Unemployment, ARMs to Increase Manatee Repossessed Homes

The rising unemployment rate and the resetting of adjustable-rate mortgage loans are expected to increase the number of repossessed homes in Manatee County, particularly in the city of Bradenton, according to housing analysts in Florida.

A specialist in bank-owned repossessed homes in Florida said he and his colleagues in the real estate industry believe that another wave of repossessed homes is coming.

As of last week, a total of 3,602 foreclosure cases were filed in the circuit court of Manatee, based on court records. During the same period last year, 3,034 cases were filed, later reaching 5,592, which was the record number of foreclosure filings in Manatee.

The unemployment rate in Manatee reached 11.8 percent in June, the highest jobless rate since Florida started monitoring joblessness across the state.

Economists said that the unemployment rate will still continue to rise even if the economy has recovered because historically job creation lags economic recovery.

Sarasota lawyer and real estate businessman Ken Chapman added that although the big waves of foreclosures have already occurred, large numbers of repossessed homes will still arise because of unemployment.

Across Florida, over 10 percent of homeowners with home loans were delinquent by at least one month in the first quarter of 2009, based on data from the Mortgage Bankers Association. The data also showed that the houses of another 10 percent had already become repossessed homes.

What will worsen the foreclosure picture, according to Florida housing analysts, is the large number of Florida homeowners who took out ARM and Alt-A loans during the market boom.

Under these attractive but risky loans, borrowers were able to buy large homes they could have not afforded with a conventional 30-year home loan. Option ARMs and Alt-A loans enabled borrowers to make very low monthly payments, with just a portion of the interest comprising the monthly payments.

Borrowers knew the monthly payments would balloon, but they were advised by their lenders or brokers that they can always sell their homes or refinance. But when the housing market collapsed, these borrowers could not sell or refinance because of the tight credit market and the sharp declines in home prices.

According to mortgage market analysts, over 50 percent of ARM and Alt-A loans across the U.S. are in default by at least two months or are already counted as repossessed homes. They said more are expected as the scheduled resetting of these loans will still peak in 2011.

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