Defaulting on the Dream
States Respond to America’s Foreclosure Crisis

The media have dubbed the current situation a “subprime mortgage crisis.” But the current foreclosure data and forthcoming trends show a more complex story, one in which a growing number of homeowners and prime loans are threatened. In short, nearly every homeowner and prospective homeowner is somehow affected by this crisis.

• Pew’s analysis estimates that one in 33 current U.S. homeowners nationwide is projected to face foreclosure, primarily in the next two years, as a result of a subprime loan made in 2005 and 2006.³
• Pew’s analysis of recent mortgage delinquency data found that subprime loans—high-risk loans to people who do not qualify for a prime or conventional loan because of low income or poor credit—make up just 14 percent of all mortgage loans being serviced, but more than half of all loans in foreclosure.⁴
• Nearly every state is affected: in 47 states and Washington, D.C. the number of mortgage loans entering foreclosure as of December 2007 had increased by at least 20 percent since December 2006.⁵
• Pew's analysis found that projected subprime foreclosure challenges are spread across states more evenly, indicating that the foreclosure crisis is nationwide and not merely concentrated in a few states.⁶ 
• 10 states alone will lose a total of $6.6 billion in tax revenue in 2008 as a result of the foreclosure crisis, according to a 2007 projection.⁷
• 1.6 million loans were in foreclosure or 90 days past due as of December 2007—up 55 percent from a year earlier.⁸
• More than 40.6 million homes across America are projected to lose value because of subprime foreclosures in their communities. Foreclosures may cost neighboring properties up to $356 billion in home value over the next couple of years.⁹
• U.S. foreclosure starts, as of December 2007, involving prime adjustable-rate mortgages increased 158 percent in one year.¹⁰ 
• Homes in foreclosure usually sell far below market value, especially in today’s depressed real estate market, and unsold properties can be expensive to maintain. Lenders experienceforeclosure losses ranging from 20 cents to 60 cents on the dollar, with one estimate of a typical lender’s foreclosure cost averaging $58,800 in the early 2000s.¹¹