“Foreclosure activity slides for fourth month, but trouble lies ahead” reports:
“The improvement in foreclosure rates may not last. Future home values will be determined by unemployment and underwater mortgages on the one hand and tax credits and low mortgage rates on the other. Recent data show that about one quarter of home loans are underwater. People with such loans do not have much incentive to keep their homes. The days when home equity loans could be used for retirement or consumer spending are past. Mortgage default rates could still be hit by homeowners who took out ‘interest only’ loans. Many of those will reset causing much higher monthly home payment obligations. Some of the people who took advantage of these options when home values were still rising in 2005 and 2006 may find that their mortgage payments are too high for them to meet.”
WATCHDOG: Worse yet, and not yet realized, is the collapse in commercial mortgages which is endangering much of the banking industry. Through forbearance and sleight of hand by the lenders, these chickens have not yet come home to roost. But they soon will.
