Foreclosures Rise on "Good" Mortgage Loans

We began hearing about rising foreclosure rates on mortgage loans a couple years ago. Most of the problems were due to so-called "bad" loans where lenders greedy for fees and profit granted home loans to people who didn't have the proper financial qualifications. A few experts had been warning of the upcoming crisis since 2000 but were drowned out by the excitement of a rising stock market and ever increasing corporate profits. Questionable mortgages were bundled into sales of financial paper and sold in financial deals that made no sense to anyone who looked closely at those transactions. Problem was - no one in regulatory agencies looked closely at the increasing levels of risk financial institutions were taking.
The scenario has changed drastically in the past year. Although most people still think of foreclosed homes as bank takeovers of loans that should never have been granted, that is no longer the issue. Those loans have been foreclosed or refinanced or bailed out. The rising rate of foreclosure is now affecting fixed rate loans for those who did qualify and have often paid their mortgages faithfully each month for years.
These aren't homeowners with rising interest rates. These are homeowners who have lost income through disappearing jobs and closing businesses. There is no loan modification that will save the home of someone with no money coming in to make payments. This is complicated by the decreased value of homes across the country.
The numbers are staggering. It is estimated that 25% of American with mortgages owe more than their homes are currently worth. In the past, a job loss might force the sale of a home for a family's financial survival. When homes have lost 20% or more of their value and there is a glut of homes for sale, selling to pay off the mortgage is not an option for many.
The best guess of economic experts is that 1 in 7 of mortgages in the U.S. are past due. Homeowners may be paying one month late or skipping a month and then trying to catch up. Lenders have agreed to help struggling homeowners but that help is often only a gesture or page on a website. In reality, there is little help available.
Homeowners may be at greater risk (if you can imagine anything worse than the current reality) in 2010. Mortgage lenders who have postponed foreclosures on homes where payments are still being made but are running behind may well decide to escalate foreclosures. This is expected to happen and the resulting increase in bank owned home inventories will further damage home values in many parts of the country.
Government efforts to slow the foreclosure landslide have done little more than put a bandaid on a life threatening wound. Without the will to stop banks from foreclosing quickly or to force reductions in interest or payments for the short term, the government efforts have had little or no effect.
The massive amount of paperwork required to apply for government bailout help is more than many homeowners can stomach. Those who do put together a package request aid under Obama's foreclosure bill report no help from their lender and say they are unable to reach anyone with the knowledge to help them complete the bailout process.

The lack of available credit and unemployment push foreclosure rates higher. Go to Solving Credit Problems for debt solutions.