Home Foreclosures: 3rd Wave Coming According to Experts
Even as consumer confidence is rising, many economists see a third wave of home foreclosures on the way.
The Players in the First and Second Wave of Home Foreclosures
The first wave of home foreclosures were brought on by real estate investors who couldn’t pay the “exotic mortgages” (ie, ARMs) as they started to reset. Many of these investors were into flipping. And, once the bottom started to fall out of the market, making prices dip, they were caught with high-interest loans that they just couldn’t pay.
Prime Mortgage Holders Make up the Third Wave of Home Foreclosure Victims According to Experts
The second wave of home foreclosures stem from the subprime mortgage mess. Homeowners who took out ARMs (Adjustable Rate Mortgages) figured they could refinance before their ARMs reset. But the housing market took a dip, unemployment started to rise and voila — a perfect storm that drove many into foreclosure.
The fact that many of these homeowners should never have qualified for mortgages in the first place is sad, side point in the home foreclosure saga.
Now, the third wave.
The Third Wave of Home Foreclosures: Who’s in This Category?
Actually, this can be called the “creme de la creme” of the bunch. For, they are the homeowners who had traditional mortgages and good credit scores. So, why are they in trouble now? A couple of things can be the cause. First, many refinanced at the height of the real estate craze; taking out money to pay off other debt, remodel, take vacations, invest in the high-flying (at the time) stock market, etc.
Second, rising unemployment. Now those HELOC (home equity line of credit) payments can’t be made. “Oh,” many may opine now, “if only I’d left my nice little 30-year fixed mortgage — and the equity in my home — alone.”
How bad is it going to get? According to the New York Times article, Job Losses Push Safer Mortgages to Foreclosure:
From November to February, the number of prime mortgages that were delinquent at least 90 days, were in foreclosure or had deteriorated to the point that the lender took possession of the home increased more than 473,000, exceeding 1.5 million . . . Economy.com expects that 60 percent of the mortgage defaults this year will be set off primarily by unemployment, up from 29 percent last year. . . .
What does all of this mean?
The home foreclosure crisis is far from over.
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Copyright © 2009 Yuwanda Black for Foreclosure Business News