Higher Interest Hike Leads To Higher Number Of Foreclosures

Posted in Foreclosures, November 5th, 2007 |

Foreclosure filings jumped to an all time high during the third quarter of 2007. There are no signs of the clouds lifting. The rise in ARM rates has led to a flood of foreclosures. According to reliable statistics the number rose 30% from the second quarter and double to what it was during the same time in 2006. Those sub-prime loans, which had started in 2004 and 2005, are ready to reset – property worth about $50 billion. The rate of increase will be so high that borrowers will find it impossible to carry on.

Moreover with the real estate market in the doldrums there is no escape route by selling off the unit and paying off the dues. The value of the property, in most of the cases, will be less than the loan amount. About 2 million house owners will be affected in the forthcoming years.

There are quite a number of sub-prime loans ready to be reset sometime in the middle of next year. This coupled with weak real estate market invariably points to hectic foreclosure activity – even increases over today’s records. Since 2005, August and September in 2007 were the two highest months. Sun Belt and Rust Belt states continued to rule the roost with Nevada topping the list. Here the ratio is 1:61. The foreclosure listings rose by 23% from the previous quarter and it tripled to what it was during the same period in 2006. California came second with a ratio of 1:88. In numbers it stood first with 94,772 to its discredit. It was 36% more than the second quarter and four times higher than 2006. Florida ranked second with 1:95. The numbers jumped to 86,465 showing a 50% hike from the second quarter and double to what it was in the previous year. The Rust Belt states of Michigan, Ohio and Indiana were included amongst the top ten with 1:102, 1:107 and 1:196 respectively.

Across the country 635,000 foreclosure listings were recorded – which means every one house out of 196 has been tagged with this name .The foreclosure process included default and auction notices together with repossession steps by lenders.

Foreclosures are not evenly spread out but with concentrations in some pockets. 45 out of the 50 states in the country showed year-over-year increases in the third quarter. The socio-economic picture is indeed grim and menacing.