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New Orleans The Wall Street Journal published a chart in Monday’s paper based on information from First American Home Core Logic, a real estate information service in Santa Ana, California in Orange County which was the heartland of the sub-prime industry. The chart indicated that between 1 in 4 and 1 in 5 (22.6%) home mortgage holders are “underwater” on their homes with negative equity. In simple terms these 10.7 Million homeowners now owe more money on their home than the home is currently worth.
In some states we are talking about a crisis of epic proportions. In Florida almost half of the mortgage holders are underwater. In California more than a third is in that predicament. Those two states have about 4.5 million people in this pickle and that’s just under half of the total. Both of those states have Republican governors, so one should expect that they will be blaming the Democratic Administration for not doing the job to relieve this crisis.
States where the problem is over the averages include:
Arizona 44.9%
Georgia 24%
Michigan 37.3%
Nevada 65%
So the hard statistical truth is that half-dozen states, and really more like five states, are really driving a huge amount of market deflation and most urgently need real propping up. Actually, I should check, but I think Michigan may be the only one of those states with a Democratic governor, so it’s a surprise that we don’t hear about this all of time. Or, maybe we will next election if these governors are so caught in defending the market’s right to push down values, that they are not creating support for homeowners desperate to hold on to their homes?
Are there any surprises on list? Frankly, yes!
Illinois has over 18% under, and they are on few life support lists. Utah is also over 18%, and I would have thought their numbers might have been lower. Maryland and Virginia, which means the DC suburbs, where I have spent some time over recent months and where values were supposedly holding even though new construction had slowed, are both on a critical list with 21.5% and 23.8% of their homeowners underwater.
This continues to be problem without a plan. Or at least a plan that works. When you are talking about 10 million families in trouble and tempted to walk away from something that is worth less than they owe, and many millions more on the bubble losing sleep with worry about this, I would say this is worth huge attention from the top down.
Hello?!?
6 Comments
Your statistics should include Riverside & San Bernardino counties in Southern California, where unemployment is reportedly at 25%, and is the center of the forclosure market in SoCal.
There is a plan. Foreclosure. Bailouts are for the rich.
Yes it is a problem but what kind of plan do you have in mind? Some states took the lead early on to have mortgage terms adjusted but over half of those mortgages went back into default within a year. No jobs, no mortgage payment.
The government certainly can’t bail out homeowners and it should not be bailing out banks and Wall Street.
Many people need to bite the bullet and move. The new owners will buy homes at much reduced prices but at least they will be able to maintain them. Some 30% of foreclosed homes are in such bad shape they don’t qualify for a government financing.
I think there is no easy solution. There will be some pain.
Barney Frank and Alan Greenspan did us no favors.
Obama and Congress need to make the big banks recognize the toxic assets. That will put them underwater,a nd they can be taken into receivership. Then the Government will be free to negotiate mortgage principals downward, which, in turn, will end the underwater problem, lower mortgage payments, free up money for consumption, and also give the Government the opportunity to make the banks lend money to small businesses. If want the economy to get better from the bottom up, these measures plus a very big jobs program are what we need.
I’m going to go out on a limb here and guess that most of those mortgages are either thirty year mortgages, or ARMs. In either case, little principal would have been paid off those mortgages in the first few years. If housing prices went down at all, many could be underwater.
It’s no wonder people are under water, because no one is holding the Banks accountable fort their actions.
I just found out that My ninety one year old mother is going to be foreclosed on, and thrown out of Her home.
NFM consultants got a mortgage thru Amtrust Bank, F/k/a Ohio Savings Bank for one hundred fifty thousand dollars on Her house thatShe owed eighty six thousand on, and was valued at one hundred ten thousand.
Her paymeant was more than Her entire social security check, so duh she couldn’t make the payments. The difference between the payoff of Her old mortgage, and the new amount borrowed misterously disappeared Her having got None of it.
She got a nice Lawyer to fight for Her in the Florida Courts, and guess what they ruled for the bank, allowing them to foreclose.
There is something drastically wrong in this country when an old person can be victimized, and the law rules for the crooks instead of a poor old woman who did nothing wrong.
She swares She didn’t even sign the papers, and they forged Her signature, but she got no copies to prove it. Pactically every law there was has been broken by these people, yet our courts can rule for them instead of Her. Leaveing Her with no recourse. Our Government bails out the banks and, let this old lady be thrown out. She couldn’t even remortgage because they loaned more than the house could ever be worth.
The people of this country need to stand up and fight for ourselves, because our Government is fighting against us.
The way this crisis was constructed (yes, I believe it was intentional) there isn’t any other way of getting at it.
The mortgage servicing companies don’t have authority to modify mortgages.
Many mortgages are split up and owned by people all over the globe.
Banks have used them in their reserves and won’t sell at low prices.
It’s a frozen situation as long as those who hold toxic assets can hold on and wait for their value to come back up. While those Rich people are waiting everyone else sinks into the swamp.
Why don’t they sell? Because they would take a huge loss.
What good is holding on? Prices might come back up OR foreclosure leads to a total loss and then their Credit Default Swaps (insurance) kick into recoup the total amount. woo hoo
But, the Credit Default Swaps aren’t generally backed by real reserves…
They figure the federal gov’t (the one they wanted to be small and off their backs) will come to their rescue and socialize their losses.
At that moment it would be a blackmail scheme: pay off their CDSs or they’ll go bust and destroy the banking system & national economy.
OMG, they killed Kenny “the economy”.
Bastards!
So, the gov’t pays off and has to look for a way out of the crisis before looking for any kind of justice.
It’s a very bad situation we owe entirely to Wall St. and the Republicans.