Significantly More Sub-Prime Borrowers to Lose Homes
It’s estimated that as many as half of the 450,000 sub-prime borrowers whose mortgage payments increase in the next three months may lose their homes because they can't sell, refinance or qualify for help from the U.S. government.
“Short of the cavalry riding in over the hill, a lot of these people are just stuck,'' said Christopher Cagan, director of research and analytics at Santa Ana, California-based First American CoreLogic, the risk management unit of the biggest U.S. title insurer.
The number of borrowers whose mortgage payments jump in the next three months will be the second-highest ever for a quarter, according to Credit Suisse Group, Switzerland's second-biggest bank. Twenty-seven percent have already missed a payment, said First American LoanPerformance, which owns the largest database of U.S. mortgages. That makes them ineligible for the Federal Housing Administration bailout proposed last month by President Bush.
There's no lifeline in sight for sub-prime borrowers, who face an average increase of 26 percent, or $400 a month, according to CoreLogic. Falling prices and a rising inventory of unsold homes make it difficult or impossible to sell or refinance without losing money and government programs aren't designed to aid the most desperate. That leaves foreclosure as the only alternative, and one that will deepen and prolong the worst housing downturn in at least 16 years.
Published on September 19, 2007
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