Loan Modification

The shifting locus of new foreclosures shows how the recession and job losses are supplanting subprime lending as the main driver of mortgage defaults, says Geoff Smith, vice-president in charge of research at Woodstock. While the first wave of foreclosures hit hardest in poorer city neighborhoods targeted by high-interest-rate lenders with loose credit standards, the latest round is striking middle-class areas where most borrowers qualified for standard-rate mortgages.

Foreclosures in the suburbs aren't likely to abate until unemployment stops rising. That means more downward pressure on home values across the metropolitan area as foreclosed homes hit the market at fire-sale prices. Suburban communities also will face the consequences of vacant houses and dislocated families, which range from overgrown yards to increased demand for social services.