In the latest phase of the nation’s real estate disaster, the locus of trouble has shifted from subprime loans — those extended to home buyers with troubled credit — to the far more numerous prime loans issued to those with decent financial histories . . . Economists refer to the current surge of foreclosures as the third wave, distinct from the initial spike when speculators gave up property because of plunging real estate prices, and the secondary shock, when borrowers’ introductory interest rates expired and were reset higher.
Peter S. Goodman and Jack Healy, "Job Losses Push Safer Mortgages to Foreclosure"; The New York Times (5/25/09)
What's eye-catching about today's NYT story isn't the phenomenon of foreclosures spreading to formerly solid borrowers now falling behind due to job losses; in the worst recession in decades, such "metastasis" is hardly a surprise.
Rather, it's the local angle: the two families profiled, both deep in the hole on their mortgages, are right here in Minnesota (one is in Woodbury, the other is in Babbit, up north).
According to the nonprofit Minnesota Home Ownership Center, three of every five Minnesota borrowers seeking foreclosure counseling now have a prime loan.
So much for "it can't happen here."
Unfortunately, it already is.
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