Southwest: Worst Default Epidemic

The nation's foreclosure epidemic continues unchecked with homeowners in the Southwest feeling the worst effects. Squeezed by high-energy prices, climbing interest rates, and aftereffects from creative financing, thousands of homeowners have been forced into foreclosure.

With two months left in the fourth quarter, foreclosures are already up 19.6% over all of 2005 - 766,058 foreclosure filings for 2006 vs. 640,457 for all of 2005; according to ForeclosureS.com, a northern California-based real estate investment advisory firm and publisher of foreclosure property information.

"Even though energy prices have tumbled from recent highs, it's too late for over-extended homeowners who used creative financing to buy homes they couldn't afford," says Alexis McGee, president of ForeclosureS.com.

"That sub-prime ARM or interest-only home loan may have seemed like the perfect solution back when the monthly payment was low, but now those payments have 'adjusted' up. A 2% rate increase can double a payment overnight," says Ms. McGee. "Combine that rate shock with the home appreciation and sales slowdowns, and homeowners without enough equity to refinance or sell their homes. Foreclosure is their only option."

Three Southwest states, California, Texas, and Colorado, have among the highest foreclosure numbers in the nation. ForeclosureS.com reports California's 117,560 foreclosures are already up 45% over all of 2005 total 80,989 filings. Texas shows 90,620 foreclosures, up 14.7 percent over 2005's total 79,012. Colorado with 54,959 foreclosures so far is up 25% over 2005 total 43,951.

The Southwest Region includes Arizona, Arkansas, California, Louisiana, Nevada, New Mexico, Texas, Oklahoma, Oregon, and Washington.

Looking at specific counties, Riverside County, California had 4,521 foreclosures in the third quarter, up 147 percent over 1,830 at the same time last year. Jefferson County, Colorado, had 1,700 foreclosures in third-quarter 2006, up 53% over the 1,111 in the same period a year earlier.

Southwest foreclosure numbers do include a few bright spots, she said. Oregon and Washington could be on track for an overall drop in foreclosures. But Ms. McGee cautions: "The quarter isn't over. Nonetheless, these numbers could be indicative that in at least some states, consumer education is making a difference."

In the Midwest, job cuts, consumer credit woes, creative mortgages, and energy costs have tightened the squeeze on homeowners in the fourth quarter.

Illinois, with 62,058 foreclosures so far in 2006, has the third highest number in the nation, up 55.9% over 39,812 foreclosures for all of 2005. Iowa's numbers are up, too - 69.7%, up 72% over 1,243 for all of 2005. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com