2 million could face foreclosure

About 2 million sub-prime borrowers could lose their homes to foreclosure through 2009, costing them $71 billion in housing wealth, a congressional report said Thursday.

Sub-prime foreclosure rates will increase as housing prices stagnate or decline, and the effects of the sub-prime mortgage crisis may spill over to the broader economy, according to a report by the Joint Economic Committee released in Washington.

“State by state, the economic costs from the sub-prime debacle are shockingly high,” said Sen. Charles E. Schumer (D-N.Y.), who heads the committee. “From New York to California, we are headed for billions in lost wealth, property values and tax revenues.”

The report spotlights the foreclosure threat facing borrowers with poor credit as interest rates on adjustable loans reset to higher levels. Sub-prime foreclosures will total about 2 million between 2007 and 2009 if housing prices drop 20% over those three years, the report said.

About 1.3 million of the nation’s 7.4 million sub-prime borrowers will face foreclosure between this year’s third quarter and the fourth quarter of 2009, the report said.

California, Florida, Ohio, New York and Texas will be among the hardest-hit states. Sub-prime loans represented 14% of all outstanding U.S. mortgages as of the second quarter of 2007, the report said.

Schumer urged mortgage lenders to help borrowers avoid foreclosure by allowing them to change the terms of their loans.