Excerpted from Business Week, The Feds’ Next Step After Rescuing Banks, Oct. 27, 2008
* * * * *
The financial system, perhaps, has been saved. Now, what about homeowners … and the surge in foreclosures.
In 2008 some 1.69 million homeowners will lose their houses — double the rate of two years ago … 3.6 million more foreclosures could pile up through 2012.
So far, attempts to slow the foreclosure epidemic at the center of the crisis have had little impact, despite “voluntary” industrywide efforts to rework troubled mortgages.
The reason: No one has figured out how to untie the Gordian knot created by the mass securitization of mortgage loans. Hundreds of investors may own an interest in the trust that holds any given mortgage. If a loan is reworked, some of those investors would lose more than others. In many cases, mortgage servicers are prohibited from modifying a pool of loans without the consent of two-thirds of the investors; often, the servicers also earn more in foreclosure than in reworking a loan.
Full article:
http://www.businessweek.com/magazine/content/08_43/b4105000306170.htm
* * * * *
Ken’s Take: There are roughly 75 million “homes” in the U.S. — approximately 1/3 are owned free and clear of any mortgages — so, 1.69 million means that a little over 2% of homes went into foreclosure in 2008 — double the historical rate of 1% — is that a big number or a little number ?
* * * * *
Want more from the Homa Files?
Click link => The Homa Files Blog
The Homa Files 
October 24, 2008 at 2:17 pm |
Potentially a huge number. Remember two things:
1) The number of foreclosures is less significant than the asset recovery value. The falling housing market is making each home liquidation MORE painful. In a rising housing market home foreclosure is often profitable. So 2% foreclosure in 2008 could cause more loss than 10% foreclosure in 2005.
2) How many times did the investor lever his bet?