IRVINE, Calif. – The number of U.S. homeowners facing foreclosure rose 9 percent in July compared with June, as rising interest rates put the squeeze on holders of adjustable-rate mortgages (ARMs), according to a report today from RealtyTrac Inc. Compared with July 2006, foreclosures were up 93 percent last month, rising in 43 of the 50 states.
The subprime lending crisis, which has spurred lenders to tighten credit, and the real estate slump that has depressed home values both are exacerbating the problem by making it more difficult for troubled borrowers to refinance, RealtyTrac noted.
“Home equity has been a major factor in consumer spending, and the major concern is, we’ll go into a recession as that equity dries up,” Susan Wachter, professor of real estate at the University of Pennsylvania’s Wharton School in Philadelphia, told Bloomberg News. “Consumer spending drove us out of the last recession in 1991, and we might see a reversal of that now.”
Nationwide in July, lenders sent 179,599 notices of mortgage default, scheduled auctions or bank reposessions, RealtyTrac said.
More than half of those filings were in California, Florida, Michigan, Ohio and Georgia. Wachter cited high home prices in those states that pushed more buyers into “aggressive, exotic mortgages, such as subprime,” adding: “Those are the mortgages that default first.”
(Rhode Island single-family foreclosures rose 37 percent in July, according to a separate report today from Goleta, Calif.-based Bargain Network Inc. READ MORE)
RealtyTrac spokesman Rick Sharga told Bloomberg that,
“If [ARMs] default like the subprimes have been defaulting this year, we won’t be out of the woods for another nine to 12 months.”
The company is predicting “about 2 million foreclosure filings this year,” Sharga said. “We honestly don’t see it getting much better before it gets a little bit worse.”
RealtyTrac Inc., based in Irvine, Calif., is a publisher of data and advice for real estate markets nationwide. To learn more, visit www.RealtyTrac.com.
