Foreclosure Rates Continue to Rise

Posted on March 18th, 2008 by saman

In the month of February, bank seizures doubled and the filings of foreclosure grew sixty percent. Last month, rates on adjustable mortgages increased on home owners could not refinance or sell because of falling prices. Over two hundred twenty three thousand homes were in default.

With prices falling, there is a serious problem of being unable to sell or refinance a home. This fact is concerning many in the real estate world.

Around four hundred sixty billion dollars worth of adjustable-rate mortgages are going to be reset in 2008 and four hundred twenty billion will go up in three years. Those who own homes were faced with increase payments as home prices dropped about eight percent. This is the largest drop in twenty years. The situation is continuing to get worse.

In the months of May and June filings of foreclosure may increase to the largest numbers yet since payments will continue to increase. There could be up to one million bank repossession this year. Bank seizures of property grew to one hundred ten percent last month, a jump from last year.

Real estate brokers say that we are in a vicious cycle. Home values are decreasing and loans are resetting at large volumes. People who want to buy a home now are having difficulty obtaining a mortgage.

Last month, we were faced with the twenty sixth month in a row where foreclosures were increasing. An increase in defaults by subprime mortgage borrowers was one of the main reasons for the collapse of the housing loan market. This led to over one hundred mortgage companies to halt lending. The value of securities tied into mortgages dropped and securities firms and lenders had to write down over one hundred eighty billion in assets that were attached to loans for homes.

The increase of foreclosures caused the inventory of available homes to increase to phenomenal levels and this makes it hard for property owners to sell.

Defaults are increasing even though the interest rate has been cut five times. The Bush administration has suggested that lenders should help those who own homes by modifying mortgages.

Economists say that the US housing problem will push the country into a recession this year. They say that the sale of existing houses and new houses will drop to five million in 2008 before increasing once again in 2009.

In New York, a state program has begun that will refinance one hundred million in various mortgages in danger of default. There will be fixed rate and stable loans. These loans have aided a few home owners already.

Government official Barney Frank has recently announced legislation to increase the government’s role in helping consumers who may lose their homes. His proposal will let the FHA to guarantee mortgages that are refinanced after loan holders and lenders decrease principal to a reasonable amount that homeowners can pay.

Home owners with subprime mortgages with adjustable rates were forty two percent of new foreclosures at the end of last year.