One oft-repeated assertion no longer holds true. Those in trouble are not, primarily, lower-income borrowers. The foreclosure crisis has become a wave, afflicting neighborhoods of every stripe — but particularly communities created by the boom itself . . .
They’re “underwater,” industry parlance for borrowers who owe more on their mortgage than their houses are worth. They have joined the growing line of homeowners seeking a break from their lenders.
Both the departing and incoming administrations in Washington have promised help on the foreclosure front, but providing help requires federal regulators to get their collective arms around the size and shape of the crisis. That isn’t easy. No one agency collects information on every loan, every borrower and every delinquency.
But interviews and a Washington Post analysis of available data show that the foreclosure crisis knows no class or income boundaries. Many borrowers ensnared in the evolving mortgage mess do not fit neatly into the stereotypes that surfaced by early 2007 when delinquency rates shot up. They don’t have subprime loans, the lending industry’s jargon for the higher-rate mortgages made to borrowers with shaky credit or without enough cash for a down payment.
The wave of subprime delinquencies appears to have crested. But in October, for the first time, the number of prime mortgages in delinquency exceeded the subprime loans in danger of default, according to The Post’s analysis.
This trend shows up most acutely in California and other high-growth regions, such as Arizona, Nevada, Florida and pockets of the Washington region, most notably in Prince William and Prince George’s counties . . .
The foreclosure crisis hasn’t played itself out. The next wave looms in the form of a new batch of adjustable-rate mortgages scheduled to reset over the next two years. Unless the market comes back with a roar, which is unlikely, more borrowers will struggle to hang on to their homes.
Where are the most underwater homes? Of the 20 Zip codes with the highest share of underwater loans, seven are in California and four are in Riverside County, the vast exurb southeast of Los Angeles.
Source: The Growing Foreclosure Crisis Dina ElBoghdady and Sarah Cohen Washington Post, January 17, 2009; Page A01 http://www.washingtonpost.com/wp-dyn/content/article/2009/01/16/AR2009011604724.html
Originally published at The Big Picture blog and reproduced here with the author’s permission.