As governments take emergency actions—which amount to economic martial law—the consequences will explode through the wider financial house of cards. The banks, already running in crisis mode, will be under even greater pressure to raise money as governments cut off their ability to liquidate seized properties.
If this can happen in Philadelphia, the big money hotbeds of Southern California and Florida might not be far behind.
The tempo of events related to the financial crisis is definitely increasing.
Authorities in Philadelphia will suspend foreclosure sales of homes whose owners have fallen behind on adjustable-rate subprime loan payments — potential relief for tens of thousands of struggling debtors.
Sheriff John Green said on Friday he would halt sales of foreclosed properties in April and would seek a court order extending a moratorium for an unspecified period.
His action follows a nonbinding resolution passed unanimously by the Philadelphia City Council on Thursday calling on Green to stop the sales to give borrowers more time to seek a settlement that would prevent them from losing their homes.
Philadelphia becomes the first U.S. city to halt foreclosure sales in the current crisis, although Cleveland and Baltimore are considering similar measures, said ACORN, an advocacy group for low-income families.
The group said 45,470 subprime foreclosures are expected in Pennsylvania between the third quarter of 2007 and the end of 2009.
Green, the sheriff of Philadelphia city and county, is trying to identify and track homeowners with weak credit histories who took out the loans with initially low repayments but who are no longer able to afford them because their rates have adjusted sharply higher.
Such loans are expected to lead to a flood of foreclosures throughout the United States this year, and have led to severe losses among financial firms trading in securities backed by the mortgages. ACORN estimates 2.2 million mortgage loans will go into foreclosure in 2008 due to the subprime crisis.
“Given the severity and complexity of mortgage foreclosures, a moratorium will allow for more time to identify and help distressed home owners,” Green said in a statement.
Research Credit: CP
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