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Is the nation's foreclosure horror story getting worse?

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By : John Smith    99 or more times read
The National Association of Real Estate Editors Journalism Conference held in Austin, Texas was told the other day that a further foreclosure-tsunami had been spotted not that far out in the ocean. According to the accredited analyst speaking there, the new wave will be as bad as the 2007 / 2008 winter spike, cresting early next year, but receding more slowly this time round. By 2012 he predicts, all will be over, and the American foreclosure industry back to business as usual again, albeit without a quick rebound in property prices.

While the bulk of the fresh wave of foreclosures will be related to adjustable interest rate mortgages and sub-prime loans, the bigger difference will be the driver – this time unemployment, and not collapsing prices will be the bogey-man.

The hot-spot map presented to the National Association of Real Estate Editors Journalism Conference shows Boise, Fayetteville, Arkansas, and Idaho joining the already troubled foreclosure hubs in California, Florida, Arizona and Nevada. Worrisome unemployment is also looming in Atlanta, the suburban areas of Chicago and Detroit, and in Washington, DC too.

The scenario presented to the Journalism Conference suggests that high unemployment will be pushing foreclosures hard by the end of 2010. That’s because borrowers with adjustable-rate-mortgages will be chasing higher interest rates by then, and, if unemployed, will start defaulting too. While, right now, strategic walk-away’s comprise just one eighth’s of mortgage defaults, that proportion will likely be on the rise too.

A leading Bank of America executive told the speaker that 86% of its borrowers continue to service their mortgages, and on time too – the response he got was that 98% to 99% should be the threshold for satisfaction. The speaker added that loan modifications would be “ineffective in resolving these types of foreclosure problems” too. He forecast that a “massive shadow inventory of loans in some stage of distress will slow down housing market recovery,” and that 1.2 million American homes are already in foreclosure, with a further 5.5 million delinquent mortgages catching up behind them. For the next 3 to 4 years a good proportion of that 5.5 million will slowly meet their doom – hopefully the lenders will not flood the market, and prices will not further collapse again.

Who knows what will follow, what seems likely to be a long, slow, flat but hopefully an eventual recovers. Will previously distressed homeowners once again be seen happily mowing lawns and planting trees? Will things get back to normal, or will America never be the same again?
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