Home Foreclosures Up (63%!!!) As Mortgage Rates Climb

[TexasLawyer]

Home Foreclosures Up As Mortgage Rates Climb

http://abclocal.go.com/kgo/story?section=business&id=4163208

May 11 - As interest rates increased steadily over the past year and the explosive growth in housing prices declined, many Americans fell behind in their mortgage payments. Now some have defaulted on home loans and could lose their homes due to foreclosures.

When home prices soared at double-digit rates during the recent red-hot housing market, many Americans stretched themselves financially to purchase a home. The use of lower-interest adjustable-rate mortgages, or ARMs, interest-only mortgages or option-ARMs that allowed home buyers to choose how to pay each month soared during the same period.

According to the Mortgage Bankers Association of America, ARMs now represent 25 percent of the more than $8.5 trillion in outstanding loans. Economists with Moody's Economy.com forecast that the interest rates on $2 trillion of those mortgage loans could be reset in 2006 and 2007. And that could become a problem if interest rates continue moving higher.

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RealtyTrac, a California organization that tracks foreclosed properties nationwide, found that the foreclosure rate in March of this year was up 63 percent compared with last year. The company's foreclosure data includes a variety of categories: homes that enter the foreclosure process, homes that are actually foreclosed on and homes that are returned to the banks.

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[Maine-ah]

1. kick.

[NoAmericanTaliban]

2. Now you know why they passed those bankruptcy laws

that make it harder to get out of dept but did nothing to the credit industry - so they can screw you coming & going.

[henslee]

16. What's next, debtors prison?

[TexasLawyer]

3. Lots of anecdotal information out there of a BIG problem brewing

More are struggling to pay the mortgage
Foreclosure filings up 30% in Mass.

By Kimberly Blanton, Globe Staff | May 10, 2006



Foreclosure filings against Massachusetts homeowners increased 30 percent in the first three months of 2006 and have doubled in the past three years, as homeowners in one of the nation's most expensive real estate markets struggle to cope with high prices and rising interest rates.

Economists and housing specialists said record numbers of mortgages have been written in recent years, as banks and finance companies devised new loans with little or no down payments or with low interest rates in the early years to help buyers afford homes. But rising interest rates and a softening real estate market have put a squeeze on homeowners who sometimes can't make the higher payments on adjustable-rate mortgages or refinance their loans to lower their payments.

"These are numbers everybody should be paying attention to," said Thomas Callahan, executive director of the Massachusetts Affordable Housing Alliance, which helps working people buy homes. "There are things that could happen like further increases in interest rates and or more serious decreases in values that can make this a lot worse than it is now, and it's pretty bad right now."

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http://www.boston.com/business/personalfinance/articles/2006/05/10/more_are_struggling_to_pay_the_mortgage/

[TexasLawyer]

4. Hey red states-- Georgia leads the nation in foreclosures

Georgia leads the nation in foreclosures
By JULIE B. HAIRSTON
Cox News Service
Friday, May 12, 2006

ATLANTA — Foreclosure was not even a remote prospect on Debi Steedley's mind when she moved into her three-bedroom, three-bath Woodstock home with her two children in the spring of 2001. The triathlon competitor had just gotten her graduate degree and was starting a business as a freelance nurse practitioner.

But an unforeseen health crisis two years ago rendered her unable to work full time, with no unemployment insurance or disability income to bridge the gap. Struggling to hold onto her home, Steedley, 47, turned to her mortgage lender, HomeBanc, which gave her an interest-only loan and an equity line of credit that initially lowered her monthly payment by hundreds of dollars.

But Steedley's health struggles continued, and her loan payments all too quickly began to spike.

"With all the refinancing and interest rates going up, it really climbed," Steedley said. "All of a sudden, boom, it was maxed out."

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http://www.oxfordpress.com/business/content/shared/news/stories/FORECLOSURES_0512_COX.html

[TexasLawyer]

5. and get ready for negative equity

Playing mortgage roulette
STORY TOOLS
Email this story | Print
By John Rebchook. Rocky Mountain News
May 12, 2006

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The Denver area may be particularly hard hit, because homeowners in Colorado on average have little equity in their homes. In Colorado, 28.5 percent of homeowners have 5 percent or less equity in their homes, and 47 percent have 15 percent or less equity, according to a report released earlier this year by Christopher L. Cagan, director of research and analytics at First American Real Estate Solutions in Santa Ana, Calif. Only Tennessee homeowners, on average, have less equity in their homes, according to the report.

This lack of equity is one on the driving forces behind the rising Denver-area foreclosure rate, according to many experts. This year is on track to eclipse 2005 as the second worst year ever for foreclosures. Last year, more than 14,000 Denver-area homeowners defaulted on mortgages.

Increasingly, people who locked in three-year ARMs with rates in the 4 percent range are finding loan rates rising by 50 percent or more.

Next, the downward spiral begins: They can’t afford the higher payment, they can’t sell their homes for a profit, or they can’t refinance because they have little or no equity in their houses or they’re precluded from refinancing because of pre-payment penalties.

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http://www.rockymountainnews.com/drmn/local/article/0,1299,DRMN_15_4694630,00.html

[cliss]

10. Thanks for the info, TL.

It's starting to become noticed here in the Portland Oregon area, too. I just ran into a friend of mine who is going into the foreclosure business.

He was rubbing his hands together and smiling an evil smile. "I'm gonna clean up", he said. "I'll even take their boat, too". I smiled to myself.

You're a little early, I thought about my newly rich friend. He's going to buy a bunch of foreclosed properties, fix them up, and make a bunch of dough.

We'll see. I think the real estate market has A LONG way to go before it becomes profitable. But - let him blow his $1 million inheritance.

[Tactical Progressive]

6. Those numbers are ridiculous

Don't these mortgage bankers know that the Bush economy is booming?

This is the problem with the liberal media, always going on about facts and reality.

Listen to your gut, mortgage bankers, and stop paying attention to statistics.

[Jack Rabbit]

7. But, but, but, the economy is just great

Bush said so. Would he lie to us?

[TheCowsCameHome]

8. Gosh. Who would have predicted this happening? Incredible.

Is the sky blue?

[VOX]

9. And all those folks who got sucked into interest-only mortgages...

Five years ago or so, are now seeing their house payments head skyward.

On edit: Often, an interest-ony mortgage is recommended for "someone who expects to earn a lot more in a few years." But how many people can actually say that happened to them in the * economy? :shrug:

[Warpy]

11. I predicted it TEN years ago

when I opted for a fixed rate mortgage I had trouble paying for the first two years, house poor.

Those things are bad news. You have to assume it will move to the cap rate at some point in the life of the mortgage and plan ahead for it. The toughest part will be when that cap is reached and the paper is sold to a new bank with a higher cap. This is the beginning of a very long and disastrous process.

Refinance if you can, get a 15 year mortgage if you can swing it. If you've got one of those creative balloon payment mortgages, get rid of it any way you can.

Debt sucks, get out from under as much as you can as fast as you can.

[phylny]

12. I am not surprised. A client's husband worked for Fannie Mae and

he told her two and a half years ago that by 2006, there would be a phenomenal number of foreclosures for this very reason.

Guess he was right.

[upi402]

13. My home is for sale, but friends tell me I'm too paranoid

I think real estate will drop by over 33% in a year to two years. I plan to hold primarily gold as I sit on the sideline for the first time in over 25 years of being bullish on real estate.
Am I too paranoid? I dunno, but some friends think I am.

[girl gone mad]

19. I think inflation will..

keep RE from dropping that far. The cost of building materials is rising across the board and we are now competing with China and India for many of those materials.

[upi402]

20. Good point about materials costs, also

rental units are in very high demand in expensive markets, causing housing to be more desirable in the near future.
Right now renting the same house is half the mortgage payment.

National Realtor's Association says it's BS but the Times did a column showing that they are more often wrong. Hyping the market is industry standard.

Check out this article though;

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=364&topic_id=1175844&mesg_id=1175844

[NorthernSpy]

14. where will they go?

Those who are being foreclosed upon and kicked out -- what becomes of them?


:think:

[upi402]

17. Many who go to a mtg. counselor keep the house or sell in time

Usually it's pretty easy to sell before the foreclosure is final. The big numbers are for those who fall delinquent and foreclosure is started.
The sage advisors say to get financial couselling early.

[TexasLawyer]

21. negative equity

when people have "negative equity" (owe more on the house than what it is worth on the current market) the incentive is to walk away from the investment. It becomes the bank's problem.

Then it becomes everyone else's problem as the foreclosed homes flood the market and further depress home prices generally. It starts to become a vicious cycle pretty fast.

So many people walked away from their home investments in Houston in the 1980s you wouldn't believe it. Even a lot of yuppie types.

[Supersedeas]

15. but but but Tony Snowjob said that M$M are ignoring the Good news

[upi402]

18. LOL-really! In my market it's 99% cheerleading

With laser beam focus of that blind eye of theirs aimed at negative stats.

Pesky facts...

[TexasLawyer]

22. The nature of economic bubbles

From the current issue of Harper's features a lead article entitled "An Illustrated Guide to the Coming Real Estate Collapse" by Michael Hudson.



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Hudson identifies several key points in all great speculative bubbles: a government which fosters the conditions for a bubble, and a speculative mindset which eschews actual investment for "making money with money." Referring to the classic South Seas Stock Bubble, he says:

Every stock market bubble in history, starting with the South Sea and Mississippi bubbles in the 1710s in Britain and France, has been sponsored by government. The driving force has been the government's attempt to cope with debt obligations beyond its foreseeable ability to pay. Creating a bubble has been a way to solve their public debt problem--and to pay off political insiders at the same time, thereby killing two birds with one stone.

Modern governments are not politically able to simply default on their debts--at least, not debts owed to their own bondholders in their own currency. The problem has to be solved through "the marketplace."

Stocks in the South Sea and Mississippi Companies were issued in tranches, permitting people to buy on margin with only a small proportion as down payment, so that they could quickly double their small initial payment as the stocks were engineered upward in price. It seemed that money could be made off money itself. This is a basic illusion that is necessary for bubbles to take off.

Saving, stock and bond speculation and real estate speculation do not by themselves lead to new investment. In fact, the higher speculative and financial returns are, the less incentive there is to actually tie down money in building new factories and expanding business.

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http://www.oftwominds.com/blogmay06/serfdom.html