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Foreclosures are primarily hurting families who are losing homes they bought to live in during the boom. But plenty of investors, including subprime borrowers, are getting burned, according to the Mortgage Bankers Association’s Jan. 17 report, which examines mortgage foreclosures, modifications and repayment plans in the third quarter of 2007.
About 18% of foreclosure actions started in the 3rd quarter of last year involved properties owned by investors (These are non-owner occupied homes). What also emerged from the data is that many subprime borrowers were taking out mortgages to buy investment properties, especially in markets now getting hit hard by foreclosures.
In Ohio, which has one of the worst foreclosure rates in the nation, 34% of subprime fixed-rate foreclosures involved investor-owned properties and 21% of subprime adjustable rate mortgage (ARM) foreclosures involved non-owner occupied houses. In Nevada, the worst state in the country for foreclosures, investor-owned properties accounted for 36% of subprime fixed-rate foreclosures and 18% of subprime ARM foreclosures.
Table 6 (on page 19) of the report details the share of investment properties in foreclosure by state for prime and subprime loans.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.