“This entire thing is not about out-of-whack mortgages. I’ve check on realty sites, and the national annual rate of foreclosure is not strikingly different than it’s ever been.
It is much worse in California, Nevada, and Florida. I suspect that what’s happened is that the banks made loans in a hyper-inflated market, and THOSE loans cannot be recovered because the house value bubble burst. The banks loaned 300 grand for a house worth 150 grand, but that the bubble had priced by appraisers for 300 grand.”
Maybe what makes it much worse for the banks is that in prior foreclosures you never had the fall in house value as well. So you foreclose and resell at maybe 70% of original listed value. Now those numbers could be at 40% or even less if the house is trashed.
You are correct that foreclosure numbers are high but not huge (around 1-2% or ~1 million homes), and this is localized. At the same time, it is spilling over nationally in terms of home sales, new home building etc.
Wouldn’t lenders have some way of moderating their exposure in an inflating housing market? Surely there’s a way to differentiate between probable speculative price rises and probable real market price rises.