The Growing Foreclosure Crisis

The Washington Post has a front page article filled with anecdotes about the foreclosure crisis. Their conclusion? Its getting worse, fast:

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

Originally published at The Big Picture blog and reproduced here with the author’s permission.

2 Responses to "The Growing Foreclosure Crisis"

  1. Darien T   January 18, 2009 at 11:50 pm

    This is not a new issue for everybody. America now is in the long-term recession, which causes great damage to foreign and local investor. Timothy F. Geithner will not be in need of a payday loan for a very long time. That is if he becomes the nation’s next United States Secretary of the Treasury. However, the Obama nominee is being criticized left and right for failing to pay taxes of about $42,000 to the Internal Revenue Service between 2001 and 2004. At the time, Geither was working for the International Monetary Fund, and apparently U.S. tax law mixed with working for an international company was too complicated for him. Good thing getting a payday loan is nice and simple. Barack Obama and his team are defending the nominee, stating that his tax mistakes were honest mistakes and Geithner is the right person to appoint as the nation’s Treasury Secretary amid the global financial crisis. Nonetheless, the Democrats have decided to delay Geithner’s confirmation until after the Jan. 20 inauguration. You can find out more about the Obama administration and what some people are saying about it at your payday loan source.

  2. George Harter   January 19, 2009 at 3:05 am

    A great article physically evicting here on RGE the other day highlighted some frightening trends. The folks who do the paper work and finish off with the Sheriff’s eviction of the wrong doers is NOT carried out by banks.Foreclosures are now the profitable property of the Mortgage Servicing Industry. Many good, upwardly mobile types are the backbone of a service industry which now turns handsome profits on carrying out foreclosures!How this system actually operates is a mystery to me. But, never mind, a borrower defaults, the mortgage is tranched out all over the universe and somehow Ruff&Ready Inc. are notified to begin foreclosure proceedings.(who really owns most mortgages now? Who makes these mysterious decisions on when to foreclose?? Are the derivatives acting autonomously? Self enforcing instruments?? Yes, I am mystified!)Now, NOBODY owns the mortgages, so, who can renegotiate?? The same person, NOBODY. Will the Mortgage Service Industry stop of its own accord? Of course not, they are not doing anything illegal, really, very often at least. This now powerful group will soldier on until the system is radically changed.My guess is that Obama’s honeymoon ends when the foreclosure wave crests hard, in Aug. Sept??? Truthfully, the US has painted itself into an impossible corner, the ownership of millions of homes is not clearly assigned anymore. Trillions of dollars of property has no legally defined ownership. wow.Obama is going to fix this?? He can’t even grasp the seriousness of the situation. What? We will create bad banks so that we can spank them??? Only a few times in my life have I witnessed miracles, this solution will take a miracle Inconceivably Large.George HarterFinancial Atheist