2007 through 2008 Foreclosure Problem - Understanding the Conundrum

Title: 

2007 through 2008 Foreclosure Problem

Word Count:

519

Summary:

The report released by Mortgage Bankers Association on Mortgage Foreclosure numbers, revealed that at present the 2007-2008 mortgage market was involved in the most awful foreclosure crisis in the recorded history. It is almost 15 percent of the sub prime borrowers defaulted and the prime borrowers have started to follow suit.

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Article Body:

The recent report released by Mortgage Bankers Association on Mortgage Foreclosure numbers, revealed that the 2007-2008 mortgage market was involved in the most awful foreclosure crisis in the recorded history. The foreclosure market was almost 15 percent of the sub prime borrowers who defaulted and the prime borrowers even started to follow suit during 2008. During the last few years, many people with the help of easy credit and adjustable rate mortgages bought big and expensive homes; thinking that when the home price will rise and they will be in profit.

The rate of foreclosure during the “Great Recession” was the highest point recorded 54 years back in the year of 1953. The number of sub prime borrowers those who are currently behind on their home loans has increased to 14.82 percent. The homes that were purchased with 2/28 adjustable rate mortgages were under the highest percentage of foreclosure. The credit crunch not only made mortgage financing tougher but also it also pushing more homeowners towards foreclosure.

According to Mortgage Bankers Association's survey during 2007; many folks knew the foreclosure crisis was likely to increase into 2008. Since during the last quarter of 2007, the foreclosure rates in states like California, Florida, Arizona, Indiana and in few other states almost touched the sky, so it was expected that the foreclosure problem would become worse in the coming period before it stabilizes again.

It was expected that the number of foreclosures and payback delinquencies would rise during the first quarter of 2008 and may be in the next quarter too. Since the mortgage interest rate was rising high once again due to the fall in the home prices, the act of refinancing had become more difficult for the current borrowers those who are not comfortable with their current interest rate and wants to refinance at some lower interest rate.

According to Mortgage Bankers Association, the main reasons behind the foreclosure crisis is the 2/28 adjustable rate mortgage and the economic condition that is under pressure. Most of the foreclosures in the mortgage market are the result of these adjustable rate mortgages that normally offers low introductory interest rates and when the rate adjusts after a few years, most of the homeowners find difficulty to meet their monthly payments. With more Adjustable rate mortgage expected to reset this year and in the coming year, it is probable that the rate of foreclosure will also increase during that time.

After Federal Reserve tried to stabilize and control the mortgage market by its cut down in the federal fund's rate. The democratic leaders are also concerned about the condition of the market. Last week they approached President's administration to appoint a person who will have the authority over the federal mortgage and will coordinate with the government to reduce the increasing number of home foreclosures. They also proposed for $200 million as funding for foreclosure prevention.

The leaders have also proposed to give government approved nonprofit money to the help the homeowners those who are facing problems in making their mortgage payments. If not the program, then at least the news can become a reason for temporary smile on the face of the homeowners and the lenders.

This past tense article makes all of us here in Texas thankful that most of our real estate values are stabile in most markets.