FORECLOSURE NATION

by Scott Van Voorhis March 6, 2009 09:00 AM

Looks like the foreclosure epidemic is getting its second wind.

The first wave of foreclosures featured homeowners duped into buying homes they couldn’t afford with goofy, subprime loans. Not to mention a whole lot of small-time investors who bought units in hopes of flipping them for big profits, as well as a just outright fraudsters who used straw buyers to create artificial sales.

But much of that first wave of crazy subprime mortgages gone bad has already crashed into the housing market and economy. Now we are starting to see the second wave, regular homeowners who are losing their jobs and their homes due to the economic downturn, of course triggered in part by the subprime fiasco.

Anyway, that is the way some are reading the latest foreclosure stats, with the number of troubled mortgages rising to 7.8 percent of all home loans, the highest since 1972, Bloomberg reports. Loans actually in foreclosure now amount to 3.3 percent of all mortgages in the country, an all-time high.


The Mortgage Bankers Association is pointing to the deepening recession and job losses as a key factor behind the growing number of bad loans.

Let’s just hope President Obama’s $75 billion lifeline to homeowners in trouble works a bit better than the now long list of previous multibillion-dollar rescue plans rolled out by the federal government and several states, including Massachusetts.

Still, even the president’s ambitious effort won’t help you if you’ve lost your job and have no money at all to pay your mortgage.

Comment Permalink Email ShareThis« Back to Front Page Previous Entry Next Entry 16 comments so far...

It's not like it matters, since the government insists on just giving these people the houses that they're living in at the expense of the rest of us who worked hard, saved to buy a home, and then got slapped in the face the first time by being locked out within the last 10 years. Now this second slap in the face. It's disgusting and wrong on so many levels. Maybe I'll stop making my car payment and just have all of you pay the bill. Why not? While we're at it, I'll go get a free house of my own..

Foreclose on them all.

Posted by Foreclose on these lowlives March 6, 09 09:22 AMThat's a big joke, buyers who were duped. They were stupid, plain and simple - NOT DUPED.

Posted by chris March 6, 09 09:30 AMI wonder what the percentage of 30 year fixed rate mortgages where the buyer put 20% or more down are in foreclosure?

Posted by CambridgeLandlord March 6, 09 09:54 AMI totally trust in Obama but we are experiencing a fundamental breakdown of some major systems. I don't expect one administration or even one term to be able to set this right. We will see many waves of foreclosures, whether there is a bailout or not.

Posted by Rhea March 6, 09 09:58 AMWhen people lose their jobs or are in serious fear of losing their jobs they Do Not Buy Homes. End of Story. We are going through an enormous shift. No longer will people reach or extend themselves for a home. The negative look on renting is going away quickly. Millions of homeowners now wish they were renting (including me). Housing will continue to Free-Fall and in fact pick up steam to the downside for years to come. We are seeing such Wealth Destruction that we will not recover for years in the stock market. Housing will revert back to shelter.

I am a lifelong Democrat and what Obama did since about July is say the economy is terrible and kept scaring people. Now Of course it was and is terrible, but you cant have the president yelling in everyones face of how dire it is. The economy is largely psychological and he has really shaken people along with his terrible leadership to the capital markets and Wall St. People will not nor should they invest if they dont knwo what the rules are. They are making things up as we go. No wonder everyone is in 3 month treasuries yileding barely over .15 of a % point.......

My children who are 6 and 11 and your children are getting royaly screwed over by the leadership of this country.

Posted by Fearful March 6, 09 10:18 AMwe haven't seen anything yet, especially here in Boston, which will go the way of CA...

Posted by Hung Wang March 6, 09 10:44 AMprime mortgages are now starting to see really high default rates - as some of us have been saying all along, calling it a subprime problem was never accurate.

Subprime was more the canary in the coal mine than the cause - the cause was over-leveraging the economy, spending way beyond our means.

Posted by charles March 6, 09 10:55 AMYou said that the second wave of foreclosures is due to people losing their jobs. Then, at the end, you say that the gov lifeline won't help you if you've lost your job.

So, it's like trying to bail water with a dixie cup while the Titanic is sinking.
I don't know, I didn't read all the details about Obama's plan.

Posted by julio March 6, 09 11:50 AMObama, are you listening??!!

Posted by Jeff March 6, 09 12:00 PMI think the hike in foreclosures will now be driven by unemployment. While there is still a significant amount of toxic mortgages out there, the problem is that if households lose their income they may lose their homes. Responsible people that saved, stayed debt free, and have equity are feeling the brunt of the economy on their savings and jobs. The rule of thumb for 6 mos - 12 mos of saving means nothing today. You need 24 mos. Where 401ks may have been a last resort, they are so depleted it is a joke. We are in a downward spiral in housing, but it is way beyond that now.

Posted by Mish March 6, 09 01:25 PMSubprime buyers were not duped into buying houses they could not afford. Other than a potential hit to their credit rating if foreclosure happened, which was probably bad to begin with, they were basically given a call option with maximum upside and zero downside by banks who were then offloading these loans via securitization. Who would not take such an option ?

The tragic thing now is that conservative tax payers, including those who preserved capital by opting out of the housing boom, are seeing their tax dollars subsidize losses by banks and homeowners alike, at the opportunity cost of what these tax dollars could have otherwise be spent on.

Posted by Thien March 6, 09 04:20 PM"Obama, are you listening??!!"

No, unfortunately he's busy having petty arguements with right-wing radio hosts and newspeople. If I didn't hear it, I wouldn't believe it.

Posted by lama March 6, 09 05:13 PMThe overall economic decline is snowballing and it is due to many factors, of which the subprime issue is just one part. People are losing homes now due to loss of their jobs and income, with inability to pay mortgages, but not all these people purchased homes in the past 5 years. Alot of responsible people simply lost their jobs throught no fault of their own. A sinking ship carries everyone down.

Posted by bostonrunner March 6, 09 06:21 PM"I totally trust in Obama ....."
Another sucker who trusts our politicians. The monitary policy is of more importance than the bailout Porkage. Poring money down AIG and Citi rat holes is another great loss to bail out the cronies....

Posted by Dan H March 6, 09 06:48 PMObama does not have the courage or conviction to stand up and actually implement the promises he made to us during the campaign. The first and foremose is earmark reform. He told us that he would veto bills laden with pork, and has already let us down. I voted for this man because I believed in his platform and long for the promise of change.

The very first legislation of substance that he signed was the stimulus bill. This bill contains more pork than anu other bill in our nations history, and the Omnibus spending bill [our regular budget] contains just as much, yet he will sign it anyway. Nancy Pelosi, Harry Reid and Barney "The Big Joke" Frank are running the Government and I think Obama is afraid of them.

This tragedy that is our current Government will do nothing more than be the cause of millions of starving people, massive civil unrest and the transformation of our good republic into a fascist police state.

What a tragedy. I weep for my children.

Posted by Mark A. March 6, 09 07:44 PM"Obama, are you listening". No, he is orating while watching the tennis match.It is becoming apparent that he is more orater than decision maker.