Home Foreclosures Soar

Posted on March 11th, 2008 by saman

At the end of the last year, home foreclosures rose to record highs. This underlines the problems of distressed homeowners and the danger the housing problem poses for the economy.

The Mortgage Bankers Association stated that the number of mortgages across the country that went through foreclosure reached a record high of .83 percent at the end of last year. This is higher than the previous high of .78 percent. Also, more homeowners got behind on monthly mortgage payments.

The rate of delinquency on mortgages rose 5.82 percent during the fourth quarter of last year. That is higher than the previous 5.59 percent. If mortgage payments are more than thirty days past due, they are considered delinquent.

Those with subprime adjustable mortgages and bad credit were hit the hardest. The numbers of late payments and forclosures for homeowners have reached a record high during the end of last year.

The number of subprime mortgages that went through the foreclosure process rose to 5.29 percent, which is higher than the previous 4.72 percent. The number of late payments rose to 20.02 percent which is higher than the previous 18.81 percent.

Real Estate analysts say that the quality of mortgage credit is quickly going downhill. These upsetting percentages arrive as people in the country fear that we are approaching or are already in, a recession.

The string of recent foreclosures will undoubtedly worsen the already poor housing market. When people are forced out of their homes by foreclosure, this adds to the large number of available home that are currently on the market. In turn, this causes a decline in work for homebuilders and this also hurts the national economy. The fact that credit is becoming increasingly hard to get has kept potential homeowners at bay and this also hurts the housing market.

Homeowners with bad credit or who do not have a large income were typically the individuals who would take out the high risk subprime mortgages. These individuals were the ones who suffered the most when the housing market began to decline. Interest rates that started low and were then reset to higher rates devastated these unfortunate homeowners. As home values declined, borrowers ended up with mortgages that were higher than the actual value of their houses.

It is certain that the drops in home prices have been the drive behind the many foreclosures but the overall reasons are different, depending on what state you live in.

In another recent report, for Americans, their home equity has fallen under fifty percent. This is the first time this has happened since the mid 1940s.

Home equity stood at 49.6 percent during the middle of 2007 and slipped to 47.9 percent toward the end of 2007. That makes for three consecutive quarters where the equity was fewer than fifty percent. This is the first time that the debt of a homeowner was higher then their equity since 1945.

Even though there are currently relief efforts in the works, Ben Bernake has recently stated that late mortgage payments and foreclosures may continue to rise for a little while longer. He also stated that can hurt neighborhoods where there have been a series of foreclosures and create undue stress on homeowners.