More Than 4 Million Families Face Foreclosure

Bob McCarty Writes ^ | 3-24-10 | Bob McCarty

[BobMcCartyWrites]

President Barack Obama's failure to manage the economy is apparent is in the housing market where more than 4 million families now face foreclosure.

[BobMcCartyWrites]

Waves of hope and change continue to beat on the nation's shores. One area where President Barack Obama's failure to manage the economy is apparent is in the housing market where more than 4 million families now face foreclosure, according to ForeclosureListings.com.

Comparing data from February 2010 to January 2010 shows that Texas has witnessed the highest increase in foreclosures with a rise of 35.3%, followed by Michigan at 17.54%, California at 11.93%, and Florida at 4.71% increases. Georgia actually showed a decrease of 5.55% and Arkansas showed the largest drop in foreclosures down 28.6%.

The nation is struggling with a lack of jobs and continued pressure on home values leaving many homeowners with mortgages higher than their homes' value. Several states are creating emergency funds to help the temporarily unemployed from being foreclosed upon. But the numbers continue to paint a bleak picture.

Even with additional funds from the government there are too many people facing unemployment and weak housing values to enable many to borrow the necessary amount to prevent foreclosure or to purchase a home in foreclosure.

49 states have participated in uniform, minimum standards for licensing of mortgage loan originators that began in New York and North Carolina, and became law, and then became a model for Congress to enact the Secure and Fair Enforcement for Mortgage Licensing Act in 2008. Having learned their lessons from government intervention of relaxing guidelines in order to help more people purchase more homes, the laws are meant to reduce the amount of foreclosures in the future, but the damage has already been done.

Our foreclosure data compares February 2010 versus January 2010. Note the actual number of homes as opposed to the percentages in just 30 days:

Notice that Atlanta, Georgia and Denver actually had decreases in foreclosures from the previous month, yet the number of actual foreclosures was 1,039 and 2,056, respectively. The foreclosure trend continues.

We found it interesting that the larger cities as above had relatively fewer foreclosures percentages from the previous month than the comparatively smaller cities of Spring and Garland, Texas, with 165 and 167 total foreclosures at 46% and 43% increases over January, respectively.

Larger cities such as Houston, which showed a change from January of over 37% with 1,192 homes foreclosed, and Phoenix -- with over 34% change and 1,645 homes foreclosed -- continue to demonstrate the plight of unemployment and abandonment in search of locations for people to live where they can find jobs.

But there were some signs of improvement, for lack of a better word. Little Rock, Ark., showed a monthly drop of 35.34% with only 75 foreclosures from the previous month, and Riverdale, Ga., showed a decrease of 25% with only 956 homes foreclosed. Likewise, two large cities of note, Washington, D.C., reported 169 foreclosures, a difference of 19.9% less than January, and Atlanta reported 1,039 foreclosures, a drop of 6.98% in the same time period.

But homeowners, grappling with the need to lower their expenditures are finding that the mortgage notes they carry are higher than the current value of their homes, as revealed in the prices for some of the average prices in the top states, below.

It should be noted that homes bought in foreclosure are often in various states of disrepair and the price of the home is adjusted accordingly. And a distressed property can, and usually does, affect the price values of other homes in the neighborhood.

As foreclosed homes are bought and repaired and brought up to their true values, the neighborhood's home values improve, and thereby the home value of the previously distressed property increases.

Today one in every 418 homes in the U.S. has been filed in foreclosure, topping over 300,000 filings for the 12th straight month, bringing the nationwide total to almost 1.4 million. Nevada, the state that just a few years ago couldn't keep up with the demand for new home building, is now the leader in foreclosures at four-times the national average, with Arizona, California, and Florida close behind.

The opposite side of the coin is that purchasing a home at discounted prices has never been easier as distressed properties now account for about one-third of all home re-sales.

[Puppage]

More than 4 million purchased homes that they could NEVER afford.

Sorry, but you can't save people from themselves.

[AzaleaCity5691]

That’s not entirely true.

Not every market in the country was a complete bubble crapshoot like California or Miami and yet people are getting hurt in the middle of the country.

You see, there were people who took out reasonable mortgages that were well within their affordability when they had jobs. They now don’t have jobs. Hence, foreclosures. There’s a 20% unemployment rate out there. Sure, there are a lot of idiots who took out loans they couldn’t afford and are getting the end result but many hard working people who lived within their means are now getting walloped by unemployment as well.

[MrChips]

True. But many people bought homes that they could afford. Then they lost their jobs.

[Puppage]

You can thank the Community Reinvestment Act for this debacle.
Now, that’s not to say they’re aren’t hard working people who were just dealt a bad hand. However, it was exacerbated by the CRA.

[Lobbyist]

Jack Cashill’s new book “Popes and Bankers” addresses this issue head-on.

[AzaleaCity5691]

No, actually, that’s a simplistic answer that was given to the public by politicians who didn’t want to tell the American people the truth because they didn’t want to get tarred and feathered.

The truth is, the American people are at fault and the government is at fault. The government is at fault because it was apparent by 2003 that this was all one huge bubble but no one dared say anything because too many people were making too much money. No one dared question that maybe the fact that a middle class home in L.A. was now costing 7 figure amounts was a cause for concern.

No one also dared to ever make a public service announcement or even a speech lamenting the fact that Americans had managed to leverage themselves into credit card debts that in many cases approached and exceeded 50% of total household income.

And I’ll tell you this. You’d be surprised how many people actually got subprime loans and didn’t default on them. Many people who got those loans were responsible and did take good use of them.

The reason the politicians have used them as a scapegoat is because they are an easy scapegoat and by blaming it on bad credit borrowers (many of whom it turns out have learned from their mistakes) they deflect the blame from the morons out in California, New York (not coincidentally, all markets that are hubs of the financial industry) that really brought the market down as their inflated prices sucked in all the capital with it.

I made my living in commercial real estate for 20 years. Believe me when I tell you, if you hold subprime borrowers as the primary reason for the collapse, then you’ve just taken the bait hook, line and sinker.

There were simply not enough homes purchased with the subprime loans to crash the market. The crash we saw was no different than the crash in South Florida after the 20’s land boom collapsed. And what we had this time was the same thing but on a national scale. A handful of metropolitan markets had extreme valuation hikes like in Florida in the 20’s, sucked in the capital with them and then when they went down it took the ship with it.

Yes, some subprime loans going down helped aggravate it but I’m sorry, the subprimes were not the cause of this. The fundamentals of the economy were weak long beforehand and the trouble we’re in now is a long time coming. What subprime defaults there were constituted only a small piece of a very very large puzzle.

[Oldpuppymax]

How many of these people are either NOT American citizens or should never have been financed in the first place??!! Somehow I doubt that info will be forthcoming!!!

[Tublecane]

“You see, there were people who took out reasonable mortgages that were well within their affordability when they had jobs. They now don’t have jobs. Hence, foreclosures”

I guess no one should ever be forced to make economic calculations except those that assume they’ll have a steady income in perpetuity. They should calculate what they’d earn with a job, and in the event they get fired, the government makes up the difference.

We’ve got to be disabused of this notion that those who face misfortune “through no fault of their own” don’t deserve what they get. You know what? That’s not the way nature or the free market works. All sorts of unhappy things happen, and it’s our job, as free and responsible people, to accept the consequences.

[Tublecane]

“True. But many people bought homes that they could afford. Then they lost their jobs.”

Do we now live in world where losing your job absolves one of all debt? Do we live in a world where debtors are unaware of the possibility that they might lose their job?

[MrChips]

No, of course it does not absolve someone of debt. But we have long lived in a world where people pursue the American dream of home ownership by taking out reasonable mortgages and expecting to be able to pay for them with their incomes (and not with their retirement savings). Banks making loans are almost never interested in your assets, retirement or otherwise. They want to know your income. And AAA-rated loans are made on that basis. Thus, there are plenty of people who were not wildly speculative when they purchased their homes who are nevertheless finding themselves in trouble not only because of losing their job, but of losing it in a recession which is never-ending (because of Obama) and gives them little hope of finding another. I expect unemployment to dip a little in the next 6 months and then to rise dramatically in 2011. Those are widely held forecasts. Those people have two choices: (1) sell their home, at a time when no one is buying houses or (2) use their retirement savings to pay their mortgages and hope that they can plant a good potato crop in the backyard.

[Tublecane]

“But we have long lived in a world where people pursue the American dream of home ownership by taking out reasonable mortgages and expecting to be able to pay for them with their incomes”

I don’t know about the “reasonable” part. Americans have been drowning in debt recently for a reason, and it’s not because they’ve been circumspect. Which is not to say that none of the people facing foreclosure have been reasonable. I’m sure they were. Also not to say bad things don’t happen to good people. They do.

However, if we are ever to disabuse ourselves of the demon of credit, people’ve gotta be afraid of defaulting. When people talk of troubled borrowers as “hard working people,” who were “reasonable,” and were more or less struck by lightning, perhaps unintentionally, the implication is that they must be saved. The exact same sort of “through no fault of their own” language was used to push through healthcare reform. Specifically, people whose coverage was dropped due to preexisting conditions. Which of course is the fault of the government’s tying insurance to employment, but which politically reads as “it could happen to you!”

Well, yes, it could happen to you. It is part of your repsonsibility to plan with that knowledge. And, if misfortune strikes despite your plans, it’s your responsibility to take the hit. We ought to be shouting that, rather than playing into the mindset that “through no fault of your own” is somehow unfair.

[Tublecane]

“Thus, there are plenty of people who were not wildly speculative when they purchased their homes who are nevertheless finding themselves in trouble not only because of losing their job, but of losing it in a recession which is never-ending (because of Obama) and gives them little hope of finding another.”

I heartedly advise people to live as if a recession is imminently possible. Among other things, it will make recessions less likely, since they are caused by overextension of credit. If nothing else, it’ll make life easier when recessions occur. Best of all, it’ll make borrowers infitely more “reasonable,” in that they won’t automatically assume the future will be exactly like the present when they take out their loans, and I won’t have to hear as many sob stories.

[Logical me]

Just a tip of the ice berg.

[MrChips]

I agree. And I am one of those people I described. When I took out my mortage, I knew that I had more than enough in retirement funds to cover my whole mortgage when I took it out at the bank. There was a sense of security in that, and a sense of doing something responsibly. I don’t think I was in any way reckless. And I will work hard, somehow, to survive, and pick myself up by my own bootstraps. All I’m saying is that Obama has almost created a “No Exit” world in which there are (1) no jobs, (2) no home buyers, (3) and the prospect that retirement assets might collapse in value. One is tempted to sell off stocks, pensions, everything liquid, right now, and pay off the house, and grow potatoes.