Posts Tagged ‘bay area’

California and the Bay Area have been worst hit by the foreclosure crisis primarily because it was in this region that there had been frenetic housing activity in the form of sub-prime loans and mortgages. This had always been one of the highly priced zones and real estate had been ballooning for many years. Many hoped that this trend would continue.

The lenders and their agents had a wolfish appetite. More and more were trapped into the zone that ultimately led to foreclosures. To willy-nilly push through loans the initial interest was low, no down payment or income proof was required. To increase the loaned amount the value of the house was falsely upgraded causing complications. Investors swooped in trying to use equity on houses as a capital for speculation and investment. Loans were made into packets and bundled off to distant addresses. The stage had been set for the outbreak of a storm of tsunami proportions.

The prices of houses began to fall. House owners found that the value of the house did not add up to the loaned amount. When interest began to rise foreclosures became inevitable.

The situation in California was especially bad because many jumbo loans had been taken here – those worth more than $417,000. These were not insured federally and lenders took on jumbo risks with the loans. The interest rates too were jumbo sized increases. It whizzed past 8% to 12% - being much more than the prime big size loans. It is then little wonder that California is leading the nation in the foreclosure race. Out of 635,000 filings in the entire country, 148,000 are from California. The prediction is that in the coming months the picture is going to worsen.

It is too late to say now that lenders should never have been allowed to play with fire with impunity. But it is not too late to enforce them to do something to clear the mess they are responsible for.

With everybody being included in the grim socio-economic picture, the Governor of California, Schwarzenegger is taking all possible steps to mitigate the crisis – the main focus being on those in the foreclosure zone. The Governor and lenders are also offering refinancing schemes to those who have not defaulted as yet. The lender has realized that this is best option open to them. Foreclosure is as costly, time and money consuming process.

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