Fillings are up 57% compared to this time last year which only indicates that Americans are not getting the help they need to stay in their homes and are victims of predatory lending and subprime adjustable arms. Many lenders still report that they allow borrowers to catch up in their payments by raising the monthly amount they have to pay. Many argue that this just delays foreclosures and does not solve the root of the problem. However more lenders are willing to start restructuring mortgages which effectively refinances any owed amount back into the loan.

The worst is still yet to come as Merrill Lynch predicts that across this year into the end of 2009 home values will fall by 25% and this is likely to drive the foreclosure rate even higher since a increasing amount of homeowners will hold mortgages valued at more then their homes making refinancing impossible unless the bank that holds the note renegotiated the terms of the loan.

The good news if any is that banks do not offer these risky mortgage products anymore. A few years ago you could get a stated stated subprime loan with a 590 credit score which would adjust in two years. Those days are over. These exotic products are not being offered due to the losses they pose to the banks. Only one real viable option remains for Americans that want to become homeowners with damaged credit, and thats FHA, refinancing with FHA is also much more relaxed then conventional banks and it has often been suggested that FHA should step in and create a mortgage product that will refinance you irregardless of your credit as long as you can afford a 30 year fixed payment.

One thing is for sure and that is if no serious action is taken to help solve the housing crisis this recession could turn into a depression due to the broad impacts credit has on our economy as a whole.

Discuss this issue here