Recent report indicates Foreclosure Crisis

Posted on October 9th, 2007 by saman

The Mortgage Bankers Association has recently released a report on Mortgage Foreclosure numbers and the report indicates that the mortgage market is going through its worst foreclosure crisis ever. The figures are 15% of the sub prime borrowers defaulted and the other prime borrowers have decided to go with the tide. People have bought houses in the last few years with the help of adjustable mortgage rates thinking that the price of their house will rise in the future and they will be in profit. However this has not been the case.

The rate of foreclosure during the last quarter has reached the highest level ever since the rates were recorded way back in 1953. The number of sub prime borrowers who are behind on their home loans have also increased to 14.82 percent. The homes which have the highest percentage of foreclosure are the ones that are bought with 2/28 adjustable rate mortgages. As a result the credit crunch is making the homeowners choose foreclosure as the only option and mortgage financing has become tougher than ever before.

The report states that the foreclosure trend is going to continue in the near future as well. The foreclosure rates during the last quarter in US states like Arizona, California, Indiana and Florida were sky high and the situation is predicted to become worse in the near future. The number of foreclosures and payback delinquencies are expected to rise in this quarter as well as the next quarter. The home prices have fallen leading to a raise in the mortgage rates. As a result refinancing has become difficult for borrowers who are not able to accept the current interest rate and hence want to refinance at low interest rates.

The two major reasons for the foreclosure crisis are the 2/28 adjustable mortgage rate as well as economic conditions that are not favorable. These adjustable rate mortgages are the major reasons behind these foreclosures a these mortgages have very low rates at the beginning and even after a few years the borrowers find it difficult to do their monthly payments due to adjusting rates. The rate of foreclosure is set to increase as the adjustable mortgage rate will happen again in the current year as well as next year.

The Federal Reserve has tried to provide a solution by controlling and stabilizing the mortgage market rate. The government officials are also concerned about the current situation. They have now appointed a person under the administration of the President who will have full authority over the federal mortgage and will coordinate with the government to reduce the number of foreclosures. $200 is proposed by the government to prevent further foreclosure cases.

It is also decided by the officials to give nonprofit money approved by the government to help those who are in a problem in making their mortgage payments. This news will bring a temporary relief for homeowners who are facing the problem.