Foreclosure Crisis Worsens with Lack of Home Refinancing Available on Main Street

A recent foreclosure crisis article published by Reuters questions whether Wall Street and the investment community have been too hasty to embrace the potentially hazardous idea the worst is over for the housing market.  Of course, it won’t be the first time Wall Street was wrong on the mortgage industry and real estate market, but even after the massive bank bailouts, WHY aren’t there more refinance loans available to the borrowers on Main St?

Mortgage interest rates on millions of subprime mortgages are set to go higher with tighter credit guidelines and a second wave of foreclosures could keep the housing market down for some time to come, the Reuters report suggests. Of particular concern is the probability for another surge in foreclosures, loan modifications and short sales auctioned and sold as banked owned REO’s.

While the existing foreclosure epidemic has its roots in the meltdown of the subprime mortgage market, there are signs of another wave tied to the surge in jobless rates brought on the by the recession. The bulk of recent home foreclosures have been among previously rock solid borrowers with FHA home loans and A-paper mortgages, the article notes, citing recent stats released by the Mortgage Bankers Association. Unfortunately, Reuters reported that foreclosure rates and the unemployment rate tend to go up in tandem. And guess what? We are speeding towards the 10% market, having already hit 9.4% in May.