Foreclosures on the Rise

[Sep 29, 2007.]

 

Foreclosures reached a record amount in the spring—the result of the collapse of the subprime mortgage market.

According to the Mortgage Bankers Association, borrowers forced into foreclosure from April to June hit 0.65%. That's the third quarter in a row of record highs.

Meanwhile, the delinquency rate was also up. The rate refers to the percentage of homeowners who have fallen behind on their mortgage payments but have not fallen into foreclosure yet. The delinquency rate stands at 5.12% of all loans. That's an increase of nearly ¾ of a percentage point compared to the rate one year ago.

The delinquencies and foreclosures are apparently most pronounced in the Midwest, in states such as Ohio, Michigan, and Indiana. The West and parts of the South have also been hard-hit. Job losses, particularly in the auto industry and other manufacturing sectors, appear to be taking their toll.

For instance, the percentage of Ohio mortgages that are 90 days past due or in foreclosure is more than two times the national average. Other states, such as Illinois, Kentucky, and Pennsylvania are also experiencing major problems as far as the housing market is concerned.

The defaults are exacerbated by the fact that home sales are declining, the number of unsold homes is rising, and prices are sluggish. Such a situation is a recipe for default.

In addition, many homeowners with adjustable rate mortgages are smarting from the fact that their rates are on the rise. In fact, as many as 2 million adjustable rate mortgages will be reset this year at significantly higher interest rates. In some cases, homeowners may see their mortgage payments triple.

The housing market is not expected to rebound until the middle of next year. As a result, many homeowners are now in imminent danger of losing their homes. In an effort to stem the tide, the President has unveiled a plan to help the beleaguered housing market, but some Congressional opponents are calling it too little, too late.

Julie Ann Amos
September 29th 2007

Recent News

• Construction Activity Plummets
  The Commerce Department reports that construction activity plummeted in July—the largest decline in six months.


• Impact of Credit Crisis Appears Limited
  While the nation's credit crisis has had a devastating effect on the housing sector, its effects on other segments of the economy appear to be limited, according to the Federal Reserve.[29th September 2007]


• Ex-Fed Chief Concedes Mistakes in Forecasting
  The one-time head of the Federal Reserve admits that he didn't see the subprime crisis coming. [29th September 2007]


• Investor Confidence Wanes Amid Housing Troubles
  The chairman of the House Financial Services Committee says investor confidence is slipping in the wake of what has been described as the worst housing crisis in 16 years.[28th September 2007]


• Consumer Confidence Shows Signs of Weakening
  Consumer confidence showed signs of weakening in August—an apparent result of the ongoing housing crisis and the turbulent stock market. [28th September 2007]


• Freddie Mac Earnings Plunge in 2nd Quarter
  Freddie Mac, which ranks number 2 in the nation in terms of buying home mortgages, saw its earnings plummet 45% in the 2nd quarter.[28th September 2007]