Foreclosures, delinquencies reach new heights
Foreclosures reached a 30-year high and delinquencies are triple what they were during the height of the housing boom reports Bloomberg. Of course, much of the problem stems from borrowers in adjustable rate mortgages who are faced with higher monthly payments. (Adjustable mortgages are typically higher once the short-term, fixed period expires.) With reduced home equity (or negative equity) and tighter credit guidelines, even good credit borrowers are unable to get in to a fixed mortgage.
We have been saying for a long time that these good credit ARM resets (including the negative amortization Option ARM loans) will be the next surge in the downturn. And that any pundit ignoring that reality is basically the Mad Hatter.
From Bloomberg on the increasing foreclosures:
Foreclosures accelerated to the fastest pace in almost three decades during the second quarter as interest rates increased and home values fell, prompting more Americans to walk away from homes they couldn’t refinance or sell.
New foreclosures increased to 1.19 percent, rising above 1 percent for the first time in the survey’s 29 years, the Mortgage Bankers Association said in a report today. The total inventory of homes in foreclosure reached 2.75 percent, almost tripling since the five-year housing boom ended in 2005. The share of loans with one or more payments overdue rose to a seasonally adjusted 6.41 percent of all mortgages, an all-time high, from 6.35 percent in the first quarter.
Tumbling home prices are making it difficult for even the most creditworthy owners with adjustable-rate mortgages to sell or get a new loan as their financing costs rise, said Jay Brinkmann, MBA’s chief economist. Prime ARMs accounted for 23 percent of new foreclosures and subprime ARMs were 36 percent, he said.
“People chose the lowest payment option to get into some of the very expensive housing markets and now that prices are coming way down, they can’t sell and they can’t afford the higher payments,” Brinkmann said in an interview.
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Foreclosures, delinquencies reach new heights
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