The 1% crises

AP/Houston Chronicle:

...

About 1.3 million homes received foreclosure-related warnings last year, up from 717,522 in 2006, Irvine-based RealtyTrac Inc. said. Foreclosure filings rose 75 percent from the previous year to 2.2 million.

Texas, the second-largest state, was fourth with nearly 150,000 foreclosure filings, but they were down 4.6 percent from 2006. Texas ranked 12th nationally with a foreclosure rate of 0.94 percent, according to the firm.

More than 1 percent of all U.S. households were in some phase of the foreclosure process last year, up from about half a percent in 2006, RealtyTrac said.

Nevada, Florida, Michigan and California posted the highest foreclosure rates, the company said.

The filings included notices warning owners that they were in default, or that their home was slated for auction or for repossession by a bank. Some properties may have received more than one notice if the owners had multiple mortgages.

...


How can a crises for one percent be turned into a crises for the country? One of the reasons is the effect on lending. Mortgage brokers responsible for facilitating the bad loans have lost the trust of the lenders which means it is much harder for some borrowers to finance a home purchase. This in turn makes it more difficult for those having trouble meeting their obligation to sell their home and get out form under it which in turn drives down the price of homes to below what they owe which makes it more likely they borrower will walk away from the the mortgage. With the costs of some homes becoming more affordable, at some point new buyers will step up. Right now the government is looking for ways to intervene to increase the financing options.

While Texas has some foreclosures, it is a big state and it seems to be absorbing the foreclosed homes better than other areas right now. The economy in Texas is probably better than other big states and home prices are lower to begin with also.

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