Change In The Character Of The Foreclosure Crisis With Mortgages
There is a change in the character of the foreclosure crisis with the prime mortgages gaining precedence over the sub-prime
. For this the unemployment scenario is responsible. Without jobs the people do not have the dollars in their pockets to pay for mortgage dues.
In 2009 the foreclosure picture looked a balloon that was being pumped up by a hose; it kept swelling up. The delinquent borrowers went into a long period of limbo as they attempted to modify their loans or waited with resignation for the banks to strike and act to throw them out.
Eight months previously when 2010 was just starting the number of those who were lagging in their mortgage dues either by one or many months was over 8 million. The largest segment, more than 3 million, was in the uncertain stage of pre-foreclosure.
But recently the banks have started to move forward and are foreclosing with zest. The balloon is starting to deflate. The number of borrowers lagging in July dropped to 7 million according to LPS Applied Analytics. It seems that the backlog is beginning to clear observed LPS. The banks or the lenders have started 279,685 foreclosures in July. In June the number was 225,700.
For the housing market this is bad news. It is adding to the inventory at a point of time when already there are a good number of houses sitting on the shop shelves. This new entry will further push down housing prices. The other borrowers who are already under strain will give up the struggle and that will translate to even more foreclosures. There are indications that already this has started to happen.
Herb Blecher of LPS said that even while more number or residences are being gobbled up by foreclosure it might kick off a domino effect. For instance in Nevada the proportion of loans going into foreclosure went up last July to 1.33% of all mortgage loans due. It was 1.01% last June.
At the same time 5.2% of the mortgages that were current in Nevada during the start of 2010 are now lagging behind by two or more months. The rate is the highest among all the states of America. Blecher posed a crucial question. Are foreclosures going to drive another wave of defaults?
More people are walking away from loans because they have gone underwater with the amount of their loan due being more than the fallen worth of the property.