The number of Americans who may lose their homes to foreclosure more than doubled in August from a year earlier as subprime borrowers with adjustable-rate mortgages saw their monthly payments rise, RealtyTrac Inc. said.
U.S. economic growth is slowing as the two-year housing decline worsens amid the surge in foreclosures and the collapse of more than 100 mortgage companies, said David Berson, chief economist of Fannie Mae, the largest mortgage buyer.
The Federal Reserve lowered its benchmark rate to 4.75 percent Tuesday, the first cut in four years, saying the “tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth.”
Lenders sent notices of default to 108,716 homeowners in August, double the 42,144 a year ago and up 50 percent from July, RealtyTrac said Tuesday. California had 41,714 new foreclosures in August, the most in the U.S., and Florida was second with 26,203, the real estate data company said.
In Colorado, one household in every 312 had foreclosure activity in August, ranking eighth in the nation.
“This is just the beginning of a wave of new foreclosures,” Rick Sharga, executive vice president of marketing for RealtyTrac in Irvine, Calif., said in an interview. “There are lots of people who bought homes they could only afford at the teaser rates, and now have very few options.”
Subprime loans, given to borrowers with limited or tarnished credit histories, often have so-called teaser rates that can cause monthly payments to double at the end of two or three years. When the loans adjust, the financing charges usually are 2 to 3 percent higher than prime rates.
