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D.C.-area foreclosures continue falling as economy improves

With the financial crisis of 2008 receding into the background, the fear it created has also subsided. An improving national economy and recovering D.C., Maryland and Virginia economies have led many people to breathe more easily. As a recent report by the Federal Reserve shows, every major economic indicator has shown improvement the last few years.

One of the best indicators of economic improvement is a decline in foreclosure numbers as well as a decline in foreclosure rates all through the Federal Reserve's Fifth District, which covers the District of Columbia, and several other nearby states.

The Fed report graphically showed improvements across a broad range of economic indicators, including the growth of industries, payrolls, unemployment rates, first-time unemployment claims, retail and nonretail industry growth, real personal income, wages and salaries, building permits, housing prices, housing starts, mortgage delinquency rates, foreclosure inventories and foreclosure starts. In this report, Fed graphs showed changes beginning in 2005.

The D.C. area, including Maryland and northern Virginia, showed positive measurements of payroll growth, real personal income and wages and salaries, although the numbers were slightly below the district average.

The bulk of foreclosures were on subprime mortgages, one of the principal reasons for the economic slide that began in 2008 and peaked in 2009. Recovery since then has been slow but steady.

Subprime mortgage foreclosures have run between two and four times the rate of prime mortgage foreclosures. Subprime mortgages were often granted to aspiring homeowners who simply were financially unable to meet their loan obligations, usually because of too little income or bad credit ratings. Many mortgage finance companies colluded with loan applicants on so-called liar loans in which applicants exaggerated their incomes in order to acquire adjustable rate mortgages. These ARM mortgages proved catastrophic once interest rates escalated in 2007 and 2008.

Source: Federal Reserve Bank of Richmond, "Fifth District Economic Indicators, April 2015," Accessed April 27, 2015

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