US Foreclosures Up 68% From Year Ago

A: Ehh, nothing unexpected here. However, we did see a 10% decline in foreclosure filings from last month; a trend I don't think will continue! With 2008 expecting a record number of mortgages to reset to higher interest rates, it's likely the foreclosure problem is still evolving rather than nearing an end.

If there is one point I would like to get across here, it's that this will be a slow and painful process that we will have to go through; to weed out the bad bets, let the system fix itself, so that we can return to a more healthy environment of longer term sustainable growth. I'm sure there will be plenty of silver linings and hopeful data reports during this process, but overall, expect the foreclosure/defaults trend to get worse before it gets better.

According to Bloomberg:

U.S. home foreclosures rose 68 percent in November from a year earlier as adjustable-rate mortgages left subprime borrowers unable to meet higher payments, according to data compiled by RealtyTrac Inc.

There were 201,950 foreclosure filings in November, including default notices, auction letters and bank repossessions, down 10 percent from October's total, RealtyTrac reported today. California, Florida and Ohio had the most filings and Nevada had the highest foreclosure rate.

Interest rates increased on more than $87 billion of subprime mortgages in the third quarter, and another $84 billion will reset in the fourth quarter, according to New York-based analysts for Credit Suisse Group. Foreclosures may surge next year as payments rise on about 1 million home loans, Rick Sharga, executive vice president for marketing at RealtyTrac, said in an interview.

This is an affordability problem for many homeowners. With rates rising, bills piling up, re-financing options restricted, and falling home values, its just a matter of time for those struggling to meet debt payments to be forced into foreclosure. Gloomy, but reality.

People normally do whatever they can to avoid foreclosure: start using credit cards for payments they can't make now, file chapter 13 bankruptcy protection to stop foreclosure action, borrow from friends, cut down on spending, etc.. Unfortunately for those that bought a house they couldn't afford and rationalized that purchase by taking out an aggressive loan product, its a ticking time bomb that will ultimately go off. This story is still being written and who knows what the next chapter will bring as we are yet to see the future effect on wall street innovations.

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