Saturday, January 17, 2009

Foreclosure Crisis

I'm paying close attention to what's going on in the housing markets (as readers may recall), so this piece at the Washington Post is interesting, "The Growing Foreclosure Crisis":

Before Robin Bohnen and her husband, Shane, bought a $1.16 million Mediterranean-style house in an upscale Southern California suburb two years ago, they were not cash-strapped, debt-ridden or credit-impaired.

Now they are all of the above. Soon they also may qualify for one more distressing category: home lost to foreclosure.

"Wake me up, can this really be happening?" the 42-year-old Bohnen says. As she tries to describe how it feels to have the nation's financial crisis land in her living room, the phone rings. She ignores it. "It's probably the bank -- again," she says.

Bohnen once owed her comfortable lifestyle to the dizzying growth that transformed Southern California over the past decade, creating a boom that led many to believe their home values would keep climbing. As the owner of a furniture store born during the housing boom, she provided bean bag chairs and bedroom sets for the brand-new communities that easy credit built.

Now, she and husband just owe. They cannot afford their $6,400 monthly payment, and in this plummeting market, they wouldn't make enough on a sale to pay off their mortgage or recoup the 20 percent they put down to buy their Riverside County home.

They're "underwater," industry parlance for borrowers who owe more on their mortgage than their houses are worth. They have joined the growing line of homeowners seeking a break from their lenders.

Both the departing and incoming administrations in Washington have promised help on the foreclosure front, but providing help requires federal regulators to get their collective arms around the size and shape of the crisis. That isn't easy. No one agency collects information on every loan, every borrower and every delinquency.

But interviews and a Washington Post analysis of available data show that the foreclosure crisis knows no class or income boundaries. Many borrowers ensnared in the evolving mortgage mess do not fit neatly into the stereotypes that surfaced by early 2007 when delinquency rates shot up. They don't have subprime loans, the lending industry's jargon for the higher-rate mortgages made to borrowers with shaky credit or without enough cash for a down payment.

The wave of subprime delinquencies appears to have crested. But in October, for the first time, the number of prime mortgages in delinquency exceeded the subprime loans in danger of default, according to The Post's analysis.

This trend shows up most acutely in California and other high-growth regions, such as Arizona, Nevada, Florida and pockets of the Washington region, most notably in Prince William and Prince George's counties.

The recession has made it tougher for people to pay their mortgages, and crashing home prices have left many borrowers underwater, unable to sell or refinance their way out of trouble. One of every five mortgage holders now has a home worth less than the mortgage on it, according to First American CoreLogic, a firm that tracks mortgages and provided data for The Post's analysis.
There's more at the link.

2 comments:

Grace Explosion said...

I think there have always been times when financial setbacks personally made a person realize they cannot afford their house payment. In the "good ole days", they would put their house up for sale. But today, they are backed into a corner. They can't afford the house payment due to financial problems related to income/expenses... and there's no graceful way out through selling the home.

The price of housing is the problem for many who would not be going into foreclosure in a better selling market. They would sell rather than face foreclosure - and now that's not an option.

Look at all of the job losses we've faced. No job - no ability to pay the mortgage. In their case, the couple cited, they faced business decrease of income which was just like the rest of us who aren't business owners facing job loss or wage cut, loss of overtime, or something.

Things are going to get worse. More and more jobs are being lost.

It all comes down to the core of the fact that, to me, "real wealth" is in manufacturing - and we've lost the base of "real wealth" so much in the USA.

Too much "false prosperity" was "created" by borrowing. Until the debt is gone - one is living beyond one's means. We borrow to finance a lifestyle we cannot afford. If the economy had "real wealth" to count on - we'd be "okay". But this economy doesn't. It's "false prosperity" propping up a false image. Our Government borrowing is going to put our Government in the position of this couple. Their tax revenues are going to go DOWN - not up. And if they try to take MORE TAXES by raising taxes - they will further cripple the economy and further lower their actual revenues. The Government is going to go bankrupt. They cannot borrow and spend us into "prosperity". They are only creating a "false prosperity". Government is creating a "market bubble" of "bailout money" and "job creation" that has no basis in "real wealth".

Really, we all need to make whatever adjustments we have to make so that our expenses are lower than our income and we are saving and paying cash - getting out of debt. And that's what our Government needs to do too. We need "real wealth" through manufacturing jobs in the US - which means that Government has to "back off" and lift taxes.

All of these different factors, and more, are all swirling... and we're going to fall over the cliff here pretty soon.

2010 maybe mid point?? CRASH!! Tsunami. The market already crashed. The private sector/the business sector, also, will crash.

Circuit City is closing all stores.

It's a harbinger of what it is to come. At least DC didn't bail them out. It would have only created "false prosperity". Our Government is creating market bubbles, false prosperity, and is not getting out of the way so our manufacturing sector can recreate itself and rebuild in an environment of very limited taxation on business.

Let's all thank the Treasury Department and DC and State Governments, and local Governments.. It's taxation and redistribution of wealth that has destroyed our economy.

Donald Douglas said...

Grace: Recall that I may be "underwater," and I'm a working professional, and my wife is too. It's interesting that this crisis is seeping down to hit those who had perfect credit, money in the bank, good jobs, and good values.

We'll see...