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Surge in Foreclosures is Predicted

By: Harold Bubil America’s real estate horror story is about to get worse; Realty Trac Senior Vice-President Rick Sharga says that another wave of toxic loan foreclosures is about to rock the market. It will be as bad as the peak of the subprime mortgage foreclosure spike in the winter of 2007-2008. By the fall of 2012, foreclosures will have returned to a normal level, making for six years of real estate hell in the US.

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Surge in Foreclosures is Predicted

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By: Harold Bubil

America’s real estate horror story is about to get worse; Realty Trac Senior Vice-President Rick Sharga says that another wave of toxic loan foreclosures is about to rock the market. It will be as bad as the peak of the subprime mortgage foreclosure spike in the winter of 2007-2008. By the fall of 2012, foreclosures will have returned to a normal level, making for six years of real estate hell in the US.

Resetting option-ARM mortgages, along with alternate-A and subprime loans given to borrowers with bad credit, will make up the bulk of the foreclosures.

The difference this time is that these defaults will be driven by unemployment, and hot spots across the US include Idaho, Arkansas, California, Florida, Arizona and Nevada. Currently, strategic defaults, in which homeowners simply decide to walk away from delinquent loans, make up about one in eight mortgage defaults. Unfortunately more and more homeowners will eventually decide this is the only way out as their option ARMs reset at much higher interest rates. Sharga also noted that loan-modification programs, touted as a solution by some, will be ineffective in resolving these types of foreclosure problems. Realty Trac charts show 2005 was a normal year, with about 800,000 total US foreclosure filings. That number has climbed steadily since then, with a projected 4.3 trillion in 2010.