Foreclosure Rates: A Growing Problem

Various foreclosure assistance programs were supposed to stall the upward momentum of high foreclosure rates, and even reverse the expanding epidemic. Instead, the situation is getting worse, and there appears to be nothing anyone can do to stop the rising tide of defaults.

Foreclosure rates hit another record high in August, with nearly 100,000 families losing their homes, despite widely touted foreclosure assistance efforts by the government and lenders.

According to news reports from Bloomberg, "Foreclosures accelerated to the fastest pace in almost three decades during the second quarter as interest rates increased and home values fell, prompting more Americans to walk away from homes they couldn't refinance or sell."

Frightening foreclosure facts

• New legal proceedings were initiated against about half a million homeowners who are behind on their mortgage payments to lenders who are members of the Mortgage Bankers Association.  That represents an increase of nearly 10 percent from the previous quarter.

• During the summer, some three million additional borrowers got behind on their payments.  That number didn't count the number of borrowers already in some phase of foreclosure.

• Delinquencies are currently up more than 25 percent compared to last year, and foreclosure rates have almost doubled year-to-year, although last year's foreclosure rates were already historically record-breaking.

• More than 1.2 million American homes are now in foreclosure, and a spike in foreclosure rates in California and Florida, which accounted for almost 40 percent of all foreclosures during the summer, offset any improvements in better performing states like Texas, Massachusetts, and Maryland.

• Meanwhile, pending sales, as reported by the National Association of Realtors, fell about 4 percent in recent months, signaling more sales deterioration to come.

• The deeper those figures fall, the more foreclosure rates will increase, because when sales fall, so do market values. As market value collapses, equity is erased, and the likelihood of someone being "upside down" in a loan increases, which often leads to foreclosure.

Foreclosure assistance needed

In a mid-September interview on ABC-TV, former Federal Reserve chief Alan Greenspan remarked that the situation "is in the process of outstripping anything I've seen, and it still is not resolved and it still has a way to go." He believes that our economic problems will "continue to be a corrosive force until the price of homes in the United States stabilizes," and predicted that normalcy will not return at least until next year. Critics of Greenspan's decisions while he was at the Fed say that he helped fuel the housing bubble by keeping mortgage interest rates too low for an extended period of time, which encouraged reckless lending and borrowing.

Nobody wants to be accountable. But the fact remains that foreclosure rates are accelerating and foreclosure assistance is failing at a time when a host of other financial problems plague the U.S. That's bad news for the economy and for average Americans, regardless of who gets blamed.