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Foreclosure "third wave" coming, economists say

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posted on May, 25 2009 @ 10:55 AM
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We all expected this to happen and here it is, the worse possible news
By Peter S. Goodman and Jack Healy

The New York Times

As job losses rise, growing numbers of U.S. homeowners with once-solid credit are falling behind on their mortgages, amplifying a wave of foreclosures.

In the latest phase of the nation's real-estate disaster, the locus of trouble has shifted from subprime loans — those extended to home buyers with troubled credit — to the far more numerous prime loans issued to those with decent histories.

With many economists expecting unemployment rates to rise into the double digits from the current 8.9 percent, foreclosures are expected to accelerate. "We're about to have a big problem," said Morris Davis, a real-estate expert at the University of Wisconsin. "Foreclosures were bad last year? It's going to get worse."

Economists refer to the current surge of foreclosures as the third wave, distinct from the initial spike when speculators gave up property because of plunging real-estate prices, and the secondary shock, when borrowers' introductory interest rates expired and were reset higher.

"We're right in the middle of this third wave, and it's intensifying," said Mark Zandi, chief economist at Moody's Economy.com. "That loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults."

Those sliding into foreclosure today are more likely to be modest borrowers whose loans fit their income than the consumers of exotically lenient mortgages that formerly typified the crisis.

Economy.com expects that 60 percent of the mortgage defaults this year will be set off primarily by unemployment, up from 29 percent last year.

From November to February, the number of prime mortgages that were delinquent at least 90 days, were in foreclosure or had deteriorated to the point that the lender took possession increased more than 473,000, exceeding 1.5 million, according to a New York Times analysis of data provided by First American CoreLogic, a real-estate research group. Those loans totaled more than $224 billion.

During the same period, subprime mortgages in those three categories increased by fewer than 14,000, reaching 1.65 million. The number of similarly troubled Alt-A loans — those given to people with slightly tainted credit — rose 159,000, to 836,000.

Overall, more than 4 million loans worth $717 billion were in the three distressed categories in February, a jump of more than 60 percent in dollar terms compared with a year earlier.

Under a program announced in February by the Obama administration, the government is to spend $75 billion on incentives for mortgage-servicing companies that reduce payments for troubled homeowners. The Treasury Department says the program will spare as many as 4 million homeowners from foreclosure.

But three months after the program was announced, a Treasury spokeswoman, Jenni Engebretsen, estimated the number of loans that have been modified at "more than 10,000 but fewer than 55,000."

In the first two months of the year alone, an additional 313,000 mortgages landed in foreclosure or became delinquent at least 90 days, according to First American CoreLogic.

"I don't think there's any chance of government measures making more than a small dent," said Alan Ruskin, chief international strategist at RBS Greenwich Capital.

So there it is... you thought last year was bad? already their seeing a 60% gain in just one year




posted on May, 25 2009 @ 11:11 AM
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Salute to you soldier and much respect upon this day.


Yes indeed a third wave is here.

This time it is solid middle class money going down the drain.

What does this signal?

It signals the ever growing gap between the rich and the new poor...who were once middle class. This in turn, when viewed with the colored specs of history, increases chance of civil unrest.

Have a great Memorial Day.



posted on May, 25 2009 @ 12:57 PM
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The Middle Class has disappeared, hasn't it? I was once Middle Class. I worked as a mechanic, and made $400 a week, had three cars, a truck and a motorcycle, and lived in a home that I had payed off with the sweat of my brow. The taxes got so high in the town most of the permanent residents moved away, selling their homes for much less that they payed for them. I took to driving semi cross country, to make more money, but wouldn't you know it, the economy kept on going down, and when I had the wreck, I suddenly owed out more than I had ever made in a year. The IRS took our tax refund for 10 years, seems my ex couldn't remember to pay the taxes on the business every quarter, and my medical insurance was cancelled two days after the wreck, when the company ended my contract. I have lived on social security ever since, unable to work, even if there was a job to have here where I live. I remember being Middle Class, but the memory is getting vague these days.

Already there are thousands of homes sitting empty because the banks have foreclosed on them...after inflating the prime rate on the mortgage to make the loan worth more that the land, when a person signed a mortgage contract, before the ink was dry it was sold again and again. This mortgage mess is caused by banks and the Federal Reserve, private banking concerns all, and the poor taxpayer bears the load, and ends up in the street. The cost of living is so fracking high it is hard to do anything. I rent, and pay our near $1000 a month to live here, not counting food and gasoline. Depressing, to be sure. It is hard to say no to a kid when he wants a new toy for doing chores, and I haven't had any new clothes in 4 years now.
Where are we headed? Nobody knows for certain, but if aliens do come here to live, they will have plenty of housing to choose from.



posted on May, 25 2009 @ 01:07 PM
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I think there is even more trouble in store for many Americans when it comes to the foreclosure crisis.

Congress has been working hard to beef up legislation regarding mortgage fraud and at some point millions of Americans might end up finding that they have to answer as to why the stated income on their loan applications didn't match Internal Revenue Records for reported Gross Income the year(s) that they took out the loan.

Many lenders and their brokers engaged in a wide spread practice of falsifying incomes on applications in many cases the borrower themselves was completely unaware of.

In these rapidly changing times I wonder how that might effect so many people who can no longer afford their homes and have had to relinquish them?

Could we see a return to debtor prisons in the United States? A prison style labor system to penalize people who mismanaged credit, or mismanaged credit having been obtained through falsified information?

The Housing Bubble might just turn out to be a gift that keeps on giving for a long time to come.



posted on May, 25 2009 @ 01:14 PM
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From the UK I heard Duncan Banatyne (from Dragons Den) talking about this issue last week - his view was we are going to Plateau on the decline for a while before seeing any green shoots.



posted on May, 25 2009 @ 06:10 PM
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One thing happened this past month that went unnoticed by most...
the 'Helping Families Save Their Homes act' had one major provision removed from the bill sent to the president...removed was the ability to let a bankruptcy judge renegotiate the terms of a defaulted mortgage...

In fact the bill sent to Obama was so watered down that only those with an FHA loan could receive help...
Defeated as from a business aspect it would have set a bad precedent in contract law but that single omission put lie to his claim of helping 8 million homeowners facing foreclosure...



posted on May, 25 2009 @ 06:15 PM
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reply to post by ProtoplasmicTraveler
 


the problem in legislation regarding mortgage fraud is it cannot be made retro-active as there was no law in place before all this... you just cant be punished for breaking a law if the law wasn't on the books at the time...

people will still lose there homes but these new protection laws make it harder to be defrauded on new sales



posted on May, 25 2009 @ 06:21 PM
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reply to post by autowrench
 


I feel your pain..
I'm retired now and already I had one grown daughter move back in... I have a son who'd like to... and one still in the house and finishing college may never leave..

looks like old grandpa here may have to go back to work full time just to take care of my adult kids

BTW I have a CDL too I drive tankers so much for living the good life after many long back breaking years of hard labor right?



posted on May, 28 2009 @ 11:21 AM
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Just one thing to add to update my old post
today 28 May 09 this news story hit the wires...



NEW YORK – A record 12 percent of homeowners with a mortgage are behind on their payments or in foreclosure as the housing crisis spreads to borrowers with good credit. And the wave of foreclosures isn't expected to crest until the end of next year, the Mortgage Bankers Association said Thursday.

The foreclosure rate on prime fixed-rate loans doubled in the last year, and now represents the largest share of new foreclosures. Nearly 6 percent of fixed-rate mortgages to borrowers with good credit were in the foreclosure process.

At the same time, almost half of all adjustable-rate loans made to borrowers with shaky credit were past due or in foreclosure.

The worst of the trouble continues to be centered in California, Nevada, Arizona and Florida, which accounted for 46 percent of new foreclosures in the country. There were no signs of improvement.

The pain, however, is spreading throughout the country as job losses take their toll. The number of newly laid off people requesting jobless benefits fell last week, the government said Thursday, but the number of people receiving unemployment benefits was the highest on record. These borrowers are harder for lenders to help with loan modifications.

President Barack Obama's recent loan modification and refinancing plan might stem some foreclosures, but not enough to significantly alter the crisis.

"It may be too much to say that numbers will fall because of the plan. It's more correct to say that the numbers won't be as high," said Jay Brinkmann, chief economist for the Mortgage Bankers Association.



So just how bad, is bad going to be? that's anyones guess now



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