Saturday, November 6, 2010, AM | 7 Comments
Troubled home owners are benefiting from a foreclosure freeze that many lenders have put in place this fall. They discovered widespread irregularities in legal paperwork as a result of the public outcry. However, some experts suggest it may very well be 2014 before the foreclosed inventory is all cleared out. Home prices will probably start rising again.
That does not mean bank repossession has stopped. It has not. On the contrary, last August 100,000 homes were seized. That’s a record for a month. The foreclosure onslaught continues to prevail on neighborhoods all over the country.
Reasons for continued foreclosure…
The primary cause for the continued mortgage foreclosure is the economic downturn in general and the loss of jobs and income in particular. Some economists tell us by the end of December 2010, foreclosure can be more than 1 million homes for the year. That’s on top of the 2.5 millions that have foreclosed since the recession began in December 2007. In three years, the total of 3.5 million is too many foreclosures and has devastated millions of people financially – good decent people.
Types of foreclosures…
Foreclosure happened for different types of people in phases.
- One phase was when some exotic loans were given out. They were for people who wanted to overextend their finances beyond their means. The banks seemed to be lenient with them perhaps because of their employees greed.
- The second and current phase is because of job and income losses that are still going on.
- There can be a third phase as well. Folks who borrowed Adjustable-Rate mortgage may be in for a big surprise the next couple of years when their mortgage is reset to higher interest rates. Many borrowers won’t be able to afford the resulting higher payments.
More underwater mortgages…
The economic conditions show few signs of improving. Unemployment remains stubbornly high. Consumer confidence is quite low. Because of these conditions, property values will likely continue on a down spiral as more foreclosures add to the housing glut. One survey shows declining home prices have pushed nearly 25% of all mortgaged properties underwater. That means homes are worth less than the amount owed on them.
In a Nutshell
I believe the only way to stop foreclosures is to somehow bring the unemployment rate down to a more manageable level. Folks foreclose because they have no money to pay their mortgage. They have no money because they have lost jobs and their income. More employment is the main reason to bring down the number of foreclosures.