Prior to writing my weekly E-Newsletter this morning, I came across and article that is not surprising at all. Unfortunate as it may seem, we here in Southern California are facing one of the worst credit crunches in housing's history. As we speak the stock market is up, at 11am PST we will hear the FED rate decision which will likely yield a .25% drop in the discount rate. In my opinion this will not "save" or change our market but rather stimulate economy and possibly loosen some of the lending nooses.  Below you will find an informative article regarding the current foreclosure problem in the U.S.  After reading this, it gives a big change on what we saw in prior months home sales forecasts. Although we all knew this was coming.  Have a great week everyone, I am currently seeing an increase in buyers and traffic on property that I have listed. Lets keep up the good work!

 - Chris

Home Foreclosures Doubled in August on Loan Rates (Update2)

By Kathleen M. Howley

Sept. 18 (Bloomberg) -- The number of Americans who may lose their homes to foreclosure more than doubled in August from a year earlier as subprime borrowers with adjustable-rate mortgages saw their monthly payments rise, RealtyTrac Inc. said.

Lenders sent notices of default to a record 108,716 homeowners in August, up from 42,144 a year earlier, RealtyTrac said today. California had 41,714 new foreclosures, the most in the U.S., and Florida was second with 26,203, the real estate data company said.

U.S. economic growth is slowing as the two-year housing decline worsens amid the surge in foreclosures and the collapse of more than 100 mortgage companies, according to David Berson, chief economist of Fannie Mae, the largest mortgage buyer. Federal Reserve policy makers are expected to lower interest rates at a meeting today after last month saying ``tighter'' credit may hurt growth, a Bloomberg survey of 134 economists found.

``This is just the beginning of a wave of new foreclosures,'' Rick Sharga, executive vice president of marketing for RealtyTrac in Irvine, California, said in an interview. ``There are lots of people who bought homes they could only afford at the teaser rates, and now have very few options.''

Subprime loans, given to borrowers with limited or tarnished credit histories, often have so-called teaser rates that can double at the end of two or three years, he said.

Auctions, Repossessions

The foreclosure process typically begins when a borrower is more than 90 days late on mortgage payments and the lender files a notice of default. If the borrower doesn't pay what's owed, the property goes to auction. If bids don't reach the loan amount, the lender takes ownership of the house.

Adjustable-rate mortgages to subprime borrowers account for 7.3 percent of all home loans and 44 percent of all new foreclosures, according to Mortgage Bankers Association in Washington. The 15 percent of all mortgages that are prime adjustable-rate loans -- granted to borrowers with good credit histories -- represent 15 percent of new foreclosures, the bankers' group said Sept. 6.

The total number of U.S. foreclosure filings, including defaults, scheduled auctions and bank repossessions, rose 115 percent to a 243,947 in August from a year earlier, the highest ever recorded in the RealtyTrac study that goes back to 2005. The total foreclosure filing number can double- or triple-count homes in default if they have more than one legal filing against them in a month.

Nevada, California

Nevada had the highest U.S. rate, with one foreclosure filing for every 165 homes, three times worse than the national average of one for every 510 properties. California was No. 2 with one filing per 224 households and Florida had the third-highest rate.

New York ranked 28th, with 5,498 filings, or one per 1,428 homes, up 21 percent from a year earlier.

U.S. banks reported owning residential property valued at $4.24 billion in the second quarter, typically houses and condominiums seized in foreclosures, according to the Federal Deposit Insurance Corp. That's up from $2.29 billion a year earlier.

About 14 percent of domestic banks have raised standards for mortgages to their best-rated customers and 56 percent have made it more difficult for subprime borrowers to get loans, according to a Federal Reserve survey of senior loan officers in mid-July.

U.S. economic growth probably will slow to 2.3 percent this year from 2.6 percent in 2006, Fannie Mae's Berson said in a Sept. 13 forecast. The median price of an existing home probably will fall 2.1 percent this year and 3.1 percent in 2008, he said.

`Likely to Slow'

``Economic growth is likely to slow in response to the problems in the housing and mortgage markets,'' Berson said in the forecast. ``Whether that slowdown will turn into a recession is unknown.''

Defaults on subprime mortgages will continue driving up foreclosures through 2009, Sharga said, citing pending interest increases on adjustable-rate loans homeowners took out in 2005 and 2006.

``There are probably two more major resets -- one next year, and the other in early 2009,'' Sharga said. ``If lenders raise their standards too high, and people can't refinance out of bad loans, it will only make matters worse.''