Home Mortgage Foreclosures Increased 80 Percent in 2008
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by: marciafreeman
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The home mortgage delinquency rate has continued to rise, as many home owners struggle with declining property values and more restrictive lending practices. 2008 saw an 80 percent rise in the number of foreclosures from the year before with an estimated 2.3 million consumers dealing with foreclosure. Many are predicting that those filings could more than triple in the years to come. Many borrowers took on a home mortgage that was more than they could afford in the long run, as they felt certain the real estate market would maintain its upward trend and credit seemed easy to come by. During this time, the subprime home mortgage market flourished, as more and more lenders offered loans to consumers who did not qualify for regular prime loans. Some of those people were able to take on those loans with zero down payment or proof of their wages and assets. In other cases, a consumer took on an adjustable rate home mortgage anticipating that the home value would increase or they would get a raise before the rates changed. Even banks and investors thought the real estate market was no longer a risky venture, as mortgages were being repackaged and resold in various forms. When the real estate market began to decline and the credit crisis set in, many consumers, banks and investors found themselves struggling.
Only a month into his new office, President Obama has made it clear that any plan to help stimulate the economy will include help to boost the ailing real estate sector. The second week of February, Secretary of Treasury Tim Geithner announced that $50 billion of the stimulus bill would be dedicated to reducing home mortgage foreclosures. The details of the plan have yet to be announced, but it is anticipated that the plan will offer incentives to lending institutions to reduce monthly home mortgage payments for their troubled customers. The new President has made it clear that he would like to assist those in trouble before they become delinquent. That will require some sort of analysis of income and debt held by a borrower. For those who will qualify, a rate reduction or a postponement of principal might be options offered to make a home mortgage more financially manageable. A home mortgage foreclosure is more costly to a bank than a loan modification, so many banks are anxiously awaiting the details of how the $50 billion will be put to use to help the housing sector. In the meantime, some banks have suspended home mortgage foreclosures until they know how the plan will work.
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