The Foreclosure Boat Is Drifting But Not Sinking

Tags: arizona, bank, california, florida, Foreclosure, Foreclosures, loan, mortgage, nevada, Pre Foreclosures, Real Estate, reo
Posted in Foreclosures, June 20th, 2007 |

In the first five months of this year countless house owners felt the sting of foreclosures. But expert McGee, president of foreclosures.com opines that numbers are confusing. It does not necessarily mean that the national economy is floundering.

The Mortgage Bankers Association is echoing these sentiments. Except for few states the overall foreclosure numbers have dropped during the first quarter of 2007. In fact soon figures will be released showing that compared to the last ten years the foreclosure numbers would have been well below the average if it had not been for big increases in few states – California, Florida, Nevada and Arizona. Amongst them Nevada tops the list at all stages of foreclosure.

The first stage is that of pre-foreclosure filing. A notice is issued stating that the property is now in foreclosure for the loan is unpaid. In the second stage the notice of auction is given fixing the date. In some states like Arizona the two stages are taken as one. The third stage is REO or real-estate/bank owned is the final one when after the auction the property is handed over either to the new owner or returned to the original borrower if the latter has been able to meet his dues.

McGee stresses that the real villain of the piece is the first move when people buy houses, which they cannot really afford. The hope was that the prices of real estate would rise but when this did not happen the reality was harsh. Interest rose and there was no other alternative but to go for foreclosure. Statistics can be confusing because the same property can account for multiply filings at each stage of the process. That is why the per capita analysis of McGee is much more precise.

The rising numbers of foreclosures is indeed sad but it should not lead to mass hysteria about national collapse. In the long term this will not happen just as it did not do so during the last crisis in the 1990’s. The numbers must take into account millions of those who meet their mortgage dues regularly. 69% of USA citizens live in their own houses, as per census numbers. The truth is that foreclosures are only small portions of total US mortgage debts and not everyone, even in the sub-prime zone, defaults. Federal Chairman Bernake agrees with this view.

Via