US home foreclosures on home mortgages are on the way up.
Nationally, foreclosures are up 38 percent, higher than in any quarter of last year, property tracker RealtyTrac Inc. said. The numbers are even grimmer in the Midwest. Michigan and Ohio, battered by automotive-related job losses, together recorded 45,000 mortgages entering some stage of foreclosure in the first quarter.
Those are increases of 91 percent and 39 percent, respectively, compared with last year's fourth quarter.
There are many reasons for the growing number of defaults, and there are suggestions that the foreclosure trend may soon worsen.
Layoffs attributable to corporate downsizings, health care issues, increasing debt levels and rising interest rates all are factors.
In addition, a growing number of homeowners are relying on adjustable-rate mortgages, catching some people by surprise when their monthly payment rises.
Significantly, some of those ARMs were offered with an initial three-year to five-year period in which the rate was fixed.
At the end of that period, the mortgages will be reset at prevailing rates, potentially upending borrowers because interest rates have been rising.
For many such people, that moment is approaching.
"The increases we've been seeing in foreclosures don't even reflect the worst-case scenario that could happen when the $2.7 trillion in adjustable-rate mortgages are reset over the next 18 months," said Rick Sharga, vice president of marketing at RealtyTrac.
Another factor is the impact of rising property values.
And in some cases people stretched to qualify for a mortgage only to be undone by higher utility and gasoline costs.
"During the refinancing boom people found themselves qualified for homes they might not have qualified for if the interest rates were higher," said Jeff Metcalf, chief executive of Record Information Services Inc., a Kaneville, Ill.-based collector of market data.
Losing jobs can and has triggered mortgage defaults.
Consider Archie Tolar, who said he once earned about $3,000 a month as a salesman at a suburban Chevrolet dealership.
Since losing his job in 2002, Tolar has struggled to make ends meet, relying mostly on $400 a month in disability payments.
"To go from $3,000 a month to $400 doesn't even cover the mortgage," the Harvey, Ill., resident said. ABN Amro Mortgage Group Inc. filed a mortgage foreclosure against him in April.
Although the numbers are higher, they are below where they have been during recessionary periods, said Alexis McGee, president of Foreclosures.com, another property tracker.
"It's a big jump, but from very, very low numbers on a historic basis," McGee said.
Source: Chicago Tribunal
