An estimated 60 percent of homeowners in Arizona, California, Florida, Georgia, Michigan and Nevada owe mortgages to banks more than the market value of their properties.
These figures showed the extent of the housing market recession in the United States. One in every five homeowners in the U.S. owes a mortgage more than the value of his property.
These developments posed a challenge to government officials who are responsible for designing a program that will help homeowners avoid the threat of foreclosure.
According to New York University economics professor Nouriel Roubini, overall home prices are down by about 20 percent. He expects prices to go down further by 40 percent.
First American CoreLogic chief economist Mark Fleming claims that in some suburban neighborhoods, builders continue to put up new homes while buyers give only small, and sometimes, no down payment.
Also, prospective borrowers are having difficulty with increasing mortgage rates. A fixed-rate mortgage of 30 years has an averaged of 6.46 percent, an increased from the previous 6.04 percent rate.
Higher mortgage rates and lower home market values indicate that fewer people are able to meet their home equity and a greater number of them facing the threat of foreclosure.
While some homeowners may lose their properties to foreclosure without a successful refinancing plan from the government, many of them are willing to pay their mortgages and wait for market values to recover.
However, it is still unclear whether the U.S. government can help borrowers avoid foreclosures, given the time it will take to start a rescue program.
Dana Perino, press secretary of the White House, tried to clarify reports that President Bush’s Administration is finalizing an agreement on a program to help nearly 3 million borrowers avoid foreclosure.
The Federal Deposit Insurance Corp. is expected to implement the rescue plan which is perceived as the most aggressive program to address the foreclosure problem.
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