Increase In Mortgage Foreclosures Will Adversely

The growing number of mortgage foreclosures arising from the subprime mortgage fiasco has begun to affect more than just individual homeowners. Now, in some areas, there are residential blocks where ten to twelve homes in a twenty-five home block, have ‘bank owned’ for sale signs on their lawns. Other areas are not quite as dense, but still have enough foreclosed homes to depress values and deter resales. These communities are being adversely affected by mortgage foreclosures from a wide range of perspectives. And no short-term solution appears likely.

Real estate markets that experienced high rates of appreciation in recent years have seen a large increase in foreclosures and values have dropped simultanously. In some, foreclosures have become the norm, rather than the exception. Even worse, statistics indicate that that cities in California, Nevada, New York, New Jersey, Michigan, Florida and the greater Washingon, D.C. area can expect even higher foreclosure rates through 2008. They also show that loss of equity resuling from high rates of subprime mortgage foreclosures will effect communities densely populated with African American and Latino homeowners disproportionately because they have a somewhat higher precentage of these risky mortgage loans.

Builders of new homes in these high foreclosure areas are also suffering as home values in their areas continue to decline. In addition to lower prices, many potential new home buyers have elected to delay their purchases while they wait to see how the whole situation evolves. Retailers and other merchants in high foreclosure rate cities are also feeling the pinch as troubled homeowners defer planned purchases and reduce personal spending. Many larger retailers have reported that while business is still good, they have noticed an increase in late payments from customers that use their company’s credit cards.

With foreclosures rising, new home sales declining and retail purchases being delayed, entire communities in high foreclosure rate areas are hurting. And while federal and state officials report that the overall U.S. economy remains strong, there are experts who fear that a recession may result unless steps are quickly taken to alleviate the current situation.

Three of America’s largest banks are currently working together in an attempt to develop programs that will provide homeowners in default with options other than foreclosure. Whether or not these solutions will become reality in time to make a difference in the overall picture remains to be seen. For many, it is already too late.

Many other groups have made proposals regarding this, but none have yet been accepted and acted upon either. Actions that have been commenced are more for limiting mortgage availability to the most credit worthy applicants who have higher credit scores and the ability to make a sizeable down payment than they are to solve existing defaults and prevent pending foreclosures.

The latest statistics show that 5.12% of all mortgage loans in the U.S. are more than thirty days delinquent. When it comes to subprime mortgages, this figures rises to nearly 15% or a 3% increase over the same period last year. Homeowners with adjustable rate mortgages (ARMs) are nearly 17% delinquent, 5% more than in 2006.

Everyone is searching for a workable solution. In the meantime, entire communities are beginning to suffer.

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Tags: Mortgage Foreclosure //