Foreclosure Facts
Posted on October 21, 2008
Filed Under Foreclosures |
Economists have stated that American economy has been officially under recession from March – November 2001, but repercussions have extended until now. There are more and more signs that prove that the USA faces another recession period. Those who have borrowed money recently can pay their debts with more difficulty than the previous year, according to reports coming from investment banks.
According to experts’ expectations, the number of American foreclosed houses is increasing during the next period. For example, during the third trimester of 2007, the number of foreclosed properties increased more than two times compared to the third trimester in 2006, for 446,726 properties at national level, according to data coming from RealtyTray Company.
A house out of 196 is foreclosed. Such data suggest that the number of Americans who can lose their property is higher than in the past and they belong to social categories that have never thought of facing such problems, like chemists or teachers.
In a study conducted by Global Insight, approximately 1.4 million houses in the USA will face foreclosure the next year, according to USA today. The value of properties can decrease with 1,200 billion dollars, on the background of increasing numbers of foreclosures and low prices.
Properties prices will decrease with an average of 7%, but in California the decline can reach 16%, according to the analysis company.
Some property purchasers have opted for loans whose interest has been low. Credits that have allowed purchasers to pay only one interest at a low rate for two years have been too attractive to be missed. It has been said that many people have used their houses like ATMs. Risks are multiple. Some people say that additional credit can destroy their financial situation. Some of them can go to mortgage repair centers, where hundreds of credit consultants are willing to help desperate homeowners.
There are people who take measures too late and many people are forced to leave their homes. People who face such situations refuse to talk about it, because they feel embarrassed and that is why they end by losing their homes.
Many Americans are not aware that they can influence negative other people’s lives and national economy if they do not pay their mortgages. Actually, the number of foreclosures that will be revamped represents only a small part of the economy of the USA that once has been estimated at 14,000 billion dollars.
However, the series of failures on Wall Street can prove that nobody is immune in the case of a negative turn of the loans market. The current financial system is interconnected: foreclosures are sold to investment companies, which re-sell them as financial risk instruments. Hedging and retirement funds thus purchase such instruments that can lead to a high coefficient of efficiency.
When property prices have increased, such assets have been very profitable. However, the collapse of properties prices has triggered a chain reaction: creditors have raised their standards and debtors have serious problems with loans covering. Unfortunately, this is not only a national problem, but it can as well have global consequences.
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