Thursday, January 15, 2009

Subprime-driven foreclosure trend unabated in 2008

Foreclosures continue to shred the fabric of the American Dream as subprime mortgages rip into homeownership.

by Broderick Perkins
© 2008 DeadlineNews.Com
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Deadline Newsroom - Foreclosures continue to hammer the housing market and subprime mortgages keep wrenching homeownership from millions.

A grim "Year-End 2008 U.S. Foreclosure Market Report" from RealtyTrac reveals foreclosures rose 81 percent last year over 2007.

While only 1.84 percent of the nation's households (includes rented and owned properties) suffered at least one foreclosure filing during the year, that amounted to one in 54 of all households feeling the pinch.

The year 2009 could be worse.

Original projections forecasting the down market would yield some 2 million foreclosures have swelled to 8 million lost homes.

RealtyTrac said a total of about 3.2 million foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on some 2.3 million U.S. properties during 2008. All those properties don't wind up repossessed, but the 81 percent increase from 2007 pales in comparison to the whopping 225 percent increase in total foreclosure properties from 2006.

Foreclosure filings were reported on some 303,000 U.S. properties in December 2008, up 17 percent from the previous month and up nearly 41 percent from December 2007, despite a Fannie Mae-Freddie Mac stay on foreclosure and eviction actions that began November 26, 2008 and lasted until January 9, 2009.

Foreclosure activity did dip for the greater fourth quarter in 2008, down nearly 4 percent from the previous 2008 quarter, but still up nearly 40 percent from the final quarter of 2007.

States hit hardest by foreclosures were Nevada, Florida, Arizona, California, Colorado, Michigan, Ohio, Georgia, Illinois and New Jersey. Cities feeling the highest foreclosure rates were Stockton, Riverside-San Bernardino, Bakersfield and Sacramento, all in California; Las Vegas, NV; Phoenix, AZ and Fort Lauderdale, Orlando and Miami, all in Florida and Detroit, MI.

The subprime factor -- by the numbers

Subprime mortgages get much of the blame for the foreclosure pandemic which is not expected to fully ease before 2010.

The same loans that opened doors for homeowners who couldn't otherwise qualify for a mortgage, became the bane of their existence as mortgage payments ballooned and home values sank leaving scores of homeowners unqualified for a refinance or loan modification bailout.

The Center for Responsible Lending's just-as-grim subprime update "Continued Decay and Shaky Repairs: The State of Subprime Loans Today," tells the 2005 to 2008 subprime-foreclosure story by the numbers.

• 1.5 million homes already lost through subprime foreclosures.

• 2 million subprime mortgage holders currently delinquent.

• 26 percent of subprime loans originated during the second half of 2005 are currently delinquent.

• 42 percent of subprime loans originated in the first half of 2007 are currently delinquent.

• $352 billion is the estimated cost of subprime foreclosures to people who happen to live near foreclosed homes.

• 40 percent of U.S. home sales in 2008 were short sales or foreclosures.

• 8.1 million foreclosures expected over the next five years. That's one in 9 households or one in six mortgaged households.

• $9 to $10 trillion is the estimated decline in U.S. household wealth between 2007 and 2009. Most household wealth is in the hearth.

• The doom is gloomy. The subprime mortgage foreclosure fallout is likely the tip of the iceberg. Jumbo loans, so-called "Alt-A" mortgages, equity loans, piggy-back notes and a host of other types of "creative financing" all helped plunge the nation into the worst economic downturn since the Great Depression.

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

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