To many people in the affluent Bay Area, losing a home to foreclosure sounds like a Depression-era relic or a Rust Belt phenomenon. Our real estate prices have defied gravity for so long; our job market is so strong; our cachet as a place to live seems so obvious. How could foreclosures happen here?
But in recent months, the Bay Area has proven to be home to numerous victims of the subprime loan debacle. Just like elsewhere in the country, people here with tarnished credit or limited funds bought houses that proved to be beyond their means, often putting little or no money down, and borrowing money through exotic, expensive loans that were virtual time bombs set to soar to unaffordable levels after an introductory period.
Aggressive mortgage brokers, voracious lenders and naive consumers combined to create an unstable situation. The tipping point came a year and a half ago when real estate prices started to flatten or fall in some areas. Suddenly, home buyers who had planned to refinance saw that door slammed shut because they no longer had equity in their houses and their "introductory rate" mortgages quickly became unaffordable as interest rates -- and their monthly payments -- rose. This year, almost 1 million people nationwide will enter a stage of foreclosure, according to RealtyTrac.com. That great tidal wave is ravaging the already beleaguered real estate market and causing repercussions from Wall Street to Washington, D.C.
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