Record-Level Foreclosures

Real estate and mortgage analysts predict the numbers have yet to reach their highs.

The first quarter of 2007 has proven to set a new record for foreclosures. The previous record was, unfortunately, set by the last quarter of 2006. According to the Mortgage Bankers Association, the stress and concerns of the housing markets are continuing.

What is even more concerning is that most analysts believe we will see this trend continue into 2008. Delinquencies and foreclosures are rising as borrowers are having more and more difficulty making their payments. The majority of these problems are tied to the adjustable rate, exotic-option ARMs, and interest-only loans as these loans reach their first payment adjustments and house payments often jump by as much as 50%.

The other factor affects borrowers who financed 95% to 100% of their purchases (whether through fixed-rate or adjustable-rate programs), putting little or no down payment into their purchases. In the majority of the country, real estate values have remained stagnant, and in many regions, they are declining. When these borrowers want to refinance, get home equity loans, or even sell, they are finding that they don’t have enough or any equity-not even enough to pay the selling costs if they were to try to sell.



The states with the highest foreclosure and delinquency rates are California, Florida, Arizona, and Nevada. Next are the Northeast states. Next are mostly the larger metropolitan cities throughout the country, including those in the Midwest, where there have been mounting economic and job issues.

One positive in all this that may help to curtail and restrain the foreclosure numbers is the ability and willingness of lenders (loan servicers) to renegotiate or lengthen the terms of loans for those borrowers who do fall behind. This is a double-edged sword, though. On the one hand, it is a definite plus for the borrower who needs help. Unfortunately, it can also simply delay the inevitable.

The other side is that it doesn’t give the market a true indication of the health of those markets. Lenders are also accepting short sales (when they will accept lower payoffs for sales than are owed on properties), and oftentimes this is a better option for the borrower than extending the terms of the loan if his or her financial picture isn’t likely to improve dramatically.

If you are one of the borrowers who may be reaching the point of becoming delinquent on a mortgage, don’t ignore the problem and hope for the best. It is best to contact your lender ahead of serious delinquency and begin the process of discussing alternatives. The lender will be much more willing to assist you if you reach out for help early. The later in the process you seek help, the more difficult it is to work with you.

Remember... the lender DOES NOT WANT YOUR HOUSE! They would rather find a way for you to keep it!