The Number Of Houses Affected By Foreclosure Hits A New Record

January 2nd, 2008

MBA’ chief economist Doug Duncan said that the number of US households in foreclosure are 994,000, further adding that “not all of them will lose their house, but that’s how many are currently at serious risk of losing their house.” According to the MBA, the battle will continue between the homeowners and the slumping housing prices and loan payments. There had been a record rise in the third quarter in not only the home foreclosure rates but also in the rates of homes, which were entering foreclosures.

The percentage of loans in foreclosure rose to 1.69 percent of loans outstanding, up 0.29 percentage point from the prior quarter and up 0.64 from a year earlier.

According to the trade group the reason for drive up of pace of homes entering the foreclosure process were problems with payments on all loan types.

Mike Larson, real estate analyst at Weiss Research in Jupiter, Florida, said, “over-easy monetary policy, a ‘hands-off’ regulatory approach, reckless real estate speculation, and the complete abandonment of prudent lending practices by the mortgage industry created a housing bubble.”

6.8 percent of all loans were sub-prime adjustable-rate mortgages, but it made up 43 percent of loans entering the foreclosure process in the third quarter. The numbers were pretty alarming as the rate of foreclosures started rose to a seasonally adjusted 0.78 percent in the third quarter, which was up 0.13 of a percentage point from the prior quarter and up 0.32 from a year earlier.

According to Duncan, this first quarter was a culmination of the effect of the credit crisis, weakness in the economy, broad-based home price drops, and loan rate resets for adjustable mortgages.

The reason as to why there is such a huge number of late payments and foreclosures is because the massive supply of unsold homes which is dragging prices lower. The higher the number of foreclosures the higher the inventory of unsold homes.

According to the survey, since 1986, the late payments on mortgages jumped to the highest level. This is also affecting the pace of the higher quality loans that is getting affected as well because of the imminent rise of the rates of homes entering foreclosure. The figures show that the rate for prime ARMs have risen to 1.02 percent in the third quarter, from 0.30 percent a year earlier, as subprime ARMs rose to 4.72 percent from 2.19 percent. Alarming as these statistics are, nevertheless they are true and needs catering to immediately.