Foreclosures Continue To Harangue USA

August 22nd, 2008

Despite intense rescue measures foreclosures continue to harangue and taunt USA. The magnitude of the housing crisis is humbling all the efforts being made by the lenders and government to contain the epidemic.

The lenders do not want to continue with further foreclosures overwhelmed as they are by unsold houses. They are offering easy loan terms to refinance and even allowing for short sales but all to no avail. Foreclosures continue to hold centre stage. So far the successes have been modest – nothing to crow about.

According to latest reports from RealtyTrac banks took over foreclosed houses to the tune of triple the number as compared to July 2007. It calculated to a foreclosure rate of 1:464. Many experts opine that the worst is yet to come.

Susan Wachter of the Wharton School at University of Pennsylvania opines that most probably the peak will be reached “from July to December”. This is based on the assumption that neither will interests increase nor will GDP decrease. She added, “If we get through that, we can avoid the darkest scenario.”

The average price of properties (single family house) is declining mainly because of the bank-repossessed houses flooding the real estate market. With the record drop in prices it is not being possible for borrowers to refinance or opt for short sales. The average price of houses dropped by 7.6% in the second quarter in comparison to what it was in 2007 during the same three months. NAR reported that the price fell from $223,500 to $206,500.

Without the options of refinancing or short selling the borrowers seem to have reached a dead end with nothing but foreclosure before them. Dominic De Simone of law firm Spahr Andres&Ingersoll said, “Unfortunately, the end of the road is often foreclosure.”

Desperate to tackle the crisis, the government at all levels is working with lenders and local non-profit groups to ease loan terms and effect workouts. But the number of foreclosures rushing into market is upsetting all calculations. The magnitude of the problem makes the relief efforts just drops in the ocean.

Hope Now consists of alliance of mortgage bodies and lenders with the support of the government. It claims to have made 181,000 successful workouts in June this year. 522,000 were done during the three months of the second quarter. But there were also foreclosure filings in June and a total of 739,714 foreclosure postings in the second quarter.