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More foreclosures on the way for 2010

Posted by Scott Van Voorhis  November 20, 2009 07:25 AM

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Looks like the foreclosure mess won’t be going away anytime soon.

Just as all the hoopla over the extension of the home buyer tax credit starts to fade, along comes the The Mortgage Bankers Association to bring the market back to reality.

One in seven loans is now in foreclosure, up from one in ten at the start of the year. It’s the highest on record since the MBA began track this stuff in 1972.

And forget about all those goofy subprime loans. The driver now is the ever rising jobless rate, which has topped 10 percent and may top 11 percent or higher before it settles out.

Foreclosures on prime mortgages accounted for 33 percent of all foreclosures last quarter, up from 21 percent at the start of the year, the group reports.

The mortgage bankers project rising foreclosures well into 2010, not leveling off unitl the jobless rate starts to moderate.

And the local numbers don’t look much better, either.

The number of homes seized and sold by lenders, the last step in a months long process, has actually been on the decline so far this year in Massachusetts.

But the number of initial foreclosure notifications sent out by lenders kicking off the process is up, and up dramatically, according to local real estate data tracker the Warren Group, publisher of Banker & Tradesman.

Initial filings were up 11 percent in October over October 2008 and have risen 27 percent year to date.

Here again rising unemployment, not foolish subprime loans, appears to be driving the increase.

It certainly helps back up Rep. Barney Frank’s case that we need to start thinking about emergency loans to jobless homeowners.

And the foreclosure debate is clearly shifting now, from one about personal responsibility to the fallout of a brutal recession.

That’s my take. How about you?

This blog is not written or edited by or the Boston Globe.
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34 comments so far...
  1. Frank is on the right course but still wrong. The USG needs to print more money to give to homeowners who are unemployed, so that they can continue with their payments. Borrowing isnt enough - there needs to be more currency in the world (to help push inflation and feed dollar rot) and this is a very pragmatic injection point of that new currency.

    As a homeowner, Im not really looking at this foreclosure news as a long-term negative to my home's value. Foreclosure homes are not well tended to. New home construction is down. Current houses not being cared for + few new houses + rising population + massive dollar printing ==> my housing investment looks good down the road. Maybe not today, but down road its going to be a big win.

    Posted by kz November 20, 09 09:12 AM
  1. Part of personal responsibility is factoring potential job losses into the "How much house can I afford?" question. Also, the unemployment rate is 10% (significantly lower for house-owning demographics, such as college-educated people), but the mortgage delinquency rate is 14%. So you can't pin it all on job losses: people simply taking on too much debt is still a major cause of the mortgage delinquency problem.

    Whether or not the program is fair or makes any kind of economic or policy sense aside, piling more debt onto people who already have more debt than they can handle hardly seems like a helping hand.

    Posted by James November 20, 09 09:12 AM
  1. funny how a shift from personal responsibility to other's responsibility occurs once it comes close to home. layoff does not = foreclosure. overleveraged buyer + underwater property + depreciating market + layoff = foreclosure. a layoff in say 2005 = windfall to happy home seller w/ new found wealth and an opportunity to rent for a fraction of the cost to own.

    you can not in good conscience take someone to task for personal responsibility when you yourself go into the biggest financial commitment of your life w/o educating yourself about personal financial decision making and at least taking a peak at an overview of how to calculate real estate values.

    Posted by still waiting November 20, 09 09:26 AM
  1. Although painful, I believe foreclosures are a good thing. Home prices and debt levels are much too high and need to correct. But even more important is the issue of character. Our country has devolved from a nation of thrift, ingenuity, and responsibility to a one of sloth, over-indebtedness, and consumerism. It's time we stop listening to the Dr. Phils and Barney Franks of the world and take responsibility for the natural consequences of our actions.

    Batten down the hatches because it's going to get much worse from here. But we will emerge a stronger and better the end.

    As they say in the Marines: 'pain is weakness leaving the body'.

    Posted by Lance Stapleton November 20, 09 10:28 AM
  1. Nov. 20 (Bloomberg) -- A recovery in U.S. housing will have to wait at least until next year.

    The outlook for the home market dimmed this week as residential construction and mortgage applications fell and loan delinquencies reached a record.

    “I don’t think the housing crisis is over,” Mark Zandi, chief economist with Moody’s, said in a telephone interview. “I think we’re going to see another leg down.”

    Seems like the eCONomists are 6-12 mos. behind the bears on this blog.

    Posted by Hung Wang November 20, 09 10:41 AM
  1. The argument that we should help the unemployed pay their mortgages is a perverse one, in my opinion. Why don't we help the unemployed pay their cars? How about gym memberships or manicures? Where does it end?

    The fact is that some people made good decisions regarding buying a home and some people made poor ones. Perhaps there is some luck involved, but luck only acts to amplify the soundness of the decision. There is no moral imperative to save a home from foreclosure... Now if you are talking about helping the unemployed find housing so that they are not homeless? Helping the unemployed retrain for new jobs? You can at least legitimately debate those issues.

    Asking the 1/3 of taxpaying Americans who cannot afford to buy or choose to rent to subsidize the 1/3 of American "homeowners" (really home-debtors) with mortgages is bad morality and really benefits no one except the real estate industry and banks.

    Posted by HCF November 20, 09 11:08 AM
  1. THe US govt does not "invent" money. (ok, it does these days... but that is not sustainable). Money comes from US. If the govt keeps printing money, we will have a real economic disaster. Look at Zimbabwe, or Weimar Germany, or Latin America not so long ago.

    Our deficit is at record levels as a percent of GDP. All the money people want to give away doesn't actually exist. Barney Frank's policies are a recipe for complete economic disaster, and scare me stiff.

    I'm not a gold bug, but I understand why people are buying gold now.

    Posted by charles November 20, 09 11:33 AM
  1. I think the X factor is how much govt action helps (for instance, govt loan modification to halt foreclosure, hence the discount between start and end step of foreclosure).

    One thing for sure is politicians, facing re-election next year, will be motivated to "help"/"do" something should there is any potential freefall instead of letting housing market re-adjust. If the existing policy does not work, they will get increasingly aggressive.

    With unemployment and weak economy taking out the extreme upside and govt intervention taking out the extreme downside, housing market will be sluggish and muddle through.

    Posted by CL November 20, 09 11:38 AM
  1. The rate of unemployment is only part of the issue on foreclosures. Length of time to get a job is the problem. As to personal responsibility, I think there were many that did save, had safety nets, and lived appropriately to their income. You can plan for the worst, but even then bad things happen when you have an economy that is the worst since the Great Depression. Until companies begin to hire again and spend money in general, housing won't get better. Although, in MA, things do seem to be a bit better. Unemployment rates went down. Housing inventory is down. Housing affordability is up. Foreclosure numbers are mixed. The real estate outlier now is commercial. As for forecasting the future, the biggest issue I see is a lot of partisanship, pointing fingers, grandstanding, and a whole lot of nothing. Katrina has hit the entire US. 12 mos as Hung Wang points out, I could see that turn into 36 mos if our government can't get its act together. Companies aren't going to pull us out of this without incentives and pressure. Right now and in the past 10 mos, no real movement. The scary thing, after all that TARP money, there is nothing left to reach into. Empty cookie jar.

    Posted by Mish November 20, 09 12:31 PM
  1. We keep hearing two complaints bfrom those unwilling to consider ending this foreclosure crisis. First is the concept that these were "irresponsible" borrowers. The second is that we must protect the "innocent" investor. Lets conside the first. Does anyone really believe that millions of people took out loans knowing that they would never be able to pay them back? Thats an absurd concept. Borrowers were led like lambs to the slaughter house by a corrupt lending system that told borrowers not to worry. They could always sell or borrow against their equity if they got in trouble. And for a number of years thats what people did. Ever watch the cable show "Flip that House"? Second, this concept of protecting the "innocent" investor. Hogwash. (An Oxmoron) The investors were sophisticated hedge funds, insurance companies and large investment pools run by extremely intelligent and educated people. Of all the entities, these are the very people who created the securatized mortgage investement concept that has brought on the foreclosure crisis. Of all parties involved these are the irresponsible ones. They were neither innocent or uninformed but they are the ones protected. Even though they invested into programs that were not insured or guaranteed these are the people who have been protected and were bailed out. Instead, the TARP funds should have purcahsed the subprime mortgages and refinanced them with low interst rates with 40 or even 50 year terms. Now, many of the ALT loans are in default. Will these people be accused of being irresponsible also? After all, they are either so upside down they are turning back their homes or they are losing their jobs. But we will continue to see the pore "innocent" investor protected rather than the evil homeowner who should have known a financial crisis was iminent. Hogwash!.

    Posted by Lee Harper November 20, 09 01:12 PM
  1. Home prices are still too high. They need to go down a lot more so that future home buyers won't get into the same kind of mess. Why did those people buy homes at lofty prices that they couldn't really afford to?

    It is totally vicious to let so many of others, who are much more resposible to ourselves, shoulder OTHERS' (yes, I don't believe that we are in this together) big problems.

    Posted by More foreclosures are good for the future November 20, 09 02:43 PM
  1. 7.5 million residential first loans are in arrears. With 800 billion comercial loans in arrears and 1.6 trillion resedidential loans (alt-a and option arms) that will adjust higher in 2010 and 2011 with over 7 million layoffs in the past 2 years Real Estate will go lower in 2010 and 2011. The subprime loans were less than 1 trillion in 2007 and 2008 in a strong economy but the current adjusments/foreclousres will be 2.4 trillion in a weak economy. Right after the most adjustments at the end of 2011 will make january 2012 the best time to buy.

    Posted by Alan Kendall November 20, 09 03:04 PM
  1. I spoke with a seller (who is still trying for 2 years to sell his overpriced Metro West home in the mid-800K range) and he told me that since he read in the papers that the economy is getting better, someone will now be able to buy his house. If not now, then in the Spring.

    I didn't bother to strain my tonsils and even begin a discussion of the unemployment rate, lack of private sector job creation, the amount of money needed for a down payment for a home in that price range, the many hurdles people now face to get a jumbo loan (which they didn't during the 2005 boom when he bought his over-leveraged home), the new appraisal regulations, so I wished him well and thought I should have mentioned that denial is not a river in Egypt.

    Posted by Narro November 20, 09 05:01 PM
  1. Believe this if can.... those who are getting a check every week/month
    DO NOT FEEL THE PAIN. That is until they get laid off

    Posted by FILFEDUP November 20, 09 05:21 PM
  1. Lee Harper,

    I've seen "Flip that House." And "Flip this House." And the whole time I was thinking, wow, those guys are greedy. Any time you see people making easy money, alarm bells should go off. Also, it doesn't take a rocket scientist to figure out that if your income is in the 50th percentile, you probably can't afford a 90th percentile house. So yeah, I'd say the buyers were irresponsible.

    Also, it's been a while since anyone on this blog posted comments sympathetic to the lenders. One of the main criticisms of Frank's lend-to-the-bankrupt plan is that it will only hurt the borrowers, hurt the taxpayers, and help the banks who made irresponsible loans.

    Posted by James November 20, 09 06:26 PM
  1. A lot of the subsidies to homeowners are actually subsidies to banks. Many homeowners would be better off not owning their underwater house bought in 2005 - they could rent for half the payment and have more cash. Their mortgage bank, on the other hand, would be toast.

    Franks' "Help the homeowner" sounds better than "Help Goldman Sachs and the Banks" but that's effectively what he's proposing.

    Posted by charles November 20, 09 11:55 PM
  1. Lacking deep knowledge of the housing boom and bust, those commenting seem to be looking for someone to blame. Ignorance led us into the crisis, ignorance is attempting to lead us out, and ignorance is finding people to pillory.

    People were not fools to buy into a rising housing market using low-interest loans. Investors, hedge funds, insurance companies, and banks were not fools to assume that after 70 years of inflation (devaluing of the dollar by the Fed) and rising housing prices, the downside risk was small. Mortgage lenders were not criminals for loaning money to people who met the requirements set by creditors.

    The rise of the Nazis in Germany was a result of a bad economy and looking for someone to blame. Let's recognize that people are not experts in finance, and experts in finance are not experts in predicting the future. We are in this mess, and the best approach is to find a way that gets us out while maximizing the benefits and minimizing the harm to all of us. If we all hang together, we are less likely to be hanged separately.

    Posted by Fredric Williams November 21, 09 12:22 AM
  1. Remember when all the bulls said the high foreclosure rate didn't matter because it was primarily in the lower income areas? You know, what happens in Dorchester, stays in Dorchester? Well, looks like the what happens in Newton, Wellsley, Natick, Cambridge, Belmont, Arlington, etc. phase is in full gear.

    "Prime fixed-rate loans continue to represent the largest share of foreclosures started and the biggest driver of the increase in foreclosures. 33 percent of foreclosures started in the third quarter were on prime fixed-rate and loans and those loans were 44 percent of the quarterly increase in foreclosures. The foreclosure numbers for prime fixed-rate loans will get worse because those loans represented 54 percent of the quarterly increase in loans 90 days or more past due but not yet in foreclosure."

    Posted by Steve November 21, 09 10:59 AM
  1. I'm an unemployed renter...shouldn't I get a bailout, so I can stay in my rental. How far can you take this nonsense???

    Posted by jc , Chino Hills, CA November 21, 09 12:17 PM
  1. Frederic Williams,

    I don't think I ever called the people who bought during the bubble fools. I called them greedy and irresponsible. If prices had gone up, they could have lived in a really nice place for several years, and when they could no longer pay the mortgage, they could have cashed out for a huge profit. Instead, prices went down. They still got to live in a really nice place for several years, but now when they can't pay the mortgage, they have to give up the house, but someone else takes the loss.

    A fool is someone who does something that is probably bad for him. Someone who does something that is good for him but bad for everyone else isn't a fool, he's greedy and irresponsible. And he doesn't deserve sympathy.

    Posted by James November 21, 09 06:38 PM
  1. I'm in the same boat as JC. Unemployed for months and paying rent out of my savings. I had been looking into buying a home for the last 3 years, but first of all I could get a large enough (honest) loan for a place I liked, in an area I liked, and second I knew I needed to have enough money aside for the rainy day that did come. Will anyone subsidize my rent so I don't end up homeless?

    Posted by Linda November 21, 09 09:15 PM
  1. I bought my California house the day they rang the bell designating the top of the market in 2006. I paid $800,000 cash for a house now worth $600,000. Please put my request into Barney Frank for my $200,000 bailout. Is this a great country or what-time-is-it?

    Posted by Steve November 22, 09 12:22 AM
  1. Millions of Americans are affected by the national housing crisis. The social stigma is reminiscent of the early days of HIV epidemic in the mid-late 80s. It's not irresponsible, deadbeats who signed for loans far above their reasonable expectations of repayment. It's hard working, responsible citizens who've been royally plundered by the securitized loan process.

    The story is a lot more complicated than the simple inability to afford the monthly mortgage payments.

    The bank may not have the legal right to foreclose on your home, but that won't stop them from trying to do so.


    Foreclosure Hamlet Admin.

    Posted by Foreclosure Hamlet November 22, 09 04:43 AM
  1. So Linda.. you might consider a move to the Western Washington area. I'm here now and I can say that at least for the time being we have a decent job market still left. Rents can be found at reasonable levels too. In the recession of 1970 thru 1973 this area was hit really hard, but now it is better, and I'd say much better than say Vegas or Phoenix or central California..and as you are aware, the NorthEast is having a lot of pain economically now too. So what I am saying is that economics vary depending on location. Don't let your savings get drained to the point you can't get out. I don't know what your past job expereince is but Puget Sound is a diverse area with many economic bases..not just one or two. When the Olympics are in B.C. there will be a major need for at least temp help and that is a foot in the door to find a more stable job. You can find decent and safe living in Everett, possibly Marysville or Arlington. Bring your raincoat'll be needing it. Just a's better than burning everything you have down to zero and then no way to get to a better position.'s easy to move Unemployment from State to State. I suspect you won't need it for long if you make the move.

    Posted by Vern November 22, 09 02:43 PM
  1. James seems to forget, or doesn't realize that the "real" unemployment numbers are closer to 17% which include those previously unemployed that have fallen off the unemployment roles as their UE benefits ended. I am surprised the mortage numbers aren't higher at this stage of the game; and fear that they will actually report much higher after the holidays...although I do agree with his premise that there are households who are (still) carrying too much debt

    Posted by Dennis November 22, 09 03:24 PM
  1. I agree with many comments that both unemployment and housing markets are going to get worse. And what got us here is a combination of over confidence, lack of responsibility, naivette and lax lending standards. A recent poll found that 52% of people who became unemployed were surprised that they were laid off, which demonstrates that people are not very good at knowing and preparing for adverse events, such as unemployment, etc. I think everyone should pay more attention to their financial health and job security and make spending and investment decisions based on their future income prospects.

    Posted by Ken Forester November 22, 09 09:20 PM
  1. Wow, even some of the bears have been bamboozled by this story. I'm always shocked that people can't spot a press release--and an agenda--when they see one.

    So, we're supposed to support this program because now, the recipients are "deserving?"

    No one cares about unemployment. If they did, they wouldn't have passed such an ineffective stimulus, whined about the deficit when it was clearly time to spend our limited money on direct job creation, or targeted only homedebtors, not renters, for housing protection. Babbling about unemployment is politically-driven spin.

    No one cares about the deficit. The overwhelming bulk of the deficit is driven by the Bush tax cuts, especially for the top 1%, combined with the collapse in tax revenues following the recession. Babbling about the deficit is politically-driven spin.

    The only thing people really care about is helping the banks and investor class continue to loot the nation. In a major balance-sheet recession, debt must be destroyed, so that future income can be devoted to consumption and investment rather than excessive debt service. And one man's debt is another man's wealth, so that means, QED, wealth must be destroyed. That's what happened in the Depression, with waves of bankruptcies nad foreclosures flattening wealth inequality for generations. Well, the elite aren't going to let that happen again. Instead, they want to pile more debt on people who don't have the income to pay their current debt, continuing the massive transfer of wealth upward to Wall Street.

    They publicly announce their crime plot, and Americans clap like trained seals.

    Posted by Marcus November 23, 09 10:21 AM
  1. The banks are sitting on a good deal of property waiting for prices to rise. I know this for a fact. I've looked at homes just coming onto the market which have been sitting for 2-3 years. I think this is criminal considering a majority of the banks doing this received bailout money. They have been compensated for their losses but refuse to take a loss. Try negotiating with them. They will not budge. Houses are in bad shape because a number of the mortgage companies are out on the West Coast and have failed ot winterize homes because they can't keep track of their vast inventory. Prices are not going to bottom out until the interest rate starts going up and when it does, look out. The Govt can not suspend the rate forever. They are doing it to avoid a total collapse of the economy. You can't keep printing money otherwise our currency will be worthless. Let the banks take their losses and allow people who can afford to buy, purchase the homes at prices that are comparable to income levels. The Govt should step in and pass a bill to prevent The Banks from manipulating the housing market through inventory control.

    Posted by Ruby November 23, 09 01:54 PM
  1. Foreclosure Hamlet: HIV takes fairly healthy people, and kills them. Foreclosure takes people who can't afford to own a home, and forces them to become renters.

    Dennis: you don't fall off the unemployment statistics just because you stop collecting unemployment. You fall off the unemployment statistics when you stop looking for a job. If you can't pay the mortgage and you're not working or looking for a job, that's a failure of personal responsibility.

    Marcus: who are these fooled bears? There seem to be a two separate debates: first, whether mortgage defaulters should get assistance, and second, whether this plan actually assists them. The second debate requires some substantial economic analysis, which most non-bears on this board (except for kz) don't participate in, so that debate died. The first debate lives on, but just because you're taking a position in the first debate doesn't mean you're conceding the second.

    Posted by James November 23, 09 03:15 PM
  1. Count us out of the market for the foreseeable future.. My fiance just lost her job suddenly last week. We have $75K saved and ready for a downpayment. Now until she finds a new job.. We can't afford to tie that money up in a down payment. We are 29 and 30... And we had a combined income of $155K... Now it's back down to $92K.

    Can't afford much in our area on that income level...

    Posted by Brent November 24, 09 01:40 AM
  1. The first debate lives on, but just because you're taking a position in the first debate doesn't mean you're conceding the second.

    I'm not taking a position on the first debate. The first debate is a scam. A feint. A distraction. Let's keep everybody busy debating whether homedebtors are more worthy of help than renters (of course not). This way, they won't have time to notice that homedebtors are not even the ones being helped. The banks are. But nobody wants to give any more money to banks, so now the PR flacks have been deployed to deflect our attention away from Wall Street to "worthy" unemployed homeowners.

    Posted by Marcus November 24, 09 10:19 AM
  1. China recently provided its people with a bonus.
    We have approximately 280Million folks living in the good old USA.
    An allocation of $1 Million dollars from the government to each household
    should cure peoples problems...enough to provide for shelter+food, etc., at the bargain cost of only $280Mil dollars.
    Instead we have made the commitment to bail out insolvent Financial Institutions at $Billions of tax-payer money, whom eventually will collapse.
    The Band-Aid solution can only help to ease the pain over a period of time.

    The Housing Industry is limping at 2003 levels. It is way over-priced. House prices will continue to come down to pre-1998 levels. This process will correct naturally by itself. The Band Aid being imposed by the government will again prolong the pain, but it is necessary due to derivatives, etc...Hence, maintain property values up.
    If you buy today, chances are you will wake up in a couple of years in a substantial negative equity situation.

    Stay put! The best is yet to come.

    Posted by David November 24, 09 01:44 PM
  1. David, you make a very good, although not novel, point here. I offer a correction to your figures: 280M households times $1M per household = $2.8B, not $280M. Still a better deal for taxpayers than TARP and all the other federal bailout type expenditures!

    Posted by Tom November 24, 09 03:06 PM
  1. Your point would be a good one except for a mistake of large magnitude in your math: 280M households times $1M per household = $280T (Trillion), not $280M. However I agree that a direct contribution to taxpayers of some amount would have been more effective than TARP and financial infusions to save banks.

    Posted by Tom November 24, 09 04:17 PM
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Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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