Soaring Home Foreclosures

While the Federal Reserve just cut the prime interest rate to ease the turmoil of the housing market, according to the San Diego Union Tribune here in San Diego, "there were nearly 4,900 San Diego County foreclosure filings in August, an 80 percent increase from the previous month…" Will there be more home mortgage foreclosures in store for San Diego and the rest of the country? The answer, unfortunately, appears to be "yes."

According to Rick Sharga, Vice President of RealtyTrac, increasingly more homeowners will face foreclosure as adjustable mortgages reset in the next 15 months or so. Zoltan Pozsar, a senior economist for Moody's Economy.com, thinks the foreclosure potential can increase dramatically until next spring when adjustable loans will reach their resetting peak. Is San Diego alone in these record-breaking numbers?

Areas that had a huge surge in home buying activities in the past few years such as California, Nevada, and Florida, as well as economically-damaged areas like Michigan are seeing a surge in home foreclosures. Many homeowners excited about rising appreciation and the opportunity to make some good money bought homes with little or no down payment and used adjustable rate mortgages to keep their monthly payments down. With the downward shift in housing, a loss of home appreciation, and mortgages that have adjusted upwards, these same homeowners are now walking away from their homes and mortgages allowing the banks to foreclose instead. Is there any hope?

With the Federal Reserve cutting the prime rate by .5% borrowers with home equity lines of credit and adjustable mortgages should get some reprieve. Should this rate cut have the intended affect of also stimulating the housing market, home prices should rise making it easier for homeowners to sell or refinance their existing mortgages rather than face foreclosure.

By Sheryl Landrum
Mortgage Credit Problems Columnist