Jaime, are these deliquencies concentrated in specific areas of the state, or pretty much spread throughout? Thanks, Jeff

More great news! Keep it coming!

I do not see this as a depressing issue. I see it as a way for people who made mistakes to learn a lesson and walk away from the homeownership that they had not planned well enough to take on. When prices collapse, those who have been waiting, lining up their ducks in order, crossing t's and dotting i's, will finally have a chance to fulfill delayed gratification.

1997 prices - here we come! Yeah!!

Jeff, the Mortgage Bankers data is statewide only. But last time I analyzed foreclosure filings at at a county level, I found a lot in Baltimore City, Prince George's County and Montgomery County. (Pending foreclosures were increasing substantially in most parts of the state, however.)

Darwin Rules, I can absolutely see price drops as one of those "good for some even as it's bad for others" situations. But foreclosures? It's pretty clear that the harm they do when they're coming in a wave like this outweighs the benefit a first-time buyer might get out of them. Take a look at a local block where most of the homes are boarded up, and you'll probably find that foreclosure (from past years) is a significant part of the reason.

I have a different perspective. Metaphorically, I see the 'harm' you mention like the pain of withdrawl from heroin, with the alternative being feeding methadone to the addict chronically and never really being 'clean'. IMHO, it is best to go cold turkey, clear out the remanant of this addiction known as easy credit, and get back to living clean.

This is only just the beginning. Wait until the recasts on the option ARMs start to hit home.

Another story which quietly slipped under the radar was that the mortgage market virtually froze up earlier this week due to inflationary concerns and a spike in 10 year treasuries. At one point, rates were up 75 bps in a single day. If you were hoping to refi, I hope you got locked in before Wednesday.

But at the end of the day, we need more sustainable prices, and the upcoming wave of foreclosures and higher interest rates will get us there.

In theory I'd agree, DR, but in practice things just seem to fall apart. Again, if there are a lot of foreclosures. The more of them, the harder it is for lenders to find buyers -- particularly buyers who intend to live there. And so the homes sit, vacant and troublesome for neighborhoods.

Consider Cleveland, where (The New York Times says) the "number of empty houses is so staggeringly high that no one has an accurate count."

If it were just temporary -- you know, wait six months and buyers will swoop in -- then the devastation would be on an individual level, affecting no one but the people foreclosed on. But it's hard to reverse neighborhood decline once it's started. And that's when it becomes a problem on a much larger scale.

Thanks for all the comments, everyone! Keep 'em coming.

So... of this latest wave of delinquency what % of the mortgages are of recent vintage? That is to say: are these old loans bought before the bubble or are these purchases (and refi's) from the peak of the bubble? It makes a big difference in how they are dealt with.

If the latter (as I suspect) then I'm with DR: "let 'em drown".

Hi, MrRational -- the Mortgage Bankers stats aren't broken out by vintage. But I'd suspect that many if not most are newer loans. That's what foreclosure-prevention counselors were finding before I went on maternity leave, at any rate.

Foreclosures are the most efficient means of correcting prices. Policies that interfere with the exercise of foreclosure rights by lenders promote inefficiency and subsidize defaulting borrowers at the expense of would-be buyers.

To be clear, folks -- I'm not saying anyone ought to do anything about the foreclosures. That's a policy argument for the policy wonks. I'm saying it's a depressing state of affairs that we're seeing delinquencies far outpacing the days when our area saw widespread FHA mortgage fraud.

I'm going to try really hard here to remain polite. The comments by Darwin Rules celebrating foreclosure (among the many comments made by this poster celebrating the market crash) is crass beyond belief. My friends are losing their house. They did not over reach. They did not live beyond their means. The rush to judgment, the schadenfreude, is cruel. Very very cruel. No one can have any idea what pain these people are going through. Sure, there are people who are losing their homes because of very bad decisions. Fine. But the cruelty? Is that necessary? I can understand a renter wanting prices coming down. But enough of the gleeful, mean comments when many people are truly hurting. Free speech and all, but I'd rather people be civilized and realize we are talking about the complete collapse of people's lives.

They can rent.

Jaime, it would see to me that the problem is the lack of leadership in attacking this social problem (the foreclosure impact on families) by our governments. They should be looking at developing ways to have more apartments and lower cost townhouses built in the interim for people to rent. Banks only want their money back, and have no incentive to deal. Homeowners are winning on that front because it used to be taboo to walk away from your house. The homeowner loses on the social costs of foreclosure; family issues, stigma, etc. If more affordable complexes could be built on either new land or rezoning of existing land, this could minimize the impact. The banks can deal with the empty houses since that was the collateral and they are entitled to it.

Until employment (number of jobs and income levels high enough to buy) come back, this problem will continue no matter what. That is what you see in Cleveland, Detroit, etc.

Lesley, you want to know what's really cruel? What should have been an easy purchase has been months and months of searching, numerous offers, and repeated wading through a minefield of properties that either can't close, are nearly total losses, or get snapped up and flipped by investors as soon as they show up on the market. It takes weeks and even months just to find out what a bank is up to. Realtors and lenders are taking every opportunity to snap up as much money as they can from those less-experienced in the buying process. You have to realize that this is a two way street. We would never have this mess on our hands if people would have just lived within their means and had saved up rainy day funds to cover themselves. It may seem cruel to wish sellers to lose their homes, but from the buyer's perspective it's just punishment for the time and stress they have to go through just to purchase something as the market recovers from years of over-indulgence. The market needs to continue correcting through foreclosures.