In 2005, prior to the mortgage meltdown, U.S. banks repossessed 100,000 homes throughout the entire year. In July 2010, 92,858 homes have been seized, according to RealtyTrac, a foreclosure and real estate data company.
July Foreclosures Near Record High
July’s foreclosure numbers, up 9 percent from June and up 6 percent from 2009, is approaching the high point of 93,777 in a single month (experienced in the months shortly following the crash). However, that may not be the worst of it–there is little sign of slowing this foreclosure trend.
Again according to RealtyTrac, there were 325,229 “notices of default” filed in July, up from 313,841 in June 2010. In addition, there are reportedly 5 million seriously delinquent homeowners teetering on the brink of foreclosure. Most of these property owners would already be in foreclosure in a normal mortgage and real estate market. However, this is not a normal market.
Loan Modifications and No Home Buyers
Many of these 5 million troubled borrowers are in a unique quandary.
Their mortgage lenders are willing to consider loan work-outs because there is a severe lack of home buyers in market. Meanwhile, loan modifications programs are slow and complex, not helping enough troubled borrowers. And some that are trying to work through the loan work-out process are finding their credit scores dinged and credit problems simply compounding into an inevitable foreclosure anyway.
Why are Foreclosures Still Rising?
The natural question is, “why are foreclosures still on the rise?” The answer is a complex combination of cause, effect, and the lags between.
The original mortgage meltdown and U.S. financial market collapse is nearly two years old, but many of the economic results are just now hitting homeowners. Immediately following the collapse many U.S. businesses reacted very quickly–rapidly contracting production, reducing inventories, and laying off employees.
Fortunately, many of these employees had unemployment benefits that nearly matched their previous earnings. These benefits were also extended by State and Federal actions. The result, extending the inevitable in the housing and mortgage markets–lots of homeowners that can’t make their mortgage payments and unemployed people that can’t buy homes.
We appear to be in a vicious death spiral of economic cause and effect. Not to be an alarmist, but what happens as very popular 2007 (the waning moments of the mortgage heyday) adjustable rate and negative amortization mortgages hit there “reset” dates?
About Editor