Friday, May 12, 2006

2,000 Bankruptcies Per Day In The US

A foreclosure report from Atlanta. "Georgia leads the country in the rate of foreclosure, RealtyTrac said. The number of Georgia homes in some stage of foreclosure has more than doubled since the end of 2005. Currently, there is one foreclosure for every 127 households, almost 25,000 homes statewide."

"The Mortgage Bankers Association is forecasting a national rise in the number of home loans that will become delinquent or enter foreclosure over the next two years. And the loans that (credit counselor) Suzanne Boas calls 'aggressive,' bankers call them 'innovative,' are among the chief causes for the increase. These loans include mortgages that charge a lower interest rate in the early years of the loan and adjust to a higher rate after the initial period."

"Foreclosure was not even a remote prospect on Debi Steedley's mind when she moved into her three-bedroom, three-bath Woodstock home with her two children in the spring of 2001. The triathlon competitor had just gotten her graduate degree and was launching a business as a freelance nurse practitioner."

"But an unforeseen health crisis two years ago rendered her unable to work full time, with no unemployment insurance or disability income to bridge the gap. Steedley turned to her mortgage lender which gave her an interest-only loan and an equity line of credit that initially lowered her monthly payment by hundreds of dollars."

"But Steedley's health struggles continued, and her loan payments all too quickly began to spike. 'With all the refinancing and interest rates going up, it really climbed,' Steedley said. 'All of a sudden, boom, it was maxed out.'"

"Steedley missed her first payment in November 2005. By the time she approached a loan officer with a payment in January, her home had been recommended for foreclosure and slated for sale in June. '"I wish I understood finances better, but when I talked to [the HomeBanc loan officer], it made sense,' Steedley said. 'The chart I was looking at showed [the loan payment] didn't move all that much.'"

And MSN Money has this updaet on bankruptcy filings. "The lull in bankruptcy filings may already be a thing of the past. Consumer bankruptcy cases plunged to a 20-year low in the first three months of 2006, reflecting the passage of a tough new bankruptcy law last year. But the pace of new filings is already on the rise."

"Courts now see an average of 2,000 new filings a day, four times the number that were filed in November 2005 after the bankruptcy law went into effect, according to Chris Lundquist, who tracks bankruptcy trends."

"'I would look to things like more delinquencies on revolving credit as well as home mortgage delinquencies and foreclosures as pre-indicators, if you will,' said Sam Gerdano, head of the American Bankruptcy Institute."


At 2:34 PM, Blogger Fred Quencey said...

Household bankruptcy filings were greater than 2000/day before the new law. To the extent that the new law is just postponing bankruptcy filings, we will obviously get much bigger nos in the future which reflect the accumulated backlog.
In previous yrs HH bankruptcies were about 4000/day which suggests that there is a lot of head room for the current 2k/day to rise. By postponing another 2k/day for, say, a yr, when the Fed starts aggressively tightening, I think we could be in for nos over 5k/day this time next year.

At 7:20 PM, Blogger Chip said...

"...I think we could be in for nos over 5k/day this time next year."

Based on history and your analysis, I wouldn't be surprised to see it rise a lot higher than that, for a while.


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