"The Growing Foreclosure Crisis" in Saturday's Washington Post looks at prime mortgages defaulting in Riverside County and elsewhere:
Before Robin Bohnen and her husband, Shane, bought a $1.16 million Mediterranean-style house in an upscale Southern California suburb two years ago, they were not cash-strapped, debt-ridden or credit-impaired.
Now they are all of the above. Soon they also may qualify for one more distressing category: home lost to foreclosure....
They cannot afford their $6,400 monthly payment, and in this plummeting market, they wouldn't make enough on a sale to pay off their mortgage or recoup the 20 percent they put down to buy their Riverside County home.
They're "underwater," industry parlance for borrowers who owe more on their mortgage than their houses are worth. They have joined the growing line of homeowners seeking a break from their lenders.
Both the departing and incoming administrations in Washington have promised help on the foreclosure front, but providing help requires federal regulators to get their collective arms around the size and shape of the crisis. That isn't easy. No one agency collects information on every loan, every borrower and every delinquency.
But interviews and a Washington Post analysis of available data show that the foreclosure crisis knows no class or income boundaries. Many borrowers ensnared in the evolving mortgage mess do not fit neatly into the stereotypes that surfaced by early 2007 when delinquency rates shot up. They don't have subprime loans, the lending industry's jargon for the higher-rate mortgages made to borrowers with shaky credit or without enough cash for a down payment.
The wave of subprime delinquencies appears to have crested. But in October, for the first time, the number of prime mortgages in delinquency exceeded the subprime loans in danger of default, according to The Post's analysis.
This trend shows up most acutely in California and other high-growth regions, such as Arizona, Nevada, Florida and pockets of the Washington region....
And there's more trouble on the way, continues the Post:
The foreclosure crisis hasn't played itself out. The next wave looms in the form of a new batch of adjustable-rate mortgages scheduled to reset over the next two years. Unless the market comes back with a roar, which is unlikely, more borrowers will struggle to hang on to their homes.
Southern California was the epicenter of the housing bubble, in many ways. Four of the largest lenders had offices there, and Riverside County became a showcase for how communities can create wealth through real estate. Now the county is a case study of what can happen when the only industry in town is growth itself.
Even today's lower rates will be a hefty upward adjustment for some homeowners. For example, real estate agent Carol Byrd, quoted in the story, bought her Riverside home three years ago for $525,000 with a teaser rate of 1.5% for the first five years.
--Lauren Beale
Thoughts? Comments?
Photo: A foreclosure sign sits in front of a home in Moreno Valley in Riverside County. Credit: Francis Specker / Bloomberg News
