According to Irvine-based RealtyTrac Inc., a total of 223,538 foreclosure filings were reported in September, up from 112,210 in the same month a year ago.  However, the number of filings in September was down 8 percent from August’s 243,947, the firm said. 

While I’d like to think this is as bad as things will get, I’m not so sure.  The loose credit market of 2-3 years ago lasted more than a few months and that leads me to believe that those 2 and 3 year ARMs that are coming due will continue to ripple through the market for several months to come.  These adjustable rate mortgages are now forcing homeowners into one of three decisions:

1. Pay the higher monthly payment and stay in the house.  (This is not always an option for cash-strapped homeowners who are often in a home they cannot afford.)
2.  Refinance.  (This is also not an option for everyone because the credit markets have tightened significantly and those same people who were stretched into their current mortgage are now unable to qualify for a refinanced note.)
3. Let the house be foreclosed upon and move on.

Unfortunately, a lot of people believe they have only one option and that is to just allow the bank to foreclose on the home.  This may seem like the easiest option at the time but the long-term consequences (impact on credit scores and inability to obtain financing in the future) are often not fully considered. 

Here’s the silver lining in all of this mess - qualified buyers are now in control and are able to be very selective in their home search.  We can also expect to see a boost in the rental market as more people are forced to rent rather than buy.  So, it would appear to be a great time for investors to snap up properties at a bargain and find renters who are can afford to pay rent but cannot qualify for a home loan in today’s market. 

Happy buying and selling,

MR