The news that we heard every day for the last couple of years was focused on the sky rocketing number of homes being foreclosed. Now that the story has collected some dust the interest of the news organizations has moved on to newer tragedies and stories that have not been over played.
It is a fact that the number of foreclosures has slowed but the slowdown has as not stopped the banks and lending institutions from foreclosing on millions of homes every year. They just became more cautious after the Robo-signing fiasco and their PR operators went into overdrive in the same way that British Petroleum did after the worst oil leak in the history of the world.
The truth is that people are still unable to refinance and loan modifications are rarely successful. The unemployment rate is still north of 8 percent and the economy is still growing at below 2% annually. The number of foreclosed homes has indeed leveled off, but with millions of homes on Fannie and Freddie’s books, the tide has not turned, just slowed.
We should expect to see a continual and predictable number of foreclosures for at least the next three years. The Government knows that if they flood the market that the housing industry will react with lower prices and we will be facing another downturn in the economy. This is the reason for the recent threat of higher interest rates that was quickly followed by thousands of loan officers losing their jobs in a week. Then the Feds backed off realizing what they had threatened was received by the banks and Wall Street was going to have a rippling effect that would send the entire economy into a backslide.
Rates have to stay low or we can expect to see a huge increase in foreclosures as homeowners are put into a position where they don’t qualify to refinance out of their ARM’s and home sellers have fewer qualified buyers to sell their homes to.