Home foreclosure listing in the Washington area more than doubled over the past year due to the increase in foreclosures in areas populated by minorities. According to the nonprofit Urban Institute, the possibility is high that minority borrowers took out subprime loans during the boom.
The institute also reported that around 2.7 percent of all mortgage borrowers in the area are in foreclosure, slightly below the 2.9 nationwide average foreclosure percentage, but up from the June 2008 percentage of around 1.4 percent and the June 2007 percentage of around 0.5 percent.
Kathy Pettit, head researcher for the institute report, said that housing analysts were surprised at the increase because the Washington, D.C. area has one of the best economies in the U.S. and one of the lowest in level of subprime lending.
Among counties in the region, the highest rates of properties entering home foreclosure listing are in Prince George’s, where more than 5 percent of all borrowers are facing foreclosure and in Prince William and in Charles, where nearly 4 percent are in foreclosure. These counties have areas where there are a lot of minority homeowners who most probably took out subprime loans.
The problem of foreclosures has not hit the Washington, D.C. area as badly as other foreclosure-battered areas like Nevada, Arizona and Florida, especially at the start of the housing crisis, but the pace of foreclosures has been rising in the capital region.
The number of prime borrowers who previously were not at risk of foreclosures but are now facing financial difficulties is rising, putting more homeowners nearer to default and foreclosure.
Loan modifications for distressed borrowers have been stepped up by lenders because of pressure from federal agencies, but many borrowers could not avail of the offered options because of unemployment.
According to the institute report, 15 percent of all borrowers who defaulted in 2004 never recovered and eventually lost their homes to foreclosure. In 2007, the percentage soared to 47 percent and another 34 percent were sold in distressed sales within 12 months of the default date.
Foreclosures in the area are expected to rise in the next several months because over 8 percent of the mortgages in the area were in default as of June this year, an increase of 6 percent from last year. Based on the report, the high number of mortgages seriously in default could put another 44,000 houses into home foreclosure listing in the Washington, D.C. area in the next several months.
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