‘A dark cloud over the American dream’

From the Central Valley Business Times:

The worst of the U.S. housing slump may be over but not the foreclosure nightmare that haunts many of the nation’s homeowners, says a Central Valley real estate investment and foreclosure information company.

More than a quarter-million (253,803) pre-foreclosures and notices of pending foreclosure auctions were filed nationwide in the first quarter of the year, according to figures compiled by Foreclosures.com of Fair Oaks.

That means 2.4 out of every 1,000 homeowners faced losing their property to foreclosure in the first three months of 2007, according to its calculations.

Those numbers are up 22.5 percent from the 207,128 filings in the fourth quarter 2006. They also don’t include tens of thousands more now-vacant properties that actually were lost to foreclosure during that same period, says Foreclosures.com. Those “REO” or bank-owned real estate filings totaled 110,791 in the first quarter alone, says Foreclosures.com, which has been analyzing housing markets since 1992.

“The numbers cast a dark cloud over the American Dream of homeownership,” says Alexis McGee, president of Foreclosures.com. “Unfortunately for those overextended homeowners it’s a cloud that isn’t likely to lift any time soon either, especially in light of the recent troubles in the sub-prime lending market.”

Recently some of the nation’s biggest subprime lenders have cut back or shut down their operations. New Century Financial Corp., for example, stopped taking new loan applications, and then filed for Chapter 11 bankruptcy protection; mega-lender Countrywide Financial pulled out of the subprime market altogether; and another big player, Fremont General Corp., after watching its stock plummet, is selling off its subprime lending unit.

The end result is that financially strapped homeowners now have even fewer bailout options, says Ms. McGee.

“Remember, a lot of these foreclosures, auctions, and REOs are in part a result of homebuyers who really couldn’t afford to purchase their homes, but did so anyway with creative financing (relaxed loan qualifications, too) and the expectation of rapidly rising home prices,” says Ms. McGee. “Now, those low monthly mortgage payments have adjusted upward beyond reach, housing price appreciation has stagnated or dropped, and in many cases their lender is gone. Though the remaining lenders hope to help their homeowners work out their mortgage woes, the plain fact is that the financial markets are now using tighter underwriting guidelines then they were just a few months ago."

She says that homeowners who can’t afford their monthly payments, rather than simply refinance their way out of trouble as was common in the past, will now have to sell their homes quickly, or risk losing them to foreclosure.

“That means in the coming months we can expect to see many more pre-foreclosure filings, more auctions, and more REOs,” she says