Foreclosures Move Up-market

Palm Coast/Flagler trend now becoming apparent nationwide as subprime mortgages account for fewer foreclosures while upscale market foreclosures increase..

Palm Coast, FL – October 14, 2009 – Dropping prices in the more expensive home market are leaving more people with mortgages greater than the value of their homes. According to the American Bankers Association, prime loans accounted for 58% of foreclosure filings in the second quarter, up fro 44% last year. The percentage of foreclosures attributed to subprime mortgages dropped from one half to one third over the same periods.
foreclosure by price tierThis trend mirrors one has already reported for the Palm Coast and Flagler County housing market. Dropping home values, driven in part by short sales have put many owners upside down, owing more on their mortgage than the property’s current value. Ironically, many do not qualify for short sales themselves because they have other assets, leaving them with few options. When loans exceed value, refinancing is problematic.
Though their loans are categorized as prime (after all they were credit worthy), many were quite exotic. Interest only loans allowed the borrower to defer principal payments for an introductory period. Option adjustable-rate mortgages allowed borrowers to make minimum payments, even less than the interest, but after an initial period, monthly payments can rise dramatically as the balance increases.
Zillow’s chief economist, Stan Humphries, estimates that nearly 25% of all homes were worth less than their mortgage balance at the end of June. According to Zillow, 30% of June foreclosures were from the top third of local home values, up from 16% three years ago. The bottom one third of the housing market now accounts for 35% of foreclosures, down from 55% in 2006.

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