Foreclosure Talking Points

Foreclosure Talking Points

• The Mortgage Bankers Association’s latest survey (http://www.mbaa.org/NewsandMedia/PressCenter/66626.htm) shows that the percentage of loans in the foreclosure process increased from 2.75 percent in the second quarter to a record 2.97 percent in the third quarter of 2008.

• The media is sensationalizing these numbers and conveying the false impression that foreclosures are running rampant in every community across the nation.

• Certainly there is no question that rising foreclosure rates are a serious problem.

• But a close examination of the facts shows that many of these reports are grossly exaggerated.

• It’s important to note that the vast majority of American home owners – 93 percent -- are making their mortgage payments on time.

• Breaking down prime and subprime loans, more than 95 percent of prime borrowers – the bulk of the mortgage market -- are up-to-date on their payments.

• The problem is in the subprime market. Nationally, about 20 percent of subprime borrowers are behind on their mortgage payments.

• But it’s also important to remember that 37 percent of all single-family homes are owned debt-free – without any mortgage – and that home owners nationwide have built up $8.5 trillion in equity that provides a good cushion against any decline in values.

• Furthermore, housing is not a national market. All housing markets are local.

• For example, the Mortgage Bankers Association’s data show that most foreclosures are concentrated in the once super-heated markets in two states: California and Florida.

• These two states combined (California 54 percent and Florida 41 percent) have about 95 percent of all prime and subprime ARM foreclosure starts, respectively.

• And remember, prime and subprime ARMs comprise the highest share of loan foreclosures.


• Foreclosure actions began on 1.07 percent of all home loans in the third quarter, down one basis point from the previous quarter. Only nine states were above the national average: Nevada, Florida, Arizona, California, Michigan, Rhode Island, Illinois, Indiana and Ohio.

• The remaining 41 states plus the District of Columbia were below the national average.

• Still, the foreclosure problem is a major issue that needs to be addressed.

• The best way to do this is to halt the slide in home prices.

• The solution is to stimulate demand. Congress should make the recently implemented home buyer tax credit much bigger and better, and available to all purchasers.

• At the same time, it should enact a sizeable government buy down of home mortgage rates.

• Together these measures would ignite buyer demand, which would help stabilize home values, reduce foreclosures and get the housing market and economy back on the right track.

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