The Localized Nature of US Mortgage Foreclosures

Last week, while traveling, I happened upon this USA Today article concerning mortgage defaults. I don't usually read this paper, but, being as I was at one of those business hotels that provides it for free, and the Wall Street Journal was nowhere in sight, I skimmed through it.

The interactive map can't be pasted here, but I urge you play with it to note how foreclosures grew in just a few states, and only some counties within those states.

To quote the article,

"Half of the nation's foreclosures last year took place in just 35 counties, a sign that the financial crisis devastating the national economy began with collapsing home loans in only a few corners of the country.

Those counties, spread over a dozen states, accounted for more than 1.5 million foreclosure actions last year.

The worst-hit places comprise about 1% of all U.S. counties.

A few of the 35 counties leading the foreclosure boom are in already-distressed areas around Detroit and Cleveland. But most are clustered in places such as Southern California, Las Vegas, Phoenix, South Florida and Washington, where home values shot up dramatically in the first half of the decade, then began to crumble.

The worst-hit counties are home to about 20% of U.S. households, but accounted for just over 50% of the nation's foreclosure actions last year, driving most of the national increase. And even among those places, a few stand out: Eight counties in Arizona, California, Florida and Nevada were the source of about a quarter of the nation's foreclosures last year.

In more than 650 other counties — about a fifth of the nation — the number of foreclosure actions actually dropped since 2006."

If you needed evidence that the mortgage crisis is localized, not requiring of federal involvement, and is really a state-based problem, this article provides it.

Is anyone really surprised that southern California, Las Vegas, Florida, Virginia (near D.C., of course), and part of Colorado were the epicenters of this mess?

You have to wonder why the other 38 states should literally be paying for this problem. It sure sounds like a problem for the affected states to solve.

And certainly, it is not a problem sufficiently widespread to require changes in federal law to allow municipal court judges to "cram down" principal and interest rate changes on holders of affected mortgages.

If there were ever a case for allowing states to function independently, as each saw fit, to solve a problem, this would seem to be it.