Even with such options as Project Lifeline, foreclosures are still on the rise. Apparently, mortgage lenders aren’t as keen as the government thought they would be to restructure mortgage loan terms. At any rate, reports are that foreclosures in April were up 65 percent from the same time last year. The crisis continues.

Foreclosures moving up the food chain

But it’s not just the middle class over-reaching with subprime mortgage loans that is causing a problem. Foreclosures are moving up the food chain, with upper middle class and even wealthy homeowners starting to feel the pain. Indeed, the Washington Post reports on foreclosures in more affluent areas:

The foreclosure signs that have been sprouting up in less-affluent communities since 2006 are beginning to appear in the well-off suburbs, attached to houses that once cost $1 million or more. Although those kinds of homes are in the minority now, real estate agents predict the numbers will swell.

Who should fix this problem?

Meanwhile, the debate rages over who should be fixing the problem with rising foreclosures. While Congress debates a housing relief bill (that the President vows to veto), some homeowners are angry. After all, if those who made poor decisions get a bailout, shouldn’t those who made responsible decisions have the option to restructure their home mortgage loans as well?

It’s a bit of a sensitive topic.

And while there is a firestorm of anger over bailing out fellow “regular” Americans who made poor decisions, the rage doesn’t seem to be transferring to the bailout of investment banks and investors who made poor decisions (remember Bear Stearns and the bailout putting taxpayers on the hook?).

Why is it that we’re so angry about helping those with foreclosures, but we’re fine with bailing out investment banks and investors?

Tags: foreclosures, mortgage loan blog, home mortgage loans, mortgage lenders,
subprime mortgage loans, housing relief, Bear Stearns

Janet Yellen, the president of the San Francisco Federal Reserve, has said that housing markets have “hit the skids” since the days of easy credit and booming home sales. Finally, years of easy money and easy mortgage financing requirements have caught up with the markets. Housing relief bills and other government measures may not be enough. Calculated Risk reports on some of Yellen’s comments about housing markets:

Since then, housing markets have “hit the skids.” In inflation-adjusted terms, residential construction fell by 13 percent in 2006 and by 14 percent in the first half of last year. Of course, once the financial shock hit last summer, things got even worse, with real residential construction dropping at a 24 percent rate on average since then. And, indicators of conditions in housing markets are pointing lower for the future. Housing starts and permits as well as sales are trending down, and inventories of unsold homes remain at very high levels. These inventories will need to be worked off before construction can begin to rebound.

Indeed, with housing markets showing increased inventory, it is no surprise that home prices are down quite a bit as sellers try to do what they can to sell their homes. Also contributing to the lower home prices overall are the foreclosures. These are sold at low prices so that mortgage lenders do not have to sit on them.

If you are savvy with your decisions, and if you have the credit score and down payment to make it possible, you can probably not only get a good deal when you buy a home, but you could also get a good deal on a home mortgage loan. Now might be a good time to invest in real estate.

Tags: housing markets, home prices, home mortgage loan, mortgage loan blog,
Janet Yellen, mortgage lenders, invest real estate

Bank of America is expected to see some serious losses with regards to home equity loans. Why? Because second home mortgages are connected to home value, and that means that as home values fall, losses due to home equity loans rise. Bloomberg reports on the current state of Bank of America:

The bank expects losses to top 2.5 percent of its $118 billion in loans linked to home values, Liam McGee, president of the Charlotte, North Carolina-based company’s consumer and small business division, said at a conference in New York sponsored by UBS AG. The bank previously projected a loss rate of between 2 percent and 2.5 percent.

Bank of America, the nation’s largest credit-card issuer, is also seeing a “recent sharp increase” in spending on necessities by its credit-card customers. That has curbed retail, travel and entertainment purchases, McGee said. Economists and bankers have said the economy may be teetering near a recession as consumers struggle with job losses and gasoline prices topping $4 a gallon.

You can also see that problems may be arising in the area credit cards as well. As more people have to turn to credit cards to cover the necessities, there could be real problems ahead.

This presents a combination problem: Home equity is tapped out, and credit cards are moving toward being maxed out. This is a trend that is sweeping the nation. The question is this: How long until Americans as a whole move from managing their debt to actually drowning in it? And consider: with home equity loans getting harder to come by, it will make it difficult for Americans to use debt consolidation to get a handle on their credit card debt.

Tags: home equity loans, home equity, home mortgage loan, mortgage loan blog,
second home mortgages, debt consolidation, credit cards