You thought the storm was almost over! Guess again! Has anyone read this article that is currently on Google Foreclosure Storm Ahead? It is in today's business news this morning about a "Foreclosure Storm Will Hit US in 2009 as Loan Changes Fail"? Many in real estate forget the fact that there are foreclosure moratoriums - state and federal governments mandated artificially a pause in taking on new foreclosures. These are legislatively enacted laws that forestall the foreclosure process. The problem isn't fixed by doing this; all it does - it postpones the inevitable. Mortgages that are not paid are in default, and the due process is to redeem that bad debt, secure the assets and liquidate it. Sooner or later the debt has to be addressed. 2009 seems like a year of reckoning is shaping up to be some storm.
The issues haven't changed, you just postpone, delay or procrastinate what you do not want to occur. We have postponed an epic "Foreclosure Tsunami!" Many of those that are on the edge will be pushed off as they receive unemployment notices. They have no cash reserves. Their $400 a month benefit will not even cover their auto payments, let alone their mortgages. One of the biggest reasons for mortgage defaults is "Unemployment!" Last Fridays' record announcement of over 530,000 layoffs in November was totally unprecedented historically, and will not be without an impact on individuals and society as a whole.
Unemployment is not the only factor that we will have to deal with. There are many others. Sub-primes will be overshadowed by Alt-A resets that dwarf the sub-primes in magnitude. The upper end market will have to adjust to the new landscape of a drought in buyers and falling prices. On modified sub-prime loans - delinquencies are up even on loans that were already modified, and as much as 50% of the modified loans are already in default again.
Comments(0)