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Two and a half Million Foreclosures; Just the beginning

Dennis Norman

I spent this morning reading a sobering and, quite frankly depressing, report issued by the Center for Responsible Lending that focused on the demographics of people losing their homes as a result of foreclosure. The report is done well and looks at the impact of foreclosures on different races and ethnicity’s and then addresses what they believe to be the cause of this crisis.

While the reports main subject was eye opening, what really got my attention as I went through the report were some of the facts and figures being quoted. This caused me to dig through the reports extensive four-pages of references and citations and then follow those back to the source. A couple of hours, and about 300 pages of paper (there goes my Sierra-Club membership) later I overwhelmed with the sobering statistics I had found concerning foreclosures.

This is a topic that is obviously on-going and affecting many people’s lives and deserves more space than I will give the topic here, but I’ll be talking more about it in the future as well.

Here are some of the facts and figures from the report from the Center for Responsible Lending as well as from some of the various sources their references lead me to:

  • During the first three years of the foreclosure crisis, from January 2007 through the end of 2009, they (CRL) estimates there have been 2.5 Million foreclosures completed.
  • 83% of these foreclosures were on loans that originated between 2005 and 2008.
  • 82% of the foreclosures were on owner-occupied homes.
  • According to the Mortgage Bankers Association 4.63 percent of mortgages in the U.S. are in the foreclosure process. This is not only a historic high but is five times higher than the average of all quarterly rates reported by the MBA from 1979 to 2007.
  • The CRL estimates that, when combining borrowers that are two or more payments behind on their mortgage with borrowers already in the foreclosure process, there are 5.7 million borrowers at imminent risk of losing their homes to foreclosure.
  • The CRL estimates that 17% of Latino homeowners, 11% of African-American homeowners and 7% of non-Hispanic White homeowners have already lost or are at imminent risk of losing their home.
  • The CRL estimates that subprime loans account for 64% of the foreclosures during this crisis period, but only account for 22% of the loans originated during the period.
  • The foreclosure rate on subprime loans is 16.5%, Jumbo Loans 4.4%, Government Insured Loans 3.8% and conventional loans 2.3%.
  • Credit Suisse, in their December 2008 Foreclosure Update, forecast that 8.1 million mortgages would be in foreclosure over the next four years (this represents 16% of all mortgages in the U.S.- almost 1 out of ever 6 mortgages).
  • The Credit Suisse estimate for foreclosures, under a recession (which we had) was increased to 9.0 to 10.2 million foreclosures through the end of 2012.
  • Goldman Sachs, in their Global Economics Paper, Jan 13, 2009) projected 13 million foreclosures by 2014.
  • A report by Urban Institute estimated the financial cost to local governments of a single foreclosure at $19,229.
  • CRL estimates that $1.86 trillion will be lost in home equity between 2009 and 2012 due to depreciated home values associated with nearby foreclosures.

When you see these facts and figures I think it is easy to understand why I have a rather conservative outlook on when the housing market will recover. Until the foreclosure crisis begins to show signs of coming to an end, which by the facts above appears to be at least 2 if not 3 or 4 years away, the housing market, and home prices, are going to continue to be impacted negatively by the foreclosures.

 

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