Foreclosure Crisis Update

The number of foreclosures in Minnesota quintupled between 2005 and 2008, according to this report  released by www.Housinglink.org.  And the trend is continuing upwards on an annual basis (although foreclosures dropped in the 4th quarter of 2010).

Foreclosures cause foreclosures, because each foreclosure drives down surrounding property values, pushing more borrowers underwater, and making it more difficult for them to re-finance as adjustable rates adjust and balloon payments become due.  Barring a moratorium, the crisis is unlikely to stop until either (1) some extrinsic factor causes economic growth or (2) homeowners who in the past five years secured short term adjustable rate or balloon payment loans with mortgages are mostly shaken out of the market through foreclosure. 

Assuming, of course -- and it's not a safe assumption by any means -- that lenders, if challenged, can produce the note and establish the right to foreclose.

Mark A. Edwards

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