Foreclosure for Sale

By: Ernie Fitzpatrick

We've not yet seen the end to the foreclosure bust! Foreclosure for sale signs are going up in the tens of thousands as we begin paying the price for the excessive living that the Federal Reserve has provided us. No one knows exactly where this will end.

I have been saying ever since 2004 that the interest only, 125% loans, and massive refinancing to take out money to put into the stock market with radical ARM's was a train wreck waiting to happen. And what we're seeing now is like a low motion re-enactment of the wreck with the first fews cars being derailed. All those cars that are coming behind will pile up foreclose in the many months ahead.

A recent AP story revealed that Domenico Colombo saw that his monthly mortgage payment was about to balloon by 30 percent, he had a clear picture of how bad it could get. His payment was scheduled to surge by an extra $1,500 in December. With his daughter headed to college next fall and tuition to be paid, he feared ending up like so many neighbors in Ft. Lauderdale, Fla., who defaulted on their mortgages and whose homes are now in foreclosure and sporting For Sale signs.

$1,500! A month!

In the months ahead, millions of other adjustable-rate mortgages like Colombo's will reset, giving them a higher interest rate as required by the loan agreements and leaving many homeowners unable to make their payments. Soaring mortgage default rates this year already have shaken major financial institutions and the fallout from more of them, some experts say, could spread from those already battered banks into the general economy.

The worst-case scenario is anyone's guess, but some believe it could become very bad. "We haven't faced a downturn like this since the Depression," said Bill Gross, chief investment officer of PIMCO, the world's biggest bond fund.

Just how bad can it get? Don't ask! :-(

But consider these facts. Some 2,000,000 homeowners hold $600 billion of sub-prime adjustable-rate mortgage loans, known as ARMs, that are due to reset at higher amounts during the next eight months alone. Sub-prime loans are those made to people with poor credit. Not all these mortgages are in trouble, but homeowners who default or fall behind on payments could cause an economic shock of a type never seen before.

Some of the nation's leading economic minds lay out a scenario that is frightening. Not only would the next wave of the mortgage crisis force people out of their homes, it might also spiral throughout the economy. Might? Probably is a better word.

Before you add more debt to your Christmas giving adn credit cards, think twice!

Foreclosures
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