Not the upper middle class!

The foreclosure crisis is creeping its way up, and in the end I think this will be the real story. And now that it's not just the unwashed subprime masses even Business Week is showing empathy for the affected:

Consider the plight of Stephanie and Bob Walker, who bought a $799,000, three-bedroom home in Los Angeles with a view of the Hollywood sign in 2006 but are losing it because last year Bob stopped getting computer consulting work that used to pull in about $240,000 a year. Bob eventually landed a job paying $60,000, and Stephanie found work as a $13-an-hour temp, but it wasn't enough to cover their mortgage and credit-card debt, which was swelled by about $130,000 worth of home renovations.

So I actually work in the "computer consulting" industry, and can assure you no one is pulling in $240,000 net a year on a consistent basis, especially not anyone with a $60K/year fundamental skill set. $20K gross in a month is definitely doable but that's rarely repeatable so I expect this was a stated income loan and doubt if the Walkers were regularly claiming $240K on their income tax returns. But the nonreality of the specifics aside BW makes a salient point:

Unemployment is exacerbating the problems at the top of the market. The jobless rate for adults with a bachelor's degree or more [is] more than double the rate of 2% a year earlier. And many families in that segment of the population built their finances on the assumption of continuous full employment, so they can't cover the mortgage when even one spouse is out of work.

Even couples that didn't use exotic financing regularly pushed their debt-to-income ratios to the absolute limit to be able to compete with people who did. And that leaves no slack, both people must stay fully employed or they can't afford the home. This source of foreclosure may currently be quite small relative to 0 down Alt-A/subprime nonsense or speculative investors, but in the end it will be the kind that hurts the most, and leaves the most lasting scars on our national psyche: families torn away from their dream homes after pouring everything they made into them for years.

72% year over year growth, that's good, right?!

Here in Washington state we're a bit behind the curve as seen in California but the overall pattern seems similar. By way of The Tim at Seattle Bubble:

Notice of Trustee Sale summary for April 2009
King: 938 NTS, up 72% YOY
Snohomish: 483 NTS, up 90% YOY
Pierce: 652 NTS, up 48% YOY

In an upcoming post I'll get into exactly what a Notice of Trustee's Sale is.

From the half-baked-silver-lining department

From the Associated Press, FEMA may put storm victims in foreclosed homes:

The idea is still being developed, but FEMA would likely contact banks, other mortgage holders and their representatives to compile a list of available homes. The evacuees would then be assigned homes close to their own and FEMA would use a contractor, acting as its agent, to pay rent directly to whoever owns the home, said Jon Arno, FEMA's individual assistance branch director for Florida.

I suppose we can all just hope we never need to discover just how impractical this is. It also seems as if an unused prison would be more on point:

"When you have a diaspora that leaves the state it's very hard to get those guys back. You really want to prevent them from leaving the state," said Jeff Bryant, the Federal Emergency Management Agency's federal coordinating officer for Florida.

"every 13 seconds"

Foreclosure snark has reached New England, from boston.com:

Here are some foreclosure stats to brighten up your day.

There have been 1 million new foreclosure filings across the country – all since January.

And that number is expected to more than double by year’s end, according to a depressing new report released by the Center for Responsible Lending.

That’s a new foreclosure filing every 13 seconds.

Foreclosures hit record high

I suspect I'll be able to make this same post every month for a long time. From Bloomberg:

The U.S. delinquency rate jumped to a seasonally adjusted 9.12 percent from 7.88 percent, the biggest-ever increase, and the share of loans entering foreclosure rose to 1.37 percent, the Mortgage Bankers Association said today. Both figures are the highest in records going back to 1972. Fixed rates rose to 4.91 percent, Freddie Mac said, and an increase in bond yields earlier this week shows rates may continue rising.

Interactive foreclosure activity map from AP

Nationwide by county. All that red should be worth a sleepless night or two for foreclosure buffs.

Anybody scared yet?

From iTulip comes this graph of the value of property which is being returned to lenders via the foreclosure process. . Anyone care to project that line out twelve months?