The Coming Foreclosure Flood
The bottom line: just counting the homeowners who are currently behind on their mortgages, along with the existing number of foreclosures forsale, at the current pace it will take nearly three years to sell all
the foreclosures out there. That doesn't include all the borrowers who
haven't fallen behind yet but are going to, because of unemployment or
because their Option ARM payments are spiking up or because they just
decide to stop paying.
Heartened by the recent rise in home prices? Don’t get too comfortable. Standard & Poor’s, the credit-rating agency that tells investors what mortgage-backed securities are worth,
reports that the increase was just an illusion. It predicts the nation
is about to see a deluge of new foreclosures that will drive real estate values back down.
Blame the “shadow inventory” – nearly 1.8 million homes that are on the road to foreclosure but for all kinds of reasons haven’t gotten there yet.
Many homeowners have fallen behind on their mortgages or stopped paying, but foreclosure has not yet arrived. Mortgage servicers, the folks who send you the bills and file for foreclosure when you can’t
pay them, are overwhelmed. Courts, too, are backed up. Mortgage
modifications and foreclosure moratoriums have put off the day of
reckoning for borrowers, but not forever. And unemployment is
sabotaging more homeowners every day.
Out of more than $1.6 trillion in existing mortgages that were packaged into mortgage-backed securities by Wall Street, some $425 billion worth are extremely late on their payments, and therefore
likely to go into foreclosure. Only a fraction of borrowers who fall
seriously behind are able to catch up, with the help of a loan
modification. And even then the majority end up falling behind again.
That amount of bad mortgage debt has been spiking up every month,
slowing down just a little thanks to the government’s Home Affordable
Modification Program, but still continuing to rise.
number of foreclosed, bank-owned homes for sale has been holding fairly
steady. That tells us that the number of foreclosures for sale on the
market is actually just a sliver of all the ones that are really out
there. S&P’s chilling conclusion: “Overall, it is our opinion that
recent positive housing reports should not be construed as a sign that
the distress in the residential housing market is abating, but rather
should be attributed to the temporarily limited supply of homes on the
market.”
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Replies
its bad, but probably things will get worse...
The job situation in Florida is grim, and people paid very high prices awhile back to get these houses and now are losing them to foreclosure, having to find a place to live, pay rent or live with relatives, or even end up homeless and start from scratch. In my town there are street after street of vacant forclosed homes, lots of house breakins into those vacant houses, lots of senseless vandalism and it is very grim. I feel so bad for people, it is a sad sad situation. I am lucky and live in the country just out of the town, so no vacant houses around me, my neighbors are woods..., but it I was surrounded by a lot of empty houses I would not feel very safe. A lot of vacant houses soon become grow houses and drug dens, and it is scary. I pray for anyone who by no fault of their own fall on circumstances where they lose their homes and I that the universe that I am not one of them.
A lot of people got into trouble because of the lending institutions because they were approving mortgages for people who really should not have gotten them because it was over their means to pay but the lenders were just pushing through all the loans, often fudging figures and telling potential homebuyers to lie to get the loans. That is just not right. Once again financial institutions are messing with peoples lives. Now they are all wa wa wa because people can't keep up with the payments, yet they caused their own problems....