We all know how quickly the number of foreclosures grows in the USA housing market. It's not just proverbial Cleveland or the states of the South East. The oncoming year 2008 will bring huge increases in mortgage loans defaults across whole America. Why? Because big banks who have underwritten those loans, have to settle outstanding deposits and borrowings.
Yes, the situation will get much worse for the average American, with long-term credit worthiness implications. In other words, those wwho were positioned as poor credit risk, will drop down to the much worse status: bad credit. This will reduce their borrowing ability, just when they need it most; trying to refinance their loans, and just get some kind of a bridging finance.
And it really doesn't matter much that the Federal reserve intends to drop the interest rate by anothe half a percenatge point. Those who have unpaid mortgages, some $3,000 or more in red, will hardly be consoled. For them the only way is to default, accept the foreclosure, and rebuilt their lives anew.
