Wednesday, February 18, 2009
The Nationwide Foreclosure Crisis
Recently RealyTrac, a real estate information watchdog located in Irvine, California, reported yet another doubling in the number of foreclosure filings across the United States. Homes going into foreclosure almost doubled last month compared to September 2006. A total of 223,538 foreclosure filings were reported. This is up from 112,210 in the same month a year ago.
One aspect of the ongoing foreclosure meltdown seldom mentioned is the negative ripple effect it is having in some unrelated areas. Multiple industries, charities, social services, restaurants, and travel services to name a few are all being affected by the current foreclosure crisis. One example is the sharp increase reported in the number of families using the local food pantries in cities around the country. Homeowners are trying to stop foreclosure and feel forced to reallocate food money to pay their mortgages.
The root cause of the trouble remains the same. Borrowers who took advantage of the run-away real estate market several years ago are now facing dramatically higher monthly mortgage payments and no way to pay them. If a homeowner can't find a way to get current on payments, the home is then often put up for auction, and if it doesn't sell, it eventually goes back to the bank.
With the rise of delinquencies and foreclosures has forced the mortgage industry to tighten lending standards, which narrows the number of options available for homeowners struggling to pay their mortgage. Homeowners trying to avoid foreclosure by refinancing or selling their homes are having little to no success due to the decline in home sales and prices across the country.
If there is any good news coming out of this it’s the reports stating foreclosures are starting to show signs of slowing in some states. Some of the hardest hit states – Florida, California, Colorado, Ohio, Michigan, and Arizona are reporting declines in the number of foreclosures for the first time in many months. This past August Colorado for example reported a 57 percent decrease in REO filings over the same time last year. These are properties in the final stage of foreclosure where a property that doesn't sell outright on the market or at auction reverts back to the lenders ownership.
Is it time to get exited? Most experts urge caution and state the foreclosure crisis is far from over. They predict the number of foreclosure filings will continue throughout 2007 and on into 2008 as hundreds of thousands of adjustable rates mortgages reset to higher interest rates thereby forcing some homeowners into inescapable debt.