Second Wave of Foreclosures

There is a second wave of foreclosures coming.  The one we have just gone through with all the "financial meltdown" was just the first of up to three waves of foreclosures.  The first one was the subprime mess, with lenders lending to people with subpar credit, that "surprise" did not or could not ultimately pay for the loans they signed up for.

The second wave is coming and will start hitting soon... these are the Alt-A loans.  I am not a financing guru by any means, but I watch the news and am aware of what several top sources are discussing.  According to wikipedia, these Alt-A loans are the loans which affect people somewhere between A+ credit and subprime.  Several of these were the stated income loans, known in the mortgage industry as "liars loans" and enough people took advantage of them to make them a problem. 

Option loans, the "pick a payment" type of loan will also be a part of the second wave of foreclosures.  When the borrower chooses to pay less than the owed amount, negative amortization occurs (increasing the principal owed).  When this happens again and again, and the buyer bought the home for $508,000 and now it's worth $320,000 (as the home across the street from me is), then they probably would choose to let it go to foreclosure.

There are more foreclosures coming.  How bad will it get?  What will the effects be?  I honestly do not know. 

I am concerned.  People who have held on in the last couple of years and seen their home values plummet, will probably see the values go down a little more before they go back up.  It is key to remember that those "losses" will only be realized if they sell in a down market.

The next wave of foreclosures is said to affect the "gated communities" of America.  We have seen all types of neighborhood's values drop across America.  How will the upper end stuff affect the economy?  I do think that those home values will have been effected by the overall crisis. 

Unless President Barack Obama requires a moratorium for foreclosures and requires banks modify loans, we are in for a bumpy ride.

 

To look at homes for sale in Washougal:

http://www.jmaproperties.com/idx/search.html?submit=true&search_city=Washougal&idx=residential&minimum_price=&maximum_price=&minimum_bedrooms=&minimum_bathrooms=