Monday, May 25, 2009

Loans that fit a Families Income are Now the Third Wave of Foreclosures. Republicans Scramble to Blame Someone?

Where are the Republicans now, as solid home owners lose their jobs and slip into foreclosure?

How will they blame those irresponsible low income buyers for the current wave of families losing their homes to job losses and a dry employment market? Who the hell are they going to vilify now?

New York Times: As job losses rise, growing numbers of American homeowners with once solid credit are falling behind on their mortgages, amplifying a wave of foreclosures. In the latest phase of the nation’s real estate disaster, the locus of trouble has shifted from subprime loans — those extended to home buyers with troubled credit — to the far more numerous prime loans issued to those with decent financial histories. “We’re about to have a big problem,” said Morris A. Davis, a real estate expert at the University of Wisconsin.

Economists refer to the current surge of foreclosures as the third wave, distinct from the initial spike when speculators gave up property because of plunging real estate prices, and the secondary shock, when borrowers’ introductory interest rates expired and were reset higher. Mark Zandi, chief economist at Moody’s said, “That loss of jobs and loss of overtime hours and being forced from a full-time to part-time job is resulting in defaults. They’re coast to coast.”

Those sliding into foreclosure today are more likely to be modest borrowers whose loans fit their income than the consumers of exotically lenient mortgages that formerly typified the crisis. expects that 60 percent of the mortgage defaults this year will be set off primarily by unemployment, up from 29 percent last year.

We were warned of a wage “race to the bottom. “ But we loved the cheap products from China, We loved the cheap outsourced services from India.

I’m part of this new wave. I lost my job due to a recent business closing. Anticipating the worst, I recently managed to refinance my 15 year mortgage to a 30 year at 4.875 percent. That’s a change from $1003 to $582 a month payment. The rent I receive from my upper flat will help pay almost all of that monthly payment. It will slow the losses from paying our other bills. But obviously, we’re not out of the woods yet. Renewing our health care insurance is out of the question now.

Oddly, I mentioned my plight in a brief “lost my income” post on a Facebook running conversation, and didn’t get a response. My close friends were caught in “fun” tests and radio station promotions. Some even dreaded the thought of yard work.

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