Foreclosures Headed Up?

Yes, mortgage foreclosures predicted to increase, to 16% of all homes with mortgages, by the end of 2012.

All the more reason bankruptcy reform is needed now, as advocated in this post by Kansas bankruptcy attorney Jill Michaux.

Horrible ARM mortgages were being written through June of 2007.  I know because I had a client get not one, but two no document loans in that month, in spite of his actual 2007 gross income being less than the total of six months of payments on the two loans.

So the adjustable rate mortgages written in 2006 and 2007 are still re-setting, that is, coming off the teaser low rates.  When the interest rate is adjusted, those payments go up to where the homeowner often cannot afford them.

So, the snowball continues rolling downhill, more foreclosures, more homes for sale, depressing the price of all homes, making it harder to re-finance, leading to more foreclosures.

The jobs recession only adds to the problem.  As Credit Suisse points out, foreclosures on non-sub-prime loans are going up as well.

And the defaults work up the chain.  GMAC, big in sub-prime loans, and, yes, continuing to push them through the first half of 2007, is a bankruptcy candidate itself.

There is no easy way out.

The much ballyhood voluntary mortgage workout programs announced by the mortgage lenders over the last few months are not working.

Half of the homeowners are back in default in the first 6 months.

Most of these modifications do not lower the total amount owed on the mortgage, so that just postpones the day of reckoning, pushing the missed payments out into the future.

I sound like a broken record, if you remember those, (Michigan bankruptcy attorney Kurt OKeefe prior post), but this bankruptcy reform would have saved trillions of dollars if implemented earlier.

With the mortgage foreclosure crisis only getting worse, it is not too late to reform now.

Related posts:

1. Government Response to the Mortgage Crisis
2. The Next Mortgage Crisis
3. Loan Servicers Sign Empty Promise To Ohio Residents Headed Towards Foreclosure