Rich homeowners underwater and drowning – Senators could care less

Today, one in five homes in America are worth less than their mortgage balances.  Research shows that in many areas of the nation, formerly “real estate rich” people are drastically underwater.  They have little incentive to keep paying their mortgages and mortgage lenders are facing increasing risks of walkaways and foreclosure. 

From the Wall Street Journal, here are some of the worst performing areas:

                Area                                      Percentage “Under Water”

             Las Vegas                                          67.2
                Stockton, CA                                      51.1
                Modesto, CA                                      50.8
                Reno, NV                                           48.5
                Vallejo-Fairfield, CA                          46.5
                Merced, CA                                        44.4
                Port St. Lucie, FL                                43.5
                Riverside, CA                                     42.8
                Phoenix                                              41.7
                Orlando, CA                                       41.7

                US Average                                        21.9                       

In San Jose – Santa Clara, California, 80% of loans obtained in the past 5 years were jumbo loans reflecting the affluence in the area.  Yet now, 12% of all sales are short sales.   One of the reasons for this is that jumbo loans are not readily available nowadays.  Without financing, sales are very difficult for those at the top.  And with increasing unemployment, even at executive and high level management levels, we can anticipate foreclosures at higher rates even in the very best neighborhoods. 

I’ve certainly seen this phenomenon in Chicago and North Suburban Illinois and it’s only a matter of time before we see the same thing developing even in a conservative market like Wisconsin.

Mortgage modifications in bankruptcy would have helped.  But the Senate voted no.  Senators from Arizona, Florida and Nevada voted no even though this legislation would have benefited their states considerably.   Senators Kyl and McCain of Arizona voted no even though 41.7% of homes in Phoenix are under water.  So did Senator Martinez of Florida despite the devastation mortgage foreclosures have wrought in throughout Florida.  And so did Senator Ensign of Nevada despite the 67.2% underwater rate in Las Vegas. 

Who do these Senators represent?  As Senator Durbin says, the Senate is owned by the Banks.  Rather clearly, these Senators are the banks’ lackeys.  When will the people stand up for their own interests?  Mortgage foreclosures are not just a problem for the ones who lose their homes.  It’s a problem for the entire neighborhood and ultimately the entire community.    People – raise your voices.  You vote.  Banks don’t.

Related posts:

1. More Homeowners are Underwater on Their Mortgages
2. Senate Votes To Reject Mortgage Cram Down Bill!
3. Foreclosures at Record Levels in April – Failure of Bankruptcy Legislation to Blame