Homes foreclosures could top 1.5 million in USA

Foreclosures May Reach 1.5 Million, Fallout Spreads Despite word that existing and new home sales were expected to pick up later this year, news from economists, analysts and a Federal Reserve governor now indicates the deepest housing decline in 16 years is about to get worse. According to expert sources, as many as 1.5 million more Americans may lose their homes, another 100,000 people in housing-related industries could be fired, and an estimated 100 additional subprime mortgage companies that lend money to people with bad or limited credit, may go under. Already, Countrywide Financial Corp., the largest U.S. mortgage lender, announced it is no longer going to make zero-down payment loans. In addition New Century Financial Corp., the largest U.S. independent subprime lender, announced its lenders plan to halt financing. The company has also discontinued taking loan applications from risky borrowers. Several other subprime lenders have already begun laying off employees. Ameriquest Mortgage Co., Ownit Mortgage Solutions LLC, WMC Mortgage Corp., Mortgage Lenders Network USA Inc. and Fremont General Corp., have let go more than 5,600 employees in the past year. Already the spring buying season, when more than half of all U.S. home sales are made, has been so disappointing that the National Association of Home Builders now expects purchases to fall for the sixth consecutive quarter after it predicted a gain just last month, observed Bloomberg. Robert Kleinhenz, deputy chief economist of the California Association of Realtors predicts if this real estate slump follows the same pattern as the last one in 1991, it will persist for at least another year and may fuel a recession. New-home sales dropped 45 percent from July 1989 to Jan. 1991 and about 1 percent for all U.S. jobs, or 1.1 million, were lost in that recession. Now, new-home sales have already declined 28 percent since September 2005, hitting a low in January, and mortgage-related jobs fell by almost 2,000 just in January. What's more, at least two dozen of the more than 8,000 mortgage lenders have reportedly been forced to close or sell operations since the beginning of 2006. The Mortgage Bankers Association's chief economist Doug Duncan forecasted that more than 100 home lenders may go out of business this year. Most of the money that fed the five-year housing boom that ended in 2006 and made it possible for many credit-risky consumers to purchase homes who otherwise couldn't have gotten a mortgage, came from subprime mortgages that carried rates at least two or three percentage points higher than safer prime loans. According to the MBA, the portion of subprime loans that financed new mortgages rose to 20 percent last year from 5 percent in 2001. In addition, data from the U.S. Census Bureau shows subprime loans contributed to a home-ownership rate that reached a record 69.3 percent of U.S. households in the second quarter of 2004, up 5.4 percentage points from the same period in 1991.


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'Beware of false prophets, which come to you in sheep's clothing, but inwardly they are ravening wolves. You shall know them by their fruits.'
Matthew 7:15,16

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