Global Economical Concerns as US Homeowners face 12% interest, mortgage crisis
From southeast Michigan to British shores, the dilemma facing US homeowners during this financial crisis is clearly unprecedented.
In mid-March, on Wall Street the Dow Jones Industrial Average recently fell 242 points to close at 12,075 amid fears the concerns in the housing market would spread to the rest of the economy. There were signs of mounting problems for firms that have aggressively sold home loans to people with poor credit ratings.
According to reports, the US Mortgage Bankers Association (MBA) pushed back its forecast of a rebound in the real estate market from the middle of 2007 until the end of the year after reporting an increase in both late payments and foreclosures in the final three months of 2006. The report noted defaults had risen for all loan types but were particularly marked for those with sub-prime mortgages with adjustable rates.
Borrowers with loans close to $265 billion are scheduled to have the interest rates on their mortgages reset this year and many of the poorest homeowners could face interest rates as high as 12%.
Research by the Centre for Responsible Lending has predicted that one in five of the sub-prime mortgages made in the past two years will end in foreclosure, resulting in the biggest crisis for the mortgage market in modern times.