The need for a foreclosure arises when a borrower is unable to meet the terms of mortgage. This means the inability to make the monthly mortgage payments. The lender repossesses the home of debtor thereafter. There has been a rise in the foreclosure rates over the years. The rate at which borrowers have been foreclosing has doubled in last few decades.

In 2005, many people took subprime mortgages, wherein people with higher-interest rates and tarnished credit reports are considered at higher risk. In the spring of the same year, there was a surprising hike in interest rates, which triggered off a subsequent rise in monthly payments for people with adjustable-rate mortgages. This created a strain when they decided to buy a new house, as the financial condition was unstable.

In addition to the rise in foreclosure rates, there has also been a rise in the home mortgage delinquency rates. This has affected the low-income families, who availed of high-interest loans.

In time, the foreclosure wave has tossed and turned dramatically. The major reason for this is the increasing popularity of the interest only and no document type of nontraditional mortgages. There was a phase in 2006, when experts were perplexed about whether the rise in foreclosures forewarned of any soft landing for the real estate market.

Present Day Foreclosure Rates

According to the U.S. Foreclosure Market Report, 130,511 new foreclosure filings were reported in the beginning of 2007. Compared to the 25% increase in January 2006, January 2007 indicates an increase of 19%. In addition, the report also indicates that there is a national foreclosure rate applicable to new foreclosure filings for every 886 U.S. households.

RealtyTrac is a leading publisher of the largest comprehensive national database of pre-closure and foreclosure properties. It publishes reports for over 800,000 properties from almost 2,500 counties across the country. In addition to this, it is the foreclosure data provider to Yahoo! Real Estate, MSN Real Estate and The Wall Street Journal's Real Estate Journal.

According to certain reports by RealtyTrac, the foreclosure rates shot up by 27% from the previous month. However, this yearly predicted increase of 25% went way below the 45% yearly increase mark, which was observed in January 2006.

Foreclosure rates for some states-

Nevada took over Colorado in the race for the highest foreclosure rates. This is on account of the 8% increase in foreclosure filings in the previous month, plus a small decrease in Colorado foreclosure filings.

Michigan has had a 70% increase in foreclosure activity. This has placed Michigan in the second highest place among all states.

The third highest state for foreclosure is Georgia. It has been the highest state, for the fourth month in a row.

Colorado has been the fourth highest, ever since it claimed the top spot for nine months, in the year 2006. The other states that are also included among the nations top 10 highest states with foreclosure rates are Texas, Florida, Ohio, New Jersey and Illinois. There is no doubt that foreclosure and default rates have been rising.