Foreclosure Fever Seems To Be Rising
Thursday, April 05, 2007
SUSIE GHARIB: Meanwhile, home builder KB Home has its first non-executive chairman of the board tonight, Hilton Hotels CEO Steve Bollenbach. KB created the job late last year after its stock options granting practices came under scrutiny and three of its top executives left. In the role of independent, non-executive chairman, Bollenbach is not considered an employee of KB Home.
PAUL KANGAS: Home builders certainly have their work cut out for them these days. Not only is there a large overhang of unsold inventory on the market, there are more houses soon to be up for sale. But those houses are being sold at foreclosure auctions. As Darren Gersh reports, new estimates show there may be more than a million up for grabs this year.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: If you want to see what happens after a housing bubble bursts, just go to the parking garage behind the Prince Georges County courthouse. This is a foreclosure auction. Some days at this courthouse, there may be half a dozen auctions or more.
Moody's economy.com estimates foreclosures will jump almost 50 percent this year, rising from 900,000 last year to about 1.3 million in 2007 and 2008. Chief economist Mark Zandi calls that a measurable economic hit.
MARK ZANDI, CHIEF ECONOMIST, MOODY'S ECONOMY.COM: It's a problem that can be digested. It's going to create a bit of indigestion, but it will be swallowed.
GERSH: Many people are now losing their homes to foreclosure, even though prime mortgage rates are low, running about 6.17 percent on a 30- year fixed. And while it's now much harder to qualify, some sub-prime mortgages are still available for those who want to refinance. Freddie Mac chief economist Frank Nothaft says sub-prime borrowers facing payment shock should first try refinancing with a prime lender.
FRANK NOTHAFT, CHIEF ECONOMIST, FREDDIE MAC: What we have seen in many cases, is that the sub-prime borrower has improved their credit history or their credit score over time by being current on their mortgage payment, by being current on some of their consumer debt obligations.
GERSH: Congress may also step in and help sub-prime borrowers by beefing up programs supporting low-income loans. But at this auction, bidders like Charles Pace see just how limited the options are for many sub-prime borrowers.
CHARLES PACE, REAL ESTATE INVESTOR: Some of them are mortgages that don't even get any bids on, because they were foreclosed on so soon after purchase that there's no leeway between what is owed and what the market value is.
GERSH: And that's one reason economist Mark Zandi predicts the jump in foreclosures will soon be followed by a bankruptcy boom. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.