Foreclosures Indicative of the Mortgage Crisis

March 24th, 2009 | Tags: Mortgage

The foreclosures on a running spree are indicative of the mortgage crisis. There are thousands going up for auction as hundreds gather to pick up bargain deals.

It is the similar scene in Chesterfield County Courthouse in the previous week as six bargain hunters prepare to snap up deals unsure about how many residential houses would actually go up for auction. Nine had been advertised but only one went up for bidding. It ultimately reverted back to the bank. This brief drama on a late winter day is a mini edition of the real estate crisis that has gripped the entire country.

The family losing out in this particular case was the Bangs. They had lived in the house for eight long years. When they finally shifted to a tiny apartment, unpaid bills continued to chase them as they began life with no hope of getting a satisfactory job.

The auction was cut short with the bankruptcy filings of two house owners. Another borrower was able to get out of the auction by negotiating a lower rate of interest on the mortgage that was more than the value of the house by nearly $160,000. Despite two other bankruptcies this deal could be arranged.

The names of the lenders were familiar – Washington Mutual the savings bank of the West Coast that tumbled in 2008. Another was a branch of Lehman Brothers that gave a loan to a borrower for a house in Matoaca that was worth $82,000 more than the value of the house. The mortgage even today after rethinking is $55,000 less than its worth.

Some of the lenders were little known – but they had done the same damage as their big brothers. There were certificates that made bundles of hundreds of mortgage loans, sliced and sold to investors across the world. There were servicers who would collect the monthly payments and send it to the concerned entities. One of the victims is a truck driver of Chesterrield who is now experiencing his third stint at bankruptcy.

From the nine foreclosure cases that have been advertised for the Chesterfield auctions it can be seen how the mortgage collapse has taken place and how the working of the banks have brought the economy down to its knees. This has become quite common – sometimes bankruptcies and occasionally banks coming forward to work out a deal. Everybody is scrambling to find a solution to the mess.