Do you remember when the mortgage meltdown crisis started and all we could hear was how the mortgage companies allowed this by giving mortgages to those who could not afford one in the first place?
Do you remember how we were told that it was the “stated incomes” that anyone could just claim an amount they earned that would qualify them for a mortgage. Then as the bubble was deflating in the real estate market we were seeing foreclosures on the rise, and continuing to this day.
Well today there is a new story that is unfolding to the old foreclosure story. We are now seeing people with good credit who did not use stated incomes in order to get their mortgage, now going in default. We are seeing fixed rate home loans that were made to good credit applicants now in foreclosure, a big difference from a year ago. It was the sub-prime and adjustable rate mortgages that was driving the housing crisis then, and that is not the case today.
A report from the Mortgage Bankers Association found that an alarming large percentage of mortgages were either in foreclosure or behind, 14 percent as of the end of September. This was a record high for the ninth quarter in a row, which is a very scary situation, because this could mean we have not seen the bottom of the real estate market despite what other reports on TV, and the news are telling you. This report went on to say that it was unemployment that was the main cause of foreclosures. We have seen prices fall on real estate and that gave us a little “bump” in the market during the summer. There is a new wave of foreclosures that will hit the market within the next year and that will drive the price of real estate down further.
We here in California along with Nevada, Florida and Arizona make up 47 percent of all new foreclosures.
How much lower can we expect real estate prices to fall? A chief economist at Moody’s Economy. com, Mark Sandi is predicting that on a national basis, home prices will fall another 10 percent between now and next fall. Will this be the bottom? Susan Park, an Exit Real Estate Group Realtor said “In her opinion it is all going to depend upon the private sector and jobs. If unemployment continues to rise then we will see more and more foreclosures and the price of real estate falling further than 10%. In my market I’m now seeing more high end homes going into foreclosure.”
Today we are seeing fixed rate, prime loans to borrowers who had good credit accounting for almost 33 percent of new foreclosures and that number is up over twelve percent from a year ago. These figures are based on the last quarter. FHA loans are beginning to see problems in their loans; over 18 percent are either behind or in foreclosure as of last quarter.
The current real estate situation is like a cancer that is quickly spreading across all sectors of the financial landscape and is affecting all sectors of employment. As we continue to see layoffs, downsizing and underemployment, we will continue to see more and more foreclosures and consequently the value of real estate falling more and more. The job market will drive the number of foreclosures not Wall Street. Until we get a handle on just how and where we, as a nation, are going to increase jobs, we will continue to see this spiral go deeper and get tighter and tighter.
Jeff Coga, a short sale real estate investor in California said “that he hears so many sad stories as he is in the trenches every day helping people from fore closure that he wishes he could help more people, but many times the banks are not interested in peoples situation and foreclose anyways.
Bernie Germani, another short sale investor said “People are in such need of hope, and there is a lot of desperation in California, and he has noticed many homeowners just giving up hope, because their loan mod failed, that was their last shot at staying in the home, and now they just thrash the house before giving the house back to the bank.”
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