A record high was set in the spring on the number of homeowners receiving foreclosure notices, which was caused by problems within the subprime mortgages. Mortgage holders that started the foreclosure process in April-June reached .65 percent, which marks the third consecutive quarter that this figure has set an all-time high.

The delinquency rate, which is the amount of people who have falling behind on their payments was up about 5.12 percent. The worsening performance was driven by 2 factors – Heavy job losses in the states of Ohio, Michigan, and Indiana and the collapse of previously booming housing markets in California, Florida, Nevada, and Arizona.

The problems that arose in the hot housing markets in California, Florida, Nevada, and Arizona was due to speculators walking away from mortgages they can no longer afford. During a 5 year housing boom, the prices in these areas surged which is described as a speculative bubble. This is where investors bid up the prices of homes hoping to quickly flipping them for profit.

Now that home sales are falling, speculators are defaulting on their mortgages because of unsold inventory. One last problem is that an estimated 2 million adjustable rate mortgages are scheduled to reset this year with higher interest rates. This might cause some monthly payments to double or even triple. This is a severe problem in the market for subprime mortgages.

[via Yahoo!]

Tags: Business, Mortgage, Home Owners, Subprime, Subprime Mortgages, Housing

If you liked this post please consider adding us to your RSS Feed