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Rising Foreclosures Cause Widespread Pain

Thursday, June 14, 2007 posted by Tommi Crow

News that home foreclosures are rising is not a surprise to those that follow the headlines. New studies estimate that 1.1 million families will lose their home over the next 2 years. The brunt of the pain will be felt by those left homeless, with tax problems and ruined credit, but the after shock will be felt by all of us.
Why? Because lenders are not in the real estate business. They must dump these non-performing assets as soon as possible. As they foreclose and take possession of all this property, they will slash asking prices as an incentive to move the inventory. Translation: Lending requirements will continue to tighten, making borrowing harder for everyone and we will all feel the effects of further downward price pressure.
Who is at the most risk of foreclosure?? Anyone who closed on an Adjustable Rate Mortgage (ARM) in 2004-2006 with a low initial “teaser” rate has a 1-in-3 chance of losing their home. If you got a subprime ARM during that period, with a higher than average interest rate, your chances are at 1-in-8.
Where are the most foreclosures taking place? For the most part, area’s with the highest rate of foreclosure are the same ones who experienced a great deal of speculation and unsustainable price increases.
Here’s a rundown on the metro areas with the highest rate of foreclosure filings:

Stockton, Calif. (1 in 88 households)
Merced, Calif. (1 in 100 households)
Modesto, Calif. (1 in 118 households)
Las Vegas
Riverside-San Bernardino, Calif.
Vallejo-Fairfield, Calif.
Sacramento, Calif.
Denver, Colo.
Detroit, Mich.
Miami, Fla.