More Foreclosed Houses Entering the Market

Posted on September 9, 2009
Filed Under Foreclosure Homes | Leave a Comment

According to Mortgage Bankers Association more foreclosed houses are entering the market – this time from the prime mortgage category. The economic slump has caused many to lose jobs and the equity on their houses. As such borrowers are being unable to pay and foreclosures are increasing. This is worsening the financial crisis and deepening the recession.

Stephen C. Levy is the director of a private research firm in Palo Alto. He warns that there is enough cause to be seriously worried. Financial expert Elizabeth Warren said,  “During the rising market, if you lost your job, got sick or your marriage failed you always had a parachute. Sell the house, pay off mortgage and have something left to start again. Or sometimes you could use your home equity line of credit to get by.”  Unfortunately today for a large majority the “parachute has gone up in flames.”

The trend in California shows that the delinquencies on the prime mortgages will continue for many years. This is the opinion of Christopher Thornberg of Beacon Economics, Los Angeles. At the time of the time of the housing boom, did not check on the capability of borrowers to repay loans. They were too complacent. During those insane years prime loans were all but forgotten. Thornberg has the distinction of being one of those experts who had predicted the coming foreclosure related financial crisis.

There is no doubt that the damage has been done the most by the sub-prime mortgages. It resulted in the heaviest debts with the lowest down payments taken from people with the lowest credit. By August 2008 over 43% of the sub-prime mortgages had slipped into foreclosure or were defaulting. The number was double that of 2007 as per the findings of First Amercian CoreLogic. The latter keeps track of 82% of all the loans in U.S.

The latest trend is the increase in foreclosures of prime loans at the same pace – and sometimes faster. 7.5% of these prime large mortgages of exclusive houses are too expensive to be sold to Fannie Mae and Freddie Mac. These are all defaulting. The figure is treble that of 2007. Thus in 2008 prime loans are accounting for a larger proportion of foreclosures than it was responsible in August 2008.

For Jones in Murietta life has gone upside down. She has been working hard since she was 19 and never opted for risky loans. Today her job has gone, daughter laid off and the house at risk from foreclosure.

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