almost unbelievable, isn't it? And how many more will there be as things grow even worse?:tsk

[jds6958]

That sounds like a big number, but according to a friend of ours who works in the business, only about 1% of all homes are in foreclosure.

You have to consider cycle time. That 1% now is not the same 1% 3 months from now. 1% at one given time is huge.

[Rebekah]

We have to remember that there are multiple reasons for homes being in foreclosure.

Yes, some are situations of job loss, death of a wage earner, divorce, hard economic times, etc. However, others are due to people knowlingly securing interest only loans, adjustable rate loans, and/or those who knowingly purchase a Neiman Marcus house on a Wal Mart budget. Of course the mortgage companies that allowed such purchases didn't help the situation.

My whole point is that there are several factors at play here, and that while it is bad, it is not as bad as it seems.

[RebMel]

Let's see: if the average home cost 100,000 x 1,000,000 defaults = 100,000,000,000 (100 Billion) in bad debt.

[lovinlife4]

There have been 4 foreclosures on our street alone. We live in a little, close knit suburban neighborhood full of families and middle class incomes. The 4 are since February and there are 2 more about to foreclose. We are taking our house off the market since the appraisals are going downhill. We'll re-list when the market picks up, hopefully next year.

[Jubilee21]

My understanding is that there are approximately 1.5 million homes out of 80 million homes sols between 2001 and 2007 with sub-prime mortages, withover 40% financed during the last two years of that period.

And it was the factor of the extreme overpricinf ( inflation) of these homes sold at very low interest rates but with unprescedented prices ( over-inflated mark ups) of the housing bubble that is affecting the majority of both groups of owners homeowners.

In effectgroups bought homes that were very over priced..and many for investment purposes, were in roll over schmes to make huge profits..so those who had "good credit" and bought a lot of property atthose very high prices are also another group on top of the subprime sector..and this pushes up the percentage of the housing market in trouble..out of those 80 million homes

then all those home buyers that bought those over inflated priced homes between 2003- 2007 made up as much as 40% of the housing market..hence the actual pictire of the home owners at risk and an actual rate of 3-6% foreclosure rate pending is more realistic...based upon over 1/3 to 1/2 of all the homes sold between 2001- 2007, and based upon over 305of all the homes sold between 2001 -2007 being at risk out of 80 million homes

That IS the problem...not the number of home owners but the number of homeowners who got into the subprime financing but also the homes that were sold at as much as 45% over the real market valuse as it applies to the banks who financed these homes..:idunno

all of these folks also participated as well as the other homeowners to some degree of getting into the borrowing against their homes values at the extremely over inflated mark ups of their homes, at a rate of over 20%..in some cases higher ..and now their homes are leveraged with this debt as the market value has dropped betwen a rate of 25% to as much as 30% for the majority of those 8o million homes..does this make sense and make the picicture more clear of the implications perhaps?

this a great site and actually has charts that show how the financing worked and how this translated into the debt the banks now own and how they are are in dire trouble over it..keeps the cookies downon the low shelf so anyone can wrap their minds around it..and shows the problem,,best not to look at it if you are already experiencing disaster fatigue..because its painfully honest:fear

OK, let’s be optimists. Let’s say that the Fed somehow balances on the tightrope and dodges major recession through pumping the system full of new money, without triggering higher levels of inflation. This will be amazing if they can pull it off – but stranger things have happened.

However, there is the separate issue of another powerful economic force at work, and that is housing prices that probably got way too high in a number of areas, and which many economists think might be in for a prolonged fall.

If this happens, then two major problems occur for subprime mortgage collateralized securities investors: the foreclosure rate rises, because the more negative home equity becomes for someone who is struggling to make payments, the more likely they are to say “forget it” and walk away from their property; and, following that (of course), the greater the losses per foreclosure for investors.

As illustrated in Scenario E above, if we say that the foreclosure rate rises from 15% to 20%, and in a market of falling values where few want to buy, the average foreclosure loss rises from 50% to 70%, then our annual total losses increase to $105 billion, or almost four times the current loss level under current conditions.



So, recession pushed our losses up by five times in our recession illustration (Scenario C), rising interest rates pushed up our losses by three times in Scenario D, and falling home prices pushed up our losses by four times in Scenario E. What if all three scenarios happen at the same time?

What happens if: 1) a significant recession does hit despite the Fed pumping the system full of money; 2) inflation does increase thanks to the Fed’s recession fighting efforts, meaning we now have stagflation; and 3) the drop in property values accelerates with the double whammy of people losing their jobs even while mortgages grow less affordable in markets that are still falling?

Or, if we want to look on an individual level, what happens to the chances of someone making their mortgage payments, when: 1) they lose their job; 2) their mortgage payments more than double in two years (since the initial teaser rate); and 3) they owe $50,000 more on their mortgage than the market value of their home?

Troubles can arrive in threes, and the triple whammy of recession, rising interest rates and falling property values can indeed come ashore one after another, like three great tsunamis hitting a beach, as illustrated above in Scenario F.

Let’s assume this three way combination means that foreclosure rates triple from 15% to 45% -- which may be a bit conservative for subprime borrowers, none of whom ever really had the money for the home in the first place, under conventional lending standards.

Let’s further say that the glut of distressed homes on the market, even as unemployment is spiking upwards and mortgages are growing both less affordable and less available, means that the fall in property values accelerates, and average investor foreclosure losses rise from 50% to 70%. As shown in Scenario F – just making those two (reasonable) changes to our assumptions means that subprime losses climb from $27 billion to $315 billion, an increase of almost twelve times!



http://www.financialsense.com/fsu/editorials/amerman/2008/0320.html

[felixthecat]

That sounds like a big number, but according to a friend of ours who works in the business, only about 1% of all homes are in foreclosure.

Exactly!

The majority of defaults are with new immigrants and illegals. This is being bllown way out of proportion. It happened because Congress passed LAWS forcing mortgage companies to not turn down folks unable to really afford a mortgage. These mortgage companies were required to offer a mortgage to those who never should have had one.

Here comes my sarcasm, you the taxpayer will now subsidize these folks through the government taking on this bad debt. Always remember the ONLY money the government has is the money it takes from YOU! We never approve greed and irresponsibility and subsidize that.

[felixthecat]

We have to remember that there are multiple reasons for homes being in foreclosure.

Yes, some are situations of job loss, death of a wage earner, divorce, hard economic times, etc. However, others are due to people knowlingly securing interest only loans, adjustable rate loans, and/or those who knowingly purchase a Neiman Marcus house on a Wal Mart budget. Of course the mortgage companies that allowed such purchases didn't help the situation.

My whole point is that there are several factors at play here, and that while it is bad, it is not as bad as it seems.

No doubt about it there are more factors.

Many bought homes they couldn't afford at the wrong time. Housing prices were on steroids. The mortgage company was happy to lend them money on an over valued house and the tax accesser was just as happy to collect more taxes. House flippers were having a field day to supply the demand and make a quick buck.

Now people have inflated house values, inflated mortgages, inflated taxes and the teaser rates are DONE. Now the higher interest rates are kicking in and they can't afford it. Buyers are required to READ the FINE PRINT with mortgages. If they agree to it, they sign off. Obviously they signed off. Some will be lucky and weather the storm. Others will not be so lucky.

What's the government doing about this?

Questions, Answers About Housing Crisis

Saturday, April 12, 2008

By TOM RAUM, Associated Press Writer

Q: How did things get so bad?

A: Tumbling house prices have left many borrowers owing more on their homes than the homes are worth. With little or no home equity, these borrowers cannot refinance. That means higher payments for people with adjustable-rate mortgages. Among those who are facing foreclosure or who have lost their homes are many borrowers who had questionable credit histories and who obtained risky subprime loans.

Rising defaults have contributed to a credit squeeze that has spread throughout the financial system. That has made it harder on first-time home buyers and people seeking to refinance. It also has affected a range of financial transactions from business borrowing to student loans.

more here:

http://www.foxnews.com/wires/2008Apr12/0,4670,HousingQampA,00.html