Posted on Tuesday, February 23, 2010
At the end of 2009, foreclosures were definitely "in the news." And for good reason. The number of foreclosures rose from 1.8 million at the end of 2008 to about 2.5 million at the end of 2009. This means that 2.21 percent of all U.S. housing units - one in 45 - received at least one foreclosure filing during 2009. That is up from 1.84 percent in 2008, 1.03 percent in 2007 and 0.58 percent in 2006. Four states - Nevada, Arizona, Florida, and California - account for 45 percent of the foreclosure inventory (and 50 percent of all delinquency filings The number of seriously delinquent prime loans grew at a much faster rate in 2009 - 66 percent - than did the number of seriously delinquent subprime loans, which increased by about 20 percent. Among recent prime loan defaults, those loans with balances in the move up category of between $417,000 and $600,000 have performed the worst. In 2006, homes in the bottom one-third of home values accounted for almost 55 percent of all foreclosures. That means 30 percent of foreclosures are homes in the top tier of local home values, almost twice the proportion of foreclosures than three years ago.
Nearly 10.7 million, or 23 percent, of all residential properties with mortgages were in negative equity as of the second quarter of 2009. An additional 2.3 million mortgages were possibly approaching negative equity - or having less than five percent in equity. That adds up to nearly 28 percent of all residential properties with a mortgage nationwide. Among the top five states, the average negative equity share was 46 percent, compared to 13 percent for the remaining states.
According to a study by Experian and Oliver Wyman, more than a quarter of all existing defaults were found to be strategic and they more than doubled from 2007 to 2008 to 588,000. The study also found that borrowers with higher credit scores were 50 percent more likely to strategically default than those with lower credit scores. In another survey study by Guiso, Sapienza, and Zingales the authors found that 26 percent of existing defaults were strategic. They also found that no household would default if the equity shortfall is less than 10 percent of the value of the home. Yet, 17 percent of households would default, even if they could afford to pay the mortgage, when the equity shortfall reaches 50 percent of the value
of their house. DSNews.com