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Home / An alarming report says 2010 will see more Foreclosures

An alarming report says 2010 will see more Foreclosures

A recent report issued by the Mortgage Bankers Association (MBA) that the rate of homeowners delinquent on their home loans is climbing. This means more homes are going to be repossessed and foreclosed upon. The report also predicts that this rate will continue to increase throughout 2010.
The record-high foreclosure rates indicated that as of the end of the third quarter of 2009, 1 in every 7 homes in the U.S. was past due on its payments or already in foreclosure proceedings. The number is the highest it has ever been since the MBA began to record these figures in 1972. Even more troubling is that the end of 2008 saw 1 in 10 homes past due or in foreclosure.
Alternating positive and negative signals in the housing market confuses many consumers and industry experts. On one hand, median home prices have stabilized after dropping from record highs in decades. States like California are seeing their most-desirable housing markets slowly increase their price levels again.
Negative trends still abound. Foreclosures are on the increase, while applications for new home purchases have been steadily declining for weeks. This is unusual considering that government and industry actions have brought interest rates to less than 5% on 30 year fixed rate loans. Incentives like this usually spur purchases, but job losses, reduced income, and consumer skepticism are leading to stagnant sales.
Economists comment that the current market cannot be readily compared to peaks in the past, where foreclosures rise for about two consecutive quarters and then taper off. It is predicted that foreclosure rates will increase far beyond this, due to the unusually high housing bubble and accompanying collapse.
Most worrisome is the addition of prime loan failures – the loans made to borrowers who supposedly had great credit ratings. Unfortunately, in this economic environment, even people who had steady streams of income are facing foreclosure due to job loss and record high unemployment rates. Prime loan failures are up from 21% in 2008, to 33% as of the end of the third quarter.
What is tough for these prime loan borrowers is that they may not qualify for government programs to prevent foreclosure, since some banks are reluctant to modify loans for those they consider in a short-lived slump.