Stemming The Foreclosure Flood

Posted on July 8, 2008
Filed Under Repo Homes | 1 Comment

There are ways and means of stemming the foreclosure flood although the reports coming in from San Bernardino County are not good. There seems to be no silver lining in the horizon.

Chapman University conducted a mid year survey concerned with the recession in the state aggravated by the housing crisis. Foreclosures have particularly been bad for the Inland Empire. This has been telling on the economy. 15,827 jobs are under threat in this region including the desert areas. Economist from Chapman University commented that if they lost their job it would be a double slap. He said that waiting is no longer feasible. During the nineties he had witnessed this type of crisis when recession was on.

This time foreclosures are more devastating than previously because it is pulling down the real estate market. All property owners and not only those stained by foreclosures are affected. The worst off are those who bought their houses during the recent past booming years. Each time a flood of foreclosures sweeps in, the market gets a battering.

The National Association of Mayors estimated that 1.4 million houses are scheduled to go into foreclosures in 2008. That amounts to a loss of property value worth $1.2 trillion. The worth of property could drop by as much as 40% to 50% or may be even more in some localities. According to Chapman survey the house prices of the Inland Empire will drop by 37% from the average by the end of the coming year, 2009.

The accusing finger points to the sub-prime loans for being the catalyst. But the way things are moving, all types of loans including the prime kind are in the middle of choppy seas. The Federal Reserve predicts that nearly 450,000 high risk mortgages will be re-set every quarter through the coming months. Each reset will trigger off a new wave of foreclosures – a virtual tsunami. This wave after wave attack is expected to continue till 2011 when hopefully it will level off if no other jumbo sized international economic problem grips the nation. The massive foreclosures will impact most in certain pockets of concentration. One of these pockets is the Inland Empire.

The authorities at all levels together with the communities are desperately working out solutions. Most of these are voluntary but of late legal steps are being taken to rein in lenders. The RTC or Resolution Trust Management is expected to show results.

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