Wichita, Kansas sees Foreclosure Spike
Mortgages considered high risk in Wichita saw a significant increase June 2008 as compared to June 2007. On the other end of the risk spectrum, delinquent payments and foreclosure on conventional mortgages were also up in Wichita, but were not in a zone that would indicate problems.
The foreclosure rates for all types of loans in Wichita are below the national averages. However, it still means that both lenders and borrowers will have difficult times as long as foreclosure rates continue to rise. Wichita area families of all income levels are being impacted, regardless of house value. Houses from $40,000 through $300,000 are being sold in foreclosure.
Almost 16% of loans categorized as subprime were delinquent in June for the Wichita area. There were over 6% in foreclosure during the same period. First American CoreLogic, a company that tracks data on mortgages in the Wichita area, reported this.
The Wichita area did not show any clear trends upward in 2008, possibly indicating that the crisis in subprime mortgages is peaking for this region. This mirrors the national trend.
Loans that are called stated income loans are having difficulties. These types of loans are also known as Alt-A. The rate of delinquency and foreclosure doubled from 2007. A person usually qualified for an Alt-A loan by having a credit score considered as good. These loans were considered lower risk than subprime and higher risk than prime.
Nine percent of Kansas mortgages are either Subprime or Alt-A. Seventy-five percent of all mortgages are considered conventional prime.
The rates of delinquency for conventional mortgages are higher than in 2007 but are lower than other years this decade. This level has not caused concern to any of the experts in Kansas or in Wichita. This may be due to the fact that housing prices have not fallen, allowing distressed homeowners to sell their properties before they become delinquent in their loans.
The main factor that seems to be contributing to the increase in foreclosures for Alt-A and subprime mortgages seems to be the increase in interest rates, as well as a tightening of the overall credit market. Borrowers are unable to refinance to a conventional mortgage once the interest rates are reset at a higher level.
Many people who used adjustable rate mortgages had every intention of refinancing them before the interest rates went up. Some homeowners either had life events like a divorce, job loss or health crisis that made it impossible for them to refinance or maintain payments on their property.
The increased interest rates resulting from a rate reset may substantially increase a monthly house payment. Some borrowers discover that once the rate has increased they are no longer able to make their monthly payments, resulting in delinquency and then foreclosure.
On a brighter note, the Wichita area does not seem to be suffering from the problem of falling home values. Falling home values contributed to the national problem with both subprime and Alt-A foreclosure levels.
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