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Paul Kiesel
Paul Kiesel
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More Foreclosures in California, Nevada and Arizona

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According to the Press-Telegram on Sunday, new statistics will be released later this week showing a huge jump in foreclosed homes across the states of California, Nevada and Arizona. Nevada fairs the worse where one in 11 homeowners will face foreclosure from now through 2009. Arizona and California share about the same strife; one in 18 homes will be foreclosed on in Arizona and one in 20 will suffer the same fate in California.

 

All of these trends are drastically up from this time last year (over 75 percent greater) and they aren’t expected to ease anytime soon. DataQuick Information Systems predicts that one in 33 homeowners nationwide will be in foreclosure through 2009. The severity of this crisis is obviously hitting California, Nevada and Arizona the hardest. A big reason for a higher foreclosure rate in these three states is due to the fact that about 25 percent of the loans taken out in 2005 and 2006 were subprime loans. As soon as these subprime loans reset (Option ARM loans), the mortgagees who were able to afford and make their payments on time prior to the reset, could no longer afford the loan once their teaser rate payment option switched to a higher rate.

 

However, foreclosure statistics that are released later this week will not necessarily include all underwater mortgages, meaning the trend of foreclosures could rise even further, because many homeowners are finding out it is more beneficial to them to just walk away from a loan that is greater than the value of their home, as the government has been dragging its heels in finding a solution or solutions in mitigating the subprime crisis. It’ll be interesting to see if and when the attention is finally turned to the TILA agreements that were used in executing a majority of these subprime Option ARM loans, which practially allowed this economic storm to commence.