1.5m Homes In US Face Foreclosure

Source : The Straits Times, July 17, 2009

Housing woes continue to spread as more people become jobless

WASHINGTON: The number of Americans on the verge of losing their homes soared to a record in the first half of this year as more lost their jobs and were unable to pay their monthly mortgage bills.

More than 1.5 million properties received a default or auction notice or were seized by banks in the period, according to a report released yesterday by foreclosure listing service RealtyTrac.

The number of properties drawing such filings jumped 9 per cent from the second half of 2008 and almost 15 per cent from the first half of last year.

Despite the Obama administration's plan to encourage the lending industry to prevent foreclosures by handing out US$50 billion (S$73 billion) in subsidies, US housing woes continue to spread.

Experts do not expect foreclosures to peak until the middle of next year.

As many as 3.2 million households will get a foreclosure filing by the end of the year, said RealtyTrac's senior vice-president Rick Sharga.

Payment-option adjustable rate mortgages will contribute to higher defaults, he added. The option allows borrowers to pay less than the interest they owe each month, tacking on the difference to their total debt and creating the potential for bigger bills in the future.

About three-quarters of those loans will adjust to require higher payments next year and in 2011, with the peak coming in August 2011 when about 54,000 loans recast, according to data from First American CoreLogic.

Last month, as home prices continued to fall, foreclosure filings rose 5 per cent from May and 33 per cent from a year earlier. June's foreclosure activity was the third-highest on record, and the fourth straight month of filings on more than 300,000 properties.

At the Federal Reserve's June meeting, central bankers were less certain than they were in April over how the US economy will emerge from the recession.

Policymakers have differing assessments of how quickly credit markets will heal, and how effective a US$787 billion fiscal stimulus and US$1 trillion expansion of the Fed's balance sheet will be, according to the Federal Open Market Committee minutes released on Wednesday.

The range of unemployment forecasts for next year widened in June to between 8.5 per cent and 10.6 per cent, a 2.1 percentage point gap, from between 8 per cent and 9.6 per cent in April.

The range of projections for 2010 growth showed a gap of 3.2 percentage points, up from a 2.5 percentage point divide in April. The lowest forecast suggests the economy will grow just 0.8 per cent from this year's fourth quarter to the final quarter of 2010; the highest projects 4 per cent growth.

'The wide array of estimates...suggests that we really don't know how this economy is going to unfold in the coming months, let alone two years from now,' said Mr Richard Yamarone, head of economic research for Argus Research Corp. -ASSOCIATED PRESS, BLOOMBERG, REUTERS