In 2006, the housing boom in the US began to cool down and increasing foreclosed news has dominated the media ever since
. Homeowners began to lose their homes or are threatened with foreclosures because they have failed to keep up with the payments on their mortgage.
Many of the foreclosed homes are tied to neighborhoods where subprime martgages were widespread. MS Foreclosure for example. Unfortunately this has led to a decrease in home values as well which just adds fuel to the fire. Additionally, state and most local governments were forced to cut back on their spending because the drop in the value of these properties sharply decreased their tax bases.
There were 3 different foreclosure signs that were observed by people involved in the market. First was the bailing out of property owners due to the plummeting prices of real estate. The secondary sign involved previous borrowers with expired introductory interest rates resulting to keeping up with a higher rate and the third one, which is currently beginning to build up, are the people holding prime mortgages and who have lost their jobs due to the economic meltdown and are now unable to pay on their mortgages. Most of them even have good credit ratings. Unemployment is now forecast to impact about 60 percent of all of the mortgage defaults. Unfortunately, this means that even more foreclosure news will be heard through the rest of this year.
The New York Times stated in February of 2009 that there are more than 1.5 million prime mortgages alone with delinquent payments (data by First American Core Logic). On the same month, delinquencies on subprime mortgages reached 1.65 million while the Alt-A loans rose to 836,000. Shockingly over $717 billion in bad loans were on the books for February - up over 60 percent from the same time period a year ago. All of these foreclosures have also dramatically impacted Wall Street and mortgage bonds. These also lead to bank loses of hundreds of billions. (Note: Search on 'forecloser' as well because it is a very common miss-spelling of foreclosure and is prevalent in the foreclosure news posts.)
The Obama administration announced in February that they will be spending $75 billion to save as much as four million homeowners from foreclosures through mortgage incentives and reduced payments. The effects of this plan are expected to be felt in the next coming months. Until then, we should brace ourselves for more foreclosure news that is looming in the neighborhood.