Rate of home foreclosures expected to increase
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The nation's already alarming pace of home foreclosures is poised to accelerate through the rest of the year, according to RealtyTrac, which reported Tuesday that foreclosure filings jumped 57% in March from March 2007.
The report painted a grim picture of growing numbers of people unable to make their mortgage payments. Bank repossessions more than doubled in March. Foreclosure filings surged 57% last month from March 2007, with one in every 538 households receiving a foreclosure filing during the month, RealtyTrac said. Nevada, California and Florida were the states hardest hit. In total, more than 234,000 homes were in some stage of foreclosure in March.
One factor driving up foreclosures has been the number of adjustable-rate loans that have reset to higher rates, raising the amount that homeowners owe each month. Because ARM resets will peak later this spring, the pace of foreclosures could rise further into the third or fourth quarter of the year, says Rick Sharga of RealtyTrac.
Job losses and shrinking home equity are contributing to the bleak outlook.
"We could argue this is the worst housing downturn ever," says Mark Zandi, chief economist at Moody's Economy.com. "Negative equity and unemployment are the driving factors. Things are getting worse, not better."
Wayne Willsey of Crestview, Fla., is facing possible foreclosure and has seen his monthly payment soar from $2,100 to $4,000 because of his ARM loan. He works for the local power company.
"I keep praying; it's really hurt the family bad," Willsey says. "I'm 55, and it's hard to start all over again."
"This isn't a subprime problem," says Dean Baker, co-director of the Center for Economic and Policy Research. "The underlying issue is housing prices are falling. It's going to get worse. Subprime (foreclosures) may have peaked and will start to trail off. In terms of the rest of the market, we're just beginning."
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Some homeowners who might have planned to refinance into lower-rate loans are finding they can't because falling prices mean they owe more on their mortgages than their homes are worth.
"Any time you take on an ARM, you have to understand there's going to be risk, and in many cases, that wasn't explained," says Brian Bethune, an economist at Global Insight forecasting.
Still, Celia Chen, director of housing economy at Moody's Economy.com, notes that ARM resets might not be so bad for some homeowners, since the Federal Reserve has aggressively cut interest rates. In some cases, an ARM will actually reset down to a lower rate.
Zandi adds: "What we're seeing that's new is people who are under water" whose loans exceed their home's value "walking away" from those homes.