Rates are off again because of continued signs of economic strength, including improved “Housing Start” numbers and positive corporate earnings reports from Wall Street. There are, however, many indicators that the economy remains weak, including negative data from the Fed, and increasing foreclosure numbers.
Foreclosures for the first six months of this year are up 9% over the previous six months, and they are up 15% over the same period in 2008.
Our banking consultants just sent us the results of a recent survey analyzing the primary causes of foreclosures. The primary cause is NOT bad credit, sub-prime loans or small down payments. The primary cause of foreclosures, irrespective of the strength of a borrower, is “negative equity”. This is the observation we have been making all along. If a borrower is significantly upside down in his or her property, he or she will likely walk away no matter how good his or her credit is. This makes it seem like all the regulations to prevent future foreclosure crises will do little good.
And, according to the Wall Street Journal, with Sub Prime and Option ARM Loans just now starting to hit the market in mass, expect a lot more inventory to continue coming to the market.
Founder/Broker | JVM Lending
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