Over 2 Million Foreclosures Predicted by 2008

There have been several studies done on this topic.  The main one I was referring to in the post was completed by The Center for Responsible Lending.  They analyze mortgage loans throughout the country to try to expose predatory lending practices.  My post was discussing their findings and conclusions.  Now we must remember the point of the study was to examine subprime mortgage loans that were originated within the last five years.  So what they are saying is from their findings they have estimated that about 1 in 3 subprime loans of the past five years that were studied will go into foreclosure, if they have not already. Another study was completed by HousingPredictor.com.  They researched the public records of 100 largest real estate markets to come up with their estimates and predictions, which happened to also be at least 2 million.

As far as tightened guidelines, its already happened in my area.  The subprime mortgage market has practically disappeared.  A year ago, I saw an individual with a 520 credit score and a record bankruptcy twice that was approved for a mortage.  Now, that has completely changed.  Now if you have under a 640 in my area it is difficult to find someone to work with you.  The options for these individuals lately has been a credit repair program with a lease/purchase option or rent-to-own.  I think the difference is that we as professionals owe it to our clients to share with them the consequences of not making good financial decisions regarding home purchases.  For example, the individual mentioned earlier with the 520 credit score could have bought the top home that they were approved for.  However, the choice was made to purchase a modest condo in our area so that they would be able to pay on time each month with a little extra principle, enter a credit repair program, and then after rebuilding credit move up to another home in the future.

Subprime lending in a lot of cases already carried an amount of risk for lenders.  Not only due to credit scores, but also because of no-doc or low-doc loans as well as mortgages with adjusting rates.  Additionally, if there were mortgage companies and loan originators "pushing through" loans that probably should have been then it is not such a stretch to believe that many people will find themselves in a foreclosure situation soon.  Will it happen?  I don't know which is why I try to use phrases like, "their estimates" or "it is predicted."  If we as real estate professional stay knowledgable about what is going on in our local market and try to educate the public, maybe it wont happen.  Maybe we can encourage individuals to move into action before their home is in foreclosures.