Sunday, September 2, 2007

Mortgage Defaults in Britain Create Micro-Markets of Decline

Michigan may be one of the top states for residential foreclosures, but now even the Brits are getting in on the miserable action. This morning, the Guardian reports that Brits are facing "micro-markets of decline." That apt phrase may well describe the real estate situation in southeast lower Michigan and Detroit.

And this sounds extremely familiar:

The Royal Institution of Charter Surveyors "believes the trend will continue in 2008 as interest rates bite for homeowners whose fixed-rate deals have come to an end. It predicts repossessions will exceed 45,000 next year, a figure that would translate into 125 repossessions per day."

Britain's population is about five times that of Michigan, but 125 repossessions per day will affect tens of thousands of families and children.

Adjustable rate mortgages do not help people "afford" homes. Here, as in Britain, ARMs are at the heart of a default crisis. ARMs defer the moment of truth when a borrower must face the real limits of income and expenses, cash flow and variable interest rates.

Even a British accent cannot take away the sting of default and repossession.