Foreclosures Estimated To Claim 2 Million Homes By 2009

The 14 states of Arizona, California, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania, Texas and Virginia have been most affected by the economic costs due to foreclosures by 2009. They are expected to suffer more than $2 billion in the coming years. California alone is expected to suffer more than $23 billion in economic costs due to problems in the subprime market.

According to a report released by the House-Senate Joint Economic Committee, 2007 to 2009 could see a minimum of 2 million home foreclosures which ultimately could destroy 71 billion US dollars worth of housing wealth in the US. This would happen if there is no check in the problems of the sub-prime mortgage market.

US Treasury Secretary Henry Paulson has said he expects a bit more than 1 million foreclosure starts in 2007 alone.

The Joint Economic Committee, led by Senator Charles Schumer and Rep. Carolyn Maloney of New York, advocated several steps that would extenuate the crisis.

“This report shows that unless action is taken, subprime foreclosure rates are likely to increase as housing prices flatten or decline, and the effects of the subprime crisis are likely to extend beyond the housing market to the broader economy” The Joint Economic Committee said.

Among some of the steps recommended one step is such which gives more funds for foreclosure counseling. Schumer said that the Senate had prior to this approved $100 million for increased counseling, though this was not enough, although he did not mention the requirement of the Senate or whether the Senate would move to increase this amount.

Schumer also suggested liquidity to the market by allowing Fannie Mae and Freddie Mac to expand their ability to buy and hold mortgages. However, the regulator for those two mortgage giants said that there was no need for more liquidity, and that Fannie and Freddie already had enough flexibility to provide needed liquidity to the mortgage markets.

According to the report there was need for other steps that are already underway. Among other steps, it mentioned the need for the Federal Housing Administration to be allowed to offer mortgage insurance to a broader range of borrowers,

Another bill, moving through Congress, is being addressed to the problem which refers to tax liability on forgiven loan debt and whether it should be waived.

The report also said loan originators should do more to adjust loans so borrowers can continue making payments on them. Although there has been pressure from the Bush administration to press lenders to take these steps, but this effort has been criticized as it has not led to any significant increase in loan modifications.

Popularity: 8% [?]

Bookmark to: