| Mortgage Defaults Continue to Grow at Record | | | | billion from $21 billion. |
| Rates | | | | At a time when the average homeowner has to |
| The initial wave of toxic Subprime Mortgages that | | | | decide which bills to pay first - more and more are |
| caused so many foreclosures and put so many REO | | | | deciding their mortgage actually comes last. Why? |
| (Real Estate Owned) properties on the market may | | | | Because they are "upside-down" in their homes - that |
| have subsided - but the bursting of the housing bubble | | | | is, they owe more than the houses are actually worth. |
| has caused so much chaos on Wall Street that the | | | | And in many cases they can rent a similar or even |
| entire world economy suffered as a result. | | | | better home for hundreds of dollars a month less, due |
| Now, America's current economic woes are going to | | | | to the lower value of homes today. So they pay their |
| trigger the next wave of mortgage defaults - not on | | | | car and their credit card payments and allow their |
| shaky Subprime deals, but on loans that were fairly | | | | home to be foreclosed. |
| solid to begin with. | | | | Most are able to live in their home many months |
| According to a recent "USA Today" article, a record | | | | without making a payment before the bank finally |
| 4.2% of consumers are falling delinquent or into default | | | | forecloses. It is not uncommon to talk to homeowners |
| on all loan categories - and most economists expect | | | | who were able to live in their properties for as long as |
| the problem to get worse this year. Now that big | | | | 18 months without making a payment! |
| companies are laying off more and more workers, | | | | After the foreclosure sale is complete, REO listing |
| more and more average Americans are having trouble | | | | agents, working on behalf of the lender, will offer the |
| paying the bills. March saw almost 700,000 jobs lost to | | | | homeowner "cash for keys" to help them relocate and |
| downsizing - and more than 2 million lost jobs | | | | to avoid a prolonged and costly eviction. Most lenders |
| altogether in 2009 so far. | | | | are quick to offer the occupant 1% of the value of the |
| James Chessen, chief economist for the American | | | | property to relocate quickly. This can equate to |
| Bankers Association, put it bluntly; "The wheels have | | | | thousands of dollars for these homeowners - money |
| fallen off the economy." Another troubling sign for | | | | that is most likely used to pay for a security deposit |
| current mortgages? The insurance programs backed | | | | and first month's rent on a new home. |
| by the Federal Housing Administration (FHA) are under | | | | It's clear the economy is really in a vicious cycle - the |
| incredible strain due to the record home-loan defaults. | | | | housing market crash has prompted the Wall Street |
| Kenneth Donohue told a Senate Budget Committee | | | | meltdown, which, in turn, has prompted mass lay-offs, |
| panel on April 2nd that the FHA may not have the | | | | which, in turn, will cause a whole new wave of |
| systems and resources to "adequately perform" its | | | | foreclosures and eventually REO listings. |
| duties, which include insuring home loans up to $729, | | | | That's why more and more people are turning to the |
| 750. | | | | REO business to weather this recession. Real estate |
| This is even more distressing considering the FHA's | | | | agents, brokers and property preservation contractors |
| share of the market has zoomed up to an incredible | | | | have hundreds of thousands, if not millions, of |
| 70% from 21% a year ago. The FHA also has fairly | | | | properties to work with - properties that must be |
| stringent standards when it comes to approving loans. | | | | secured, repaired, maintained and sold. These |
| A record mortgage default rate in America - now at | | | | properties are selling due to the low prices and |
| almost 8% according to the Mortgage Bankers | | | | incredible opportunities they present to investors who |
| Association - is driving the erosion of the FHA | | | | have the money to take advantage of them. |
| mortgage insurance fund, which has shrunk to $12.9 | | | | |