Foreclosures more likely, report warns

The San Francisco Chronicle reports:

As many as 2.2 million Americans with subpar credit could lose their homes through foreclosure over the next several years, a new report said.

California will see some of the sharpest increases in foreclosure rates among what are known as subprime borrowers because the deflation of the housing market here is making it increasingly difficult for distressed homeowners to sell or refinance, according to the report released Tuesday by the Center for Responsible Lending.

Nationwide, subprime loans, which once made up just a fraction of the mortgage market, accounted for nearly a quarter of loans written in the first 10 months of the year, the report found. Subprime loans are made to borrowers who are considered high risk because of low credit scores.

The number of subprime loans has jumped over the past five years in California as the housing boom drew people into the market who were counting on rapid price appreciation to pay down debt.

Any substantial move in interest rates higher could create even bigger problems for these marginal homeowners.Remember,a homeowner without equity is a renter with debt.