No Respite From Galloping Foreclosures And Skyrocketing Bank Repossessions

Posted on July 29, 2008
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From the June figures rolling in, it appears that there is no respite for the nation from galloping foreclosures and skyrocketing bank repossessions. Foreclosures galloped to an increase of 53% while bank seizures almost tripled leaving the country dotted with empty houses – eerie and vacant.

Over 252,000 houses are in foreclosure calculating to a ratio of 1:501 according to RealtyTrac. Bank repossessions increased by 171% – the maximum since RealtyTrac started tracking foreclosure operations in 2005.

Mark Zandi of Moody’s Economy in Pennsylvania commented that the foreclosure crisis is getting worse by the day and it seems that the country must be prepared to put up with it for another ten years. The job market is shrinking and the equity of the houses is vanishing. This is making lenders shy to sit down to workouts of mortgages. Borrowers do not think it is worth fighting for a house that has become worthless – the value having gone down to levels below the loan amount. So they are just walking out.

Since the Great Depression of the 1930’s the nation has not seen such foreclosure activity. In April there was a record fall in house prices in 20 metropolitan areas of the country. A vicious cycle has set in with foreclosures causing a fall in real estate and the latter in turn causing foreclosures. There seems to be no escape route from the tight circle. By the end of the year the banks will be weighed down with 1 million properties. This will account for one fourth or one third of all the houses waiting on the shop shelves to be sold.

More than half the borrowers of sub-prime loans did not have clear credit records. Their houses will be impacted with negative equity before the year draws to a close. The foreclosure number will increase by 63% according to a report released by Credit Suisse headed by Rod Dubitsky.

The foreclosure crisis has made the mortgage industry cautious. They have imposed tighter rules and this means fewer borrowers will be able to avail of loans. The prediction by Credit Suisse is that by 2012 there will be 2.7 million sub-prime mortgages will slip into foreclosure. The crisis will in all probability peak during third quarter of this year. Since the spring of 2006, equity to the tune of 43.5 trillion has been erased off according to Mark Zandi.

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