Research by Moody's Economy.com predicts that in 2009 1.8 million borrowers will lose their home to foreclosure. This figure rises from 1.4 million homeowners in 2008. Moody is a leading independent provider of economic, financial, country, and industry research. Moody attributes the increase in foreclosure rate to the rise in unemployment. At the start of the housing crisis in 2007, the unemployment rate was about 4.6%. Last month it reached 9.4%. Many believe it reach 10% by the end of the year. This unemployment figure does not account for those self-employed individuals unable to collect unemployment, those that have a reduced wage, and those that have not given up. Other experts believe the true unemployment figure to reach closer to 15%. In San Diego unemployment is predicted to hover around 11-12%
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As the start of the housing crisis, homeowners that had subprime loans were the first to lose their homes. Now unemployment is the biggest factor driving foreclosures today. "It's a much harder nut to crack, unemployment," said Mark Calabria, director of financial regulation studies at the Cato Institute. "It's much easier to bash lenders than to create jobs."
In the first quarter of 2009, the prime loans rather than subprime loans accounted for the largest share of foreclosures. This shift is due almost entirely due to unemployment. Hope Now, a group of mortgage lenders backed by the government, has established a committee to look at how to best help unemployed homeowners facing foreclosure. One strategy involves creating new types of loan modifications. "We are going to be seeing more foreclosures because of prolonged unemployment," said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee. "These are people who weren't in trouble and wouldn't be in trouble if they hadn't lost their job." The government has yet to reveal what this new type of loan mod would entail.
For homeowners that still have income (unemployment insurance included), reduced income, or the possibility of finding a new job, a loan modification may be a good choice, if you decide that you wish to keep the house, rather than sell the house. In San Diego, homeowners who purchased or refinanced between 2004 and 2007 may be significantly upside down, an a short sale may be the best option to avoid foreclosure.
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