Many experts are predicting that foreclosures may reach as many as 7 million mortgages in the next twenty-four months, and that an additional 5 million are at risk of default because borrowers owe more than the property is worth. This is called being Underwater with your mortgage – check out chapter 8 of my book for more information.
Looking ahead, our nation’s foreclosure problems are going to get much worse before they get better. There are thousands of delinquent home loans piling up on lender’s desks. A high percentage of these delinquent homeowners will default on their mortgage loans. This will prompt lenders to file for foreclosure. So the flood of potential foreclosure filings is swelling among the major financial institutions across the nation.
So How Bad Is It?
Will we see the start of another housing collapse before the end of 2010? How about the by the end of 2011? The truth is that there are many troubling signs in the housing numbers. The massive tax credit that the government was offering to home buyers helped prop up the housing market for quite a while, but now that the tax credit has expired, many real estate professionals are bracing for the worst. The reality is that foreclosures continue to set all-time records, the mortgage industry is a complete mess and another massive wave of adjustable rate mortgages is scheduled to reset in 2011. The record high rate of mortgage delinquencies and foreclosures remain the banking industry’s biggest obstacle towards financial recovery. The horrific statistics for the first quarter on mortgage defaults provides little reason to believe that the housing crisis will end anytime soon. It is going to get worse before it gets bad. How are you feeling now?
There is over $10.2 trillion in mortgage debt outstanding in the consumer mortgage market. Over 14% of mortgages in the US are either in foreclosure or 30 days late. If you do the math, this equates to 51 million active mortgages times 14% equals 7,140,000 mortgages in default or 30 plus days late. How can this be?
Many government programs are failing because thousands of homeowners have no ability to pay their mortgage once they have entered the program. And then you have a growing number of Americans who can pay their mortgage but are deciding to just stop paying.
Most of the problem is with the overall economy. Even though strategic defaults (walking away) are growing, 4 out of 5 foreclosures occur because homeowners cannot pay their mortgage. We have millions receiving unemployment benefits and a record high of over 42 million receiving food stamps. Until we see this trend reversed and employment growing in a healthy way without government assistance, we can rest assured that any talk of a housing recovery is merely an elaborate trick.
Nineteen million homes in America now stand vacant with our national debt at approximately $12 trillion and growing. Can you say “Tax Increase”? Wait until 1-11-2011.
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