House values down again, foreclosures up again.

When WWII ended Americans owned about 80% of their homes. This went down over time as mortgage borrowing grew faster than house prices. Now, with house prices declining, the share of home equity owned by Americans has dropped under 50%, according to the Federal Reserve. This, of course, will limit Americans’ ability to borrow.

Meanwhile, as house prices drop, foreclosures are setting new records. In the fourth quarter of 2207, more than 2% of all loans were in foreclosure, and another .83% “entered the foreclosure process” according to the Wall Street Journal. Almost 6% of all homes were delinquent in their mortgage payments (highest since 1985).

If we look only at subprime, adjustable rate mortgages these numbers are much bigger. One out of five of these loans were past due and another 13% were in foreclosure.

All this is increasing the demand for reductions in principle as the best way to give relief.

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