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Making records 1.2 million houses have been engulfed by a fresh surge of foreclosures during the second quarter of 2008. It accounts for 2.8% of all mortgage loans. It is a spike from 1.4% of the previous year according to Mortgage Bankers Association. Delinquency rates are continuing to soar pointing to grim days ahead. The MBA has been keeping data on foreclosure and delinquency since 1979.

The MBA has in its kitty 45-million house mortgage contracts. Of these 490,000 are new entries into the foreclosure zone. In the previous quarter the number was 448,000 marking an increase of 9% in the recent quarter. It is the 7th running quarter of foreclosure increases.

The delinquency numbers are also high. A mortgage loan becomes delinquent when at least one payment has been missed. It points towards the inevitable foreclosure. During the first six months of this year 2.9 million house owners or 6.4% were lagging behind in their mortgage payments. This is an increase of 25% from the previous year.

The national numbers are affected mainly by the figures rolling in from the hard hit states like California, Florida, Nevada, and Ohio etc. The position is worsening also in Texas, Massachusetts and Maryland as well. California and Florida together were responsible for 39% of all the foreclosures that began during the second quarter. The numbers in Rhode Island and Indiana too were much higher than the national average.

The sub-prime mortgages continue to sink into foreclosure. It accounts of only about 6% of all the mortgages but is responsible for 36% of all the new foreclosures of the second quarter. It meant 6.65 of the sub-prime (ARM) slipped into foreclosure during these months. It is 20 times more than the number of prime mortgages that have tripped.

Statistics show that the foreclosure crisis has “long since stopped being just about sub-prime” said Mike Larson of Weiss Research. Some of the delinquencies from prime mortgages increased to3.9% from 3.7% during the first three months of this year and 2.7% from the previous year during the same months. He said, “This is the highest reading yet.” The fear is that even if the sub-prime stabilizes it will be overtaken by the prime mortgages keeping the general foreclosure picture the same. The problem relates to the general economy and a much broader scenario.

The only ray of hope is that the fall in the price of houses has paused recently.

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Conditions of title is often of concern to a potential investor in Florida foreclosures for sale. It is a natural concern and the quality of the title deed has to be taken into serious consideration. There might be judgments or liens that cloud the title, fortunately for investors this is actually a myth. The lender will make a bid at the auction if he wants to take possession of ownership of the property. Typically the lender is the senior lien holder and if he purchases the property, as the senior lien holder, he will wipe out all other more junior lien holders. This process also eradicates any judgments against the title.

With Florida foreclosures for sale, if the lender who foreclosed on the mortgage does not want the property, he will not bid on it at the action. This could be due to the fact that the property has too many superior liens, such as the IRS or a tax lien. You might be able to learn a valuable lesson from this, as if you are attending an auction and desire to invest in a certain property, if the lender does not bid at the auction, you should also probably not bid.

In an effort to recoup losses in Florida Foreclosures for sale, the lender will bid on it in order to eradicate all other lien holders. Typically they will then pay all outstanding property taxes etc to ensure that the property has a clear and free title. No bank or lender is going to make the time and effort, including the expense to foreclose on a property that they will eventually lose because of a back tax lien of a few thousand dollars.

Once the lender has absorbed all of these costs they will add them on to the asking price of the Florida foreclosure for sale. They will thereafter sell the property with a clear title; they will not however sell the property at the same price as they paid for it on auction. It is a totally myth that the lender is compelled to sell a Florida foreclosure for sale at the same price they purchased it for on auction. So get this idea out of your head right now!

By the same token, and also very much another myth, is that banks and lenders are making it easy for investors to purchase Florida foreclosures for sale. In fact it has been said that they are literally bending over backwards to get rid of these. It is not so! While it is true that they do not want a whole lot of properties on their books and they want to sell, they are not just giving these away. Banks also have to make money, they are corporations, with investors and shareholders to answer to, and as we are all too aware, banks never give away anything for nothing. They are not in the market to lose money so don’t fool yourself that you are able to purchase Florida foreclosures for sale, for a complete song.

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South Florida cities are no longer willing to lie low – they are fighting foreclosures tooth and nail. As foreclosures leave behind a trail of vacant houses it is the taxpayer’s who are feeling the pinch of keeping the neighbourhood safe and clean. Deerfield Beach has sanctioned money for the maintenance of foreclosed units.

The foreclosure numbers are galloping ahead in Florida without any signs of slowing down. The rates spiked in Broward and Miami-Dade counties within one year from 2006 to 2007. Miami-Dade reported 9,814 foreclosures in2006. This increased to 26,931 in 2007. In Broward County the jump was from 516 to 3,616 in 2007. This is having a chain reaction on those who are not foreclosed upon for indirect reasons. Property values of all are plumbing down with neighbourhoods becoming unsafe hemmed in by vacant foreclosed houses.

Dino Lapena is a resident of Deerfield Beach. He complained that the adjacent property has remained derelict since it was foreclosed. This is bringing a bad name to the entire locality that was once a ‘nice neighbourhood’. He said that a nearby house that had been worth $300,000 was sold for $180,000. There are no buyers despite the surge in vacant foreclosed units.

Deerfield Beach Commission approved last week the sanctioning of $50,000 as emergency fund to appoint contractors for mowing lawns, cleaning pools etc. Some of the fetid pools are breeding mosquitoes and disease is spreading. At places the grass is 4’ high reported Michael Mahaney the city manager.

Deerfield Beach noted 81 foreclosures in 2007 but this year it has already crossed 600 in June 2008. A meeting of the Code Enforcement Board was held to decide on the condition of the foreclosed vacant houses. Mahaney wanted as many as 37 houses to be declared unsafe and a threat to the locality. This will not solve the continuing foreclosure problem but it will somewhat address the safety and health related issues of the locality. The money will be realized by placing liens on the properties that will be dealt with. It is uncertain when the money will be realized but what is certain that prevention will be taken so that innocent children do not die from West Nile fever. When the board gives the green signal, clearing and cleaning operations will swing into action from Thursday.

Palmetto Bay leaders are taking similar action.

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The plummeting housing prices and soaring foreclosure create opportunities for first time house owners, according to a reputed auction house in Florida. In the yester years foreclosure properties were shunned as distressed properties that needed total over hauling before it became habitable and that was expensive. In recent times however foreclosure properties in the housing market draw agents and investors who understand foreclosure as good investment opportunities. Intelligent people purchasing a house for the first time dive into the market during such recession periods to retrieve property at bargain prices. The staggering real estate market, flooded with bank-owned foreclosure auctions allow purchasers heavy discounts on these properties, as the lenders, eager to dispose off these mortgages within the shortest period possible become very flexible.
Florida continued to be battered with foreclosure during the second quarter of 2008. RealtyTrac, the nation’s most trusted name in the real estate market and tracking foreclosure records in the nation, reported that Florida ranked as running the country’s fourth highest foreclosure rate during the past three months. One in every 78 households received a foreclosure filing which was twice as much as the nation’s average in foreclosure filings.
Dave Webb, Principal of Hudson and Marshall, the country’s most experienced foreclosure auction firm declared that 700 bank-owned homes in cities throughout Florida were to be auctioned in mid-August. Detailing the programme, Dave said, over 100 houses would be auctioned in Orlando, almost 100 houses in Tampa and more than 200 houses would be auctioned in Miami/Ft. Lauderdale area. The sellers paid for the title insurance of all the properties. The foreclosure properties were to be auctioned at ‘as-is-where-is’ basis, Hudson and Marshall confirmed. The buyers were allowed to carry out a thorough inspection of the house they wanted to bid for. After the sale, the successful bidder was required to deposit in cash or certified funds an amount of $2500 for each of the properties he had successfully purchased.
Hudson and Marshall, based in Texas, was America’s premier auction authority with forty years of auction history in the US. Maximizing sales, the company was able to sell 70,000 houses in the past eight years by means of an accelerated sales process, which efficiently sold innumerable properties that minimized expenses and maximized returns to the lenders. Last year, H&M total sales amounted to $1.2 billion and the company’s anticipated sales were stated to auction another 30,000 houses through 2009.

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The US Senate had introduced a Bill to back borrower-initiated plan to save foreclosure from taking hold of the property and it was binding on the lenders as well. The Bill had been introduced in the House (H.R.3609) and the Senate (S. 26360) was prepared to provide workouts that would be initiated by the suffering house-owners and mandatory on the lenders. It would allow bankruptcy judges to reframe the loan contracts by either lowering the interest rate or by reducing the principal amount of the mortgage loan. The policy intended to make loan repayments more affordable to borrowers.
According to legal experts, the bankruptcy law of 1993 prohibits modification of mortgage contracts of primary residences by bankruptcy judges and so the law needed an amendment to enforce the plan modified by the bankruptcy judges. Besides, the greatest advantage of the plan was that there would be no extra burden on tax-payers.

Dean Baker of the Center for Economic and Policy Research had proposed another plan for house owners in trouble. The plan termed as ‘own-to-rent’ required house owners facing foreclosure to live in their houses as tenants and pay rent at the existing market rate and not pay the mortgage amount as owners, which was higher than the rentals they would have to pay. Borrowers qualified under the plan would be identified at the median house price in a metropolitan area and was unlikely to benefit house owners belonging to the high-income group. The plan would not burden taxpayers either. A bill to the same effect was recently put up at the House (H.R.6116).

The present foreclosure crisis had taken a back seat in political circles that had decidedly little to comment on foreclosure crisis and anti-foreclosure policies, although it was evident that the foreclosure crisis would intensify in the months to follow. Consequently more house owners would join the bandwagon and demand for more suitable policies to address their problem. The house-owner initiated policies were preferred over the lender-initiated policies in that they gave maximum protection to the house owners against foreclosure. It was desired however that both the options be available to all, especially to low- and moderate-income borrowers.

The bill had the support of AFL-CIO, SEIU, NAACP, ACORN, the Center for Responsible Lending and other consumer protection groups.

The only snag in the bill was that the borrower would have to declare bankruptcy and the Mortgage Bankers Association was vehemently opposing the bill from coming into force.

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Foreclosure have lain seize on Orange County, especially where sub-prime lending had concentrated, and was intensifying. During the second quarter of the year, four Santa Anna ZIP Codes were the epicenter of foreclosure in the county. The overall ratio between foreclosure and the total number of condominiums and houses more than doubled over that in the first quarter in some ZIPS, according to DataQuick, which analyses foreclosure trends in the country.
Statistics show that 75% of the people in Santa Ana had borrowed money to buy houses under sub-prime lending in 2005 when the real estate market was booming, and it was they that were the worst hit in the nationwide foreclosure crisis. Santa Ana, with 92701 properties filing a foreclosure was the forerunner and 23 out of every 1000 households received a foreclosure filing during the second quarter compared to 10 out of every 1000 ratio in the first quarter, as projected by DataQuick which detailed foreclosure in each ZIP for the quarter ending June 2008.
The tentacles of foreclosure had spread to the neighbouring county cities, including Anaheim, Orange, Garden Grove and Stanton and even beyond to places that have not been the target of sub-prime lenders. Market watchers stress that people enjoying good credit back-up had ventured to buy houses in areas such as parts of Lake Forest, Ladera Ranch, Rancho Santa Margarita and Aliso Viejo, as investments or to live in, in the near future. Unfortunately, these buyers are suffocated under their mortgage loans.
These South county ZIPs rank third for having the maximum concentration of foreclosure among counties. Experts blame foreclosure for pulling down the prices of houses in the country. In Santa Ana’s six ZIP codes the median prices of houses sold dropped 50% compared to a 13% drop in June last year.
US Representative, Loretta Sanchez, covering Santa Ana, Garden Grove, parts of Anaheim and Fullerton, promised that the housing bill passed at the Congress intended to help areas like central Orange County. The housing bill would enable borrowers entrapped in the foreclosure dilemma to interchange the existing loan mortgages for loans at more affordable rates and conditions. The borrowers in default would be backed by refinance mortgages by the Federal Housing Administration to the tune of $3oo billion. Apparently, though the bill looks good, it is obvious that lenders would be unwilling to suffer losses on loans backed by the FHA, snapping out the efficacy of the much-publicized housing bill.

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The long tentacles of foreclosures in USA are now reaching out to affect the global economy. It is spreading with no signs of retreat according to the International Monetary Fund. Reporting on the global financial situation as in April IMF states that that the international financial markets continued to be brittle with indications of risks being high on the agenda.

It is a year now since the foreclosure crisis has made its presence felt in USA.. The financial institutions have bared their losses but the story has not ended there – the infection is spreading to other types of credit.

The International Monetary Fund is an institution consisting of 185 nations. It stated, “Credit quality across many loan classes has begun to deteriorate with declining house prices and slowing economic growth.”

Till about a year ago the foreclosure crisis was mainly thrashing the borrowers. Slowly foreclosures began to strangle the lenders in the country. They had eaten too much and the huge number of foreclosures led to their suffering from indigestion. But America is a big brother to all countries across the globe. There is a saying that when USA sneezes the others catch a cold. All those who had eaten at the same foreclosure table of woes are now showing symptoms of discomfort and economic ill health. Banks are being pressurized to raise extra capital despite the depletion of huge bank stocks. This has “increased the likelihood of a negative interaction between banking system adjustment and the real economy” according to the latest report from Global Financial Stability.

At a news conference Jaime Caruana of IMF said, “the downside risks outlined in the April GFSR appear to be materializing, leading to a negative feedback loop between the financial system and the broader economy.”

According to IMF calculations the banks and other financial bodies have written off $400 billion in mortgage investments. There is no sign of improvement with innumerable foreclosures waiting to be auctioned and signs that millions more will become delinquent. The call of the hour is to stem the tide of foreclosures in USA. The stumbling of Fannie Mae and Freddie Mac has further eroded confidence.

Banks are tightening credit and selling assets. In the first quarter of this year the private sector borrowing of US dropped by 5.2%. This level has not been recorded since the year of the last recession – 2001.

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The foreclosure mess mires as $25 billion might be required to save Freddie Mac and Fannie Mae. The Congress is putting its best foot forward to stabilize these two mortgage giants. The federal rescue efforts will ultimately come out of the pockets of the taxpayers. The lawmakers argue that by saving them, the foreclosure victims under threat from eviction will also be saved.

The costly rescue operations have not been inked as yet – it is just a point of worry at this juncture. Peter Orzag of the Budget Office of the Congress said in a written letter to the lawmakers that there are chances that the government will not have to intervene directly to prop up the duo by lending dollars or by buying up stock.

But the Congress has to vote early to allow the treasury authority to temporarily haul the duo on to a lifeboat. It will enable thousands of house owners cowering under the foreclosure cloud to refinance into more easy loans that will be backed by the government. It will halt evictions and put a hold on neighbourhoods being dotted with dangerous empty houses.

Against the wishes of President Bush the bill will pump in $4 billion in to those regions that have been worst hit by the foreclosure crisis. It is this that has made Bush threaten to veto the bill.

The Democrats are scenting blood in this election year when economic blues are uppermost in the minds of the voters. The leaders of the party are planning to include an independent measure that will increase the compulsory limit on the national debt grants from $800 billion to $10.6 trillion.

By setting up a new regulator, new restrictions will be imposed upon Fannie Mae and Freddie Mac. These two own and or guarantee $5 trillion mortgages in USA –nearly half the total mortgages of the country.

An affordable housing fund will be created from the profits of the firm. It will cover losses incurred because of the foreclosure rescue plan. Henry Paulson, the treasury secretary has been anxious for the government to get temporary powers to offer huge sums to prop up Freddie and Fannie so as to calm the investors and thus bring about stability in the financial market. Rumours about their financial instability led to the falling of their stocks.

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