Record High Foreclosures
May 28, 2008 · Print This Article
Another piece of devastating news hit the media recently concerning foreclosure rates. In a report released last month the amount of home foreclosures rose to an all time high during the last portion of 2007 between October and December.
This news has fueled the ever growing fears that many consumers have regarding the possibility of a recession while others are using this data to help prove the thought that the U.S economy is already in a recession.
According to the Mortgage Bankers Association 0.83% of homes went into foreclosure proceedings. The previous record was at 0.78% and was set just months earlier of 2007, July through September. This fact did not help to improve consumer’s pessimistic appraisals of the housing market and their financial future.
Consumer’s thoughts were reflected by the Mortgage Bankers Association’s chief economists Doug Duncan who stated that the growing foreclosure rates are among the “worst it’s been”.
It would seem that the weakening housing market and increase in foreclosures are primarily affecting borrowers using sub prime adjustable rate mortgages (ARMs). Sub prime ARMs are used for those borrowers who may represent a risk to the lender. The ARMs are subjected to change due to current interest rates which are why these forms of loans are so preferred. However, with the housing boom of recent years, home owners have found that their home is not retaining enough equity and that soon they owe more on their home then their home is worth.
This fact is leading to the large amounts of foreclosures, is home owners just can not make payments and fall into default with the lenders. As more homes go into foreclosure they add to the already excessive amount of homes which are helping to depreciate home equity.
According to one report home equity has fallen below 50% which has not been seen since the mid 1940s.
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