U.S. Mortgage Foreclosures Rise as Owners `Give Up'

[Barefootsies]

By Kathleen M. Howley

March 6 (Bloomberg) -- U.S. mortgage foreclosures rose to an all-time high at the end of 2007 as borrowers with adjustable-rate loans walked away from properties before their payments increased, the Mortgage Bankers Association said today.

New foreclosures jumped to 0.83 percent of all home loans in the fourth quarter from 0.54 percent a year earlier. Late payments rose to a 23-year high, the organization said in a report today.

``We're seeing people give up even before they get to the reset because they couldn't afford the home in the first place,'' said Jay Brinkmann, vice president of research and economics for the Washington-based trade group.

The Bush administration is urging lenders to avert foreclosures by modifying mortgage terms amid the worst housing slump in a quarter century. The Federal Reserve has slashed its benchmark interest rate twice this year to try to avert the first recession since 2001. The central bank yesterday said the net worth of U.S. households decreased by $532.9 billion during the fourth quarter as home values fell.

The share of all home loans with payments more than 30 days late, both prime and fixed-rate loans, rose to a seasonally adjusted 5.82 percent, the highest since 1985, the bankers' group said in today's report.

Buyers `Overstretched'

About 40 percent of all foreclosures are homeowners with prime or subprime loans who couldn't make their payments before the reset, Brinkmann estimated in an interview. Another 23 percent are borrowers who received some form of loan modification, typically a freezing or a reduction of their rate, and then default, he said

Forty-two percent of new foreclosures in the fourth quarter were people with adjustable-rate subprime mortgages, given to borrowers with limited or tainted credit records, according to the report. Those types of loans accounted for about 7 percent of all mortgages, the report said.

``It comes down to an overstretching of buyers to get into homes they couldn't afford and an overextending of credit by lenders who were more willing to take risk,'' Brinkmann said.

Another 20 percent of new foreclosures were prime adjustable-rate mortgages, which accounted for 15 percent of all home loans, according to the report.

Late Payments Data

Twenty percent of adjustable-rate subprime loans had late payments in the fourth quarter, a number that excludes the one of every eight mortgages already in foreclosure, the bankers group said in their report.

The share of late payments for adjustable prime loans was 5.51 percent, from 3.39 percent a year earlier, and the foreclosure inventory rose to 2.59 percent, almost tripling from a year earlier.

The Mortgage Bankers survey examines 46 million residential home loans, about 80 percent of the market. The study gives percentages without providing the number of loans they represent.

Homebuilding executives, economists and securities analysts predict the housing market won't begin to recover until at least 2009. U.S. sales of new and existing homes probably will fall to 5 million this year, a drop of 33 percent from the all-time high of 7.46 million in 2005, before rising to 5.23 million in 2009, Freddie Mac said in a March 3 forecast.

Freddie Mac and Fannie Mae, the biggest U.S. mortgage finance companies, have posted their largest-ever losses as rising defaults boosted credit costs. Fannie Mae had a $3.55 billion loss in the fourth quarter, the Washington-based company said Feb. 27. Freddie Mac reported $2.45 billion fourth-quarter loss the following day.

The Mortgage Bankers survey came on the same day that the National Association of Realtors reported that the number of Americans signing contracts to buy previously owned homes was unchanged in January.

The Realtors' index of signed purchase agreements held at 85.9, higher than forecast and the second-lowest level since the Chicago-based group began keeping records in 2001.

To contact the reporter on this story: Kathleen M. Howley in Boston at [email protected].

http://www.bloomberg.com/apps/news?p...hJQ&refer=home

[Brother Bilo]

That's horrible. I mean, a lot of these people should of known better than to get into a place they couldn't really afford, the market couldn't stay as good as it was forever.

Just looking around where I live now, there are so many houses that are still vacant. Houses that were built 2 or 3 years ago that still haven't been lived in.

[Calico Jack]

You'll be finding that here in Australia too anytime soon, now the major banks are toying with the idea of raising interest rates above the levels set by the Reserve bank. Bastards!

[Barefootsies]

Yep, same here. The market's a glut. Prices dropping $20-50k+ from last summer and fall. Delicious since I am going to be buying. But sad for many.

I have been watching some of the HGTV and other home shows on the cable. Funny when it gets to the financing part, and options, they make the SMART ARMS sound so lovely....

lol

[pornguy]

Originally Posted by Brother Bilo

That's horrible. I mean, a lot of these people should of known better than to get into a place they couldn't really afford, the market couldn't stay as good as it was forever.

Just looking around where I live now, there are so many houses that are still vacant. Houses that were built 2 or 3 years ago that still haven't been lived in.

They were sold a story by the lenders with all sorts of guarantees.

And guess what.

[VikingMan]

The average person has zero clue about the financial/ investment world and NO desire to pull the fork out of their mouth or turn on off the TV for a moment in order to learn.

They get their daily dose of reality from CNBC and that is why they are fucked.

[Calico Jack]

We've just had our 4th interest rate rise in 4 months here and we're paying about $100 more a month. From what I read and hear, we're far from seeing the last rate rise too.
Lots of houses for sale here and people are downsizing not able to continue to afford the payment on houses that were affordable just 4-5 years ago.

[Drake]

Saw this coming years ago when the market was good and many people were getting crazy loans.

[IllTestYourGirls]

I cant wait till Obama or Clinton force people to buy insurance and pay for others that can not afford to buy the insurance. Should help people pay for their houses.

[L-Pink]

Originally Posted by Barefootsies

Yep, same here. The market's a glut. Prices dropping $20-50k+ from last summer and fall. Delicious since I am going to be buying. But sad for many.

I have been watching some of the HGTV and other home shows on the cable. Funny when it gets to the financing part, and options, they make the SMART ARMS sound so lovely....

lol

Did everyone see the thread about Detriot last week? This thread still amazes me. Check out some of the links ... !!!


http://www.gfy.com/showthread.php?t=...hlight=Detriot

.

[Barefootsies]

Originally Posted by *******

The average person has zero clue about the financial/ investment world and NO desire to pull the fork out of their mouth or turn on off the TV for a moment in order to learn.

They get their daily dose of reality from CNBC and that is why they are fucked.

Agreed.

Which is why the premise of eliminating social security, and having all these "winners" managing their OWN affairs is a hilarious premise.

If this country wanted to move to something like that, you can start by teaching high school students about finances. Credit cards, bank loans, credit score, etc. Then maybe in a few generations people could handle it.

Maybe.

[Barefootsies]

Originally Posted by L-Pink

Did everyone see the thread about Detriot last week? This thread still amazes me. Check out some of the links ... !!!


http://www.gfy.com/showthread.php?t=...hlight=Detriot

.

Yep. It's even worse. Old college roommate is homeland security over there. They are stripping whole houses of copper and wiring and shit.

[Babaganoosh]

This is great news for buyers. I intend to buy a house within a year or so. I read a report from Coldwell Banker that said home values will decrease by 15% in 2008 and another 10% in 2009.

[L-Pink]

Originally Posted by Barefootsies

Agreed.

Which is why the premise of eliminating social security, and having all these "winners" managing their OWN affairs is a hilarious premise.

If this country wanted to move to something like that, you can start by teaching high school students about finances. Credit cards, bank loans, credit score, etc. Then maybe in a few generations people could handle it.

Maybe.

Then we would have to bail out those that made bad financial decisions, the mess would never end.

[teomaxxx]

Originally Posted by Barefootsies

Yep, same here. The market's a glut. Prices dropping $20-50k+ from last summer and fall. Delicious since I am going to be buying. But sad for many.

I have been watching some of the HGTV and other home shows on the cable. Funny when it gets to the financing part, and options, they make the SMART ARMS sound so lovely....

lol

wait at least till the end of year. I am heavily shorting lenders/financials/homebuilders and the worst is yet to come.

[Rodent]

AHHHH were all gonne die!@#! Come fall/end of the year should be nice period to pick up a house on the cheap if you are looking to get into one. I know a few people who plunked down on houses in the last 3 years only to see 100K+ knocked off what its worth now.

[ajrocks]

I love how the banks fuck up everything because they are greedy and then the government walks in and bails them out.

[tony286]

I think is more the mortgage brokers than the consumer. Most consumers dont know shit, all they care about is the size of their payment. The broker only talks about the rosy side of things and the consumer takes the bait. I think banks should say to people, your close to losing your house. If you were to move tomorrow the rent in your area would be say $750 a month. We are extending your loan to 75 yrs and pay us that. When the market gets better we will revisit. It saves them being stuck with a glut of houses and the costs of foreclosure. Its better than getting nothing or 30 cents on the dollar which is what its going to come to.

[Peaches]

I can't believe people don't read a contract that is probably THE most expensive purchase of their entire lives. If you were conned and are screwed by having an ARM you can't afford, you have no one to blame but yourself, IMO. If you can't read and understand a contract, spend $500 for a freaking lawyer to do it for you. I mean seriously - we're talking about a hundreds of thousands of dollars purchase, you should know EXACTLY what you're getting into.

[L-Pink]

Originally Posted by Peaches

I can't believe people don't read a contract that is probably THE most expensive purchase of their entire lives. If you were conned and are screwed by having an ARM you can't afford, you have no one to blame but yourself, IMO. If you can't read and understand a contract, spend $500 for a freaking lawyer to do it for you. I mean seriously - we're talking about a hundreds of thousands of dollars purchase, you should know EXACTLY what you're getting into.

A good salesman will beat common sense everytime.

[DaddyHalbucks]

It's a nice time to BUY.

[LeRoy]

Yep i'll be looking to rent a new place soon my landlord is losing the house

[Peaches]

Originally Posted by L-Pink

A good salesman will beat common sense everytime.

Thankfully after buying several houses (and several cars) I've yet to find a "good salesman" then.

I can remember when I went over my last contract with my banker and I made him explain EVERYTHING. The best was when he said "And here's the part that says we're going to sell this loan before the ink is dry."

[Peaches]

Originally Posted by D2222

Yep i'll be looking to rent a new place soon my landlord is losing the house

Contact the bank and see if you can buy it from them. Banks don't like owning houses. Since you're already there, it's a win/win for them.

Obviously if it's already gone to auction and been sold, this advice sucks.

[L-Pink]

Originally Posted by Peaches

Thankfully after buying several houses (and several cars) I've yet to find a "good salesman" then.

I can remember when I went over my last contract with my banker and I made him explain EVERYTHING. The best was when he said "And here's the part that says we're going to sell this loan before the ink is dry."

The key word you used was "banker" .... Most mortgage brokers were just selling paper.

[tony286]

Peaches your far from the avg consumer, your a smart business woman.So what you see as simple common sense doesnt even cross the avg persons mind hence all these mortgages going bad.

[atom]

I was on a 5 year arm and 2 1/2 years ago refied to a 15 year. it didnt take a rocket scientist to see that rates were going to go up and all hell would break loose for those people. I just wish I would have saved a little more money up so I could have bought another house in the next year and a half.

The house right next to me was repo'd and the bank is trying to dump it off for what I paid for mine almost 7 years ago. Its comparable in size. Funny how the city appraises my house going up in value every year though so I get to pay more property tax.

[Peaches]

Originally Posted by tony404

Peaches your far from the avg consumer, your a smart business woman.So what you see as simple common sense doesnt even cross the avg persons mind hence all these mortgages going bad.

I bought my first house when I was 21 and my ex was 23. I was a SAHM and he was in construction - hardly business savvy. We still read the contract and understood it before we signed the paperwork.

IMO, if you don't understand what you're signing and you blindly follow a salesperson's advice, you get what you bargained for. And if you screwed up, please don't expect my tax dollars to bail you out. That goes for the mortgage companies too - I don't want to bail them out either as they also knew what they were getting into.

[aico]

It's all part of the master plan.

[L-Pink]

A banker want's to know why a cable bill from three years ago was late before approving your mortgage.

Some of the mortgage brokers didn't even ask for proof of income.

That's why there is a mortgage crisis.

[Peaches]

Originally Posted by atom

Funny how the city appraises my house going up in value every year though so I get to pay more property tax.

Can you dispute your property taxes? I've done that a few times and actually won I felt like such a deadbeat arguing when it only saved me a few dollars, but money is money.

[VikingMan]

Originally Posted by aico

It's all part of the master plan.

I agree, have another beer, charge another plasma screen on your credit card. You are still fucked but at least you will feel a little better about being such a dupe.