How bad is it? Pretty bad.
A Foreclosures.com report noted that two in every 1,000 homeowners faced foreclosure in the first three months of 2007. Some areas are more affected than others. An American Banker study reviewed the top 50 metropolitan areas with the highest foreclosures in 2006. Many areas of the country faced extremely harsh conditions. San Antonio was ranked 10th in foreclosures with one out of every 37 homes being foreclosed. In Columbus, Ohio, one in every 45 homes was facing foreclosure.
Fannie Mae Vice President and Chief Economist, David Berson anticipates that for the first time in 30 years, home price growth by most measures will fall into negative territory.
Since 2000, subprime loans have risen to $591 billion in 2006. MBA (Mortgage Banker Association) data reveal that in the last quarter of 2006, foreclosures on subprime loans increased by 50 percent over the same period in the prior year.
Author, Aaron NematNejadThe Subprime MeltdownAn Explanationoffers some telling insights.
Many economists are blaming the crisis on exuberant brokers who lure borrowers into mortgage deals. These borrowers very often do not understand the types of loans or the contracts they sign.
Lenders very often use independent brokers who originate half of underwritings, of which 70 percent of them are subprime.
Subprime mortgage brokers were actually protected by a legal leniency. Under U.S. law, investors who buy securities backed by mortgages or even the actual mortgages are not exposed to lawsuits for fraud.
The article also cites lack of government regulation as the cause of the problem. You think.
from the Oct. 17-23, 2007, issue