The Foreclosure Issue

We all need to face this, foreclosures are not going away anytime soon.  Alan Zibel of the AP confirmed this week that the Great Recession has brought with it high unemployment which is putting the squeeze on people trying to make their mortgage payments.  These aren’t people who bought something they couldn’t afford with a subprime loan.  These are the people losing their jobs and can’t make payments on A-paper (see 30-year fixed conventional) loans.  Add this to the many Option ARM loans resetting next year (and even more in 2011), and you’d be hard pressed not to admit that foreclosures won’t be a factor until 2012.

Kathleen Howley of Bloomberg throws her two cents in by adding that there are also increased losses on FHA loans.  To be fair, FHA loan guidelines are MUCH more strict than anything we saw in the subprime market.  Default is occuring due to high unemployment (and underemployment).

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