Reasons For Foreclosure To a homeowner, foreclosure is a shocking experience. When foreclosure takes place, it is extremely costly to the homeowners because not only have they lost their home, they have also lost any equity they may have built up in the property. (Equity is the difference between the true market value of the property and the balance owed and/or the total amount of all liens against the property). Along with the loss of all equity, people losing their property due to foreclosure also lose the amount of their original down payment and any money spent on improvements since they bought the home.
As we mentioned earlier, there are many reasons why property (home) owners find themselves in the type of financial trouble that could result in foreclosure. Here are some of the most common reasons.
1. Economic Downturn The downsizing of many companies was a major reason for the declining job market in the early nineties. Companies that downsize create employee layoffs and/or changes in job classifications. The economic trend over the last few years has generally required more than one person in each household to work. The combined income created more buying power for the family unit. Company downsizing resulted in one or more family members losing their job(s) and/or a reduction in the number of hours worked by one or more family members. The loss of income created a budget problem for many families, making it hard to keep up with their mortgage payments and other bills.
The downturn in the economy resulted in declining property values. Before the economical downturn in the early 1990s, property values, for the most part, had continually increased. Now, we are again seeing a decline in property values. This decline has created many problems. Lower property values caused an inability on the part of many homeowners to refinance, making them unable to take advantage of the lowest interest rates available in many years. Many homeowners found that they could not refinance or borrow against their home equity to consolidate their debt load (bills). When homeowners lose part of their income due to situations such as economical downturn and the decline of property value, the result, in many cases, is the loss of their home due to foreclosure.
2. Balloon Payments A balloon payment is the final installment payment on a note that is greater than the preceding installment payments and which pays the note in full. Many homeowners bought during the so-called good times, when property values were appreciating/ increasing rapidly. Sellers were able to sell their homes at two to three times the original cost. Many sellers were willing to carry back a 2nd or 3rd mortgage/ note/ loan on the property themselves. The length of time the seller would carry the paper/ note/ loan would generally be three to five years. The new borrower/ homebuyer usually made interest only payments on the carry back. At the end of the three to five-year term, the entire balance on the 2nd or 3rd loan/ note carried back by the previous owner would be due.
Once the note reached the maturity date at an agreed upon time, the entire sum/ balance of the carry back loan would then be due and payable to the seller/ previous owner. Unfortunately, the property value did not always appreciate/ increase, meaning that the new homeowners could not refinance or borrow enough money to make the payment. The missed balloon payment started the process ending in foreclosure.
3. High Payments During the late 1970s and through most of the 1980s, home values increased all over the U.S. Many buyers thought the home prices would continue that upward trend. Many expected the property values to continue to spiral upward, and some even expected property values to possibly double and triple. A number of buyers bought properties they could barely afford with the intent to refinance later at a lower interest rate or possibly to sell and capture the profit. Many persuaded themselves that if they didn’t buy immediately, they would be unable to buy in the future, when prices were expected to be significantly higher. Some buyers made a lot of money buying and selling properties. However, many others lost their properties as a result of high monthly payments they could not maintain. (Many are in trouble right this minute and need help.) This resulted, in many cases, in foreclosure.
4. Speculation Many real estate investors bought on speculation. They theorized that buying several properties, and using them as rentals, would make them millionaires in a short period of time. Some did just that, but many others had problems. The lack of experience in managing rental properties, plus the problems accompanying rental properties, became a nightmare for many. The change in economic conditions created additional problems when the renters could no longer afford to pay the required rent. When the rents were not coming in as expected, the owners could not keep up with the loan payments. Other problems included some of the payments on properties being more than the rental income (the rental income was less than the loan payment), creating a negative cash flow for the property owner. Declining property values also created a situation wherein properties would not sell for enough money to pay off the existing mortgage. Foreclosure was frequently the result.
The above reasons are not the only reasons for foreclosure, but they are some of the most common. Foreclosure conditions have created problems for both homeowners and lenders. In good economic times, foreclosures may not be as costly to the lender as in poor economical times. In good times, they may be able to sell the property for full price and recover their investment/ balance owed the lender. In a poor economy, however, lenders often suffer tremendous losses when they end up with a property. Again, as a reminder, lenders do not like to foreclose; the last thing they desire to have is another piece of property. In poor economical times - in fact, at most times - lenders are very willing to negotiate to avoid complete foreclosure. Quite often, forbearance agreements can be worked out with the lender or lenders.
Additional Related
Resources
Bank Foreclosure Listing Listings of homes or properties that have been taken over by the banks lending department from the homeowner because they have failed to make the repayment of a loan which he has taken from bank, are Read more...
Pre-foreclosures: The Goldmine Of The Next Decade Foreclosure is a process in which a piece of real estate becomes the property of a lending institution due to the legal owner's inability to make scheduled payments on the mortgage or deed of Read more...
Information About Foreclosure And Short Sale In this article you will have the opportunity to read about foreclosure and short sale. You will receive useful information about these two topics (what they mean, how they may b at use to you). Read more...
How Does Foreclosure Impact Your Credit Report? How does a foreclosure effect your credit report is a perplexing question. This is because Fair-Isaac Company, who started the credit scoring system, will not share this information. What complicates Read more...
Federal judge: Texas law governs Utah foreclosures - Salt Lake Tribune By Tom Harvey The Salt Lake Tribune
Published Feb 10, 2012 12:18PM MDT
A federal judge has ruled that Texas laws and not those of Utah govern foreclosures by a unit of Bank of America. In doing so, U.S. District Judge Ted Stewart has dismissed a proposed class action lawsuit against the bank and its foreclosure arm, ReconTrust, as well as an attorney who performs the foreclosures In Utah for the bank. The lawsuit was based on a Utah law that says only Utah attorneys and title companies with offices in the state can act as a trustee and foreclosure on property. But ... ... Utah to get $171M in huge foreclosure deal - Salt Lake Tribune By Tom Harvey The Salt Lake Tribune
Published Feb 9, 2012 09:41PM MDT
Utah is receiving an estimated $171 million in money, reductions in mortgage principals and loan modifications as its portion of a sweeping $25 billion deal struck by 49 states and the federal government with five of the largest U.S. banks. Many Utah homeowners who lost their homes to foreclosure over the past four years will get about $2,000 apiece in compensation. Those who are being foreclosed on or whose loan is for more than their home is worth (known as being underwater) could receive red... ... Attorney general's pressure on banks paying off - SFGate: Op-Ed Attorney general's pressure on banks paying off Mortgage settlement is too little, too late for many - Chicago Tribune: Nation Mortgage settlement is too little, too late for many Mortgage settlement is too little, too late for many - LA Times: Business Some who suffered foreclosures say the payouts are a pittance, and many homeowners in trouble won't qualify for help.<br/><br/>The massive mortgage settlement may be setting new national standards for loan servicing, but it may be too little and too late to help troubled homeowners.
<p><a href="http://feedads.g.doubleclick.net/~at/FIhKte3halN0vZviMeNmRjMJJ3s/0/da"><img src="http://feedads.g.doubleclick.net/~at/FIhKte3halN0vZviMeNmRjMJJ3s/0/di" border="0" ismap="true"></img></a><br/>
<a href="http://feedads.g.doubleclick.net/~at/FIhKte3halN0vZviMeNmRjMJJ3s/1/da"><img src="http://feedads.g.doubleclick.net/~at/FIhKte3halN0vZviMeNmRjMJJ3s/1/di" border="0" ismap="true"></img></a></p><img src="http://feeds.feedburner.com/~r/latimes/business/~4/uKa70eYGLUY" height="1" width="1"/> Utah oil-gas firm may lose leases over unpaid debt - Salt Lake Tribune By paul beebe The Salt Lake Tribune
Published Feb 9, 2012 03:39PM MDT
A British company has started foreclosure proceedings against the assets of Richfield Oil and Gas Co. for failing to repay a loan that was overdue by one day. Nostra Terra Oil and Gas CEO Matt Lofgren on Thursday refused to explain why his company moved so soon against Salt Lake City-based Richfield, saying only that ?not much? was disclosed by Nostra Terra about the foreclosure it initiated Feb. 1. Douglas Hewitt, Richfield?s CEO, said his oil and gas exploration company does not understand why... ... Birthplace Of 'Robo-Signing' Eyes Deal Critically - NPR News On Thursday, the federal government reached a $26 billion deal with the nation's largest banks to compensate homeowners. In Florida, where a lawyer uncovered and named the rushed mortgage-approval process, some lawyers and homeowners say technical issues and trust battles remain for courts and the banks. Utah to get $25M from foreclosure-abuse deal - Salt Lake Tribune Staff and news services
Published Feb 9, 2012 10:02AM MDT
All but one of the states have reached a $25 billion deal with the nation?s biggest mortgage lenders over foreclosure abuses, and Utah?s share will be as much as $25 million. Although Utah Attorney General Mark Shurtleff said earlier Thursday Utah?s share would be $100 million, his staff is now indicating the figure will be closer to $25 million. Shurtleff described the settlement as ?a new day for those in Utah who were victimized by big banks? shoddy practices.? Federal and state officials joi... ... Rental costs soar in RI during foreclosure crisis - Boston Globe: Rhode Island Rental costs soar in RI during foreclosure crisis Soup kitchen planned for RI Statehouse - Boston Globe: Rhode Island Soup kitchen planned for RI Statehouse Rosenblum: Hey, Peter Max lovers: Did you paint this car? - Star Tribune: Local Soup kitchen planned for RI Statehouse Deal to settle foreclosure abuses moves closer - Salt Lake Tribune The Associated Press
Published Feb 7, 2012 05:15PM MDT
Washington ? Arizona, Michigan and Florida, three of the states hit hardest by the housing crisis, will join a nationwide settlement over foreclosure abuses, officials with direct knowledge say. They will join more than 40 other states in approving a deal that would benefit many Americans who lost their homes or can?t afford their mortgages. The three states? involvement buoys hopes that a full 50-state deal is imminent. Formal announcements from Arizona and Florida could come within a week, ac... ... Volunteers/Donations Needed 2/7 - Denver Post: News: Local Volunteers/Donations Needed 2/7 Advocates to hold RI Statehouse soup kitchen - Boston Globe: Rhode Island Advocates to hold RI Statehouse soup kitchen Big foreclosure servicer indicted for 'robo-signing' - MSNBC In one of the first criminal prosecutions in the post-housing bust era, DocX has been indicted on forgery charges by a Missouri grand jury, The New York Times reports.<br clear="both" style="clear: both;"/>
<br clear="both" style="clear: both;"/>
<a style='font-size: 10px; color: maroon;' href='http://www.pheedcontent.com/hostedMorselClick.php?hfmm=v3:082bc25f91a39bbb26970b482d5c3297:%2FBiOiN3q67KQNwgEFcj2sMiLkEgzYZeQfr6rbs%2FKPj1usPnMCtO3eSf8dypAgugODH%2BekTRRdptlrg%3D%3D'><img border='0' title='Email this Article' alt='Email this Article' src='http://images.pheedo.com/images/mm/emailthis.png'/></a>
<a style='font-size: 10px; color: maroon;' href='http://www.pheedcontent.com/hostedMorselClick.php?hfmm=v3:c05dbaed9c979b30ffa58245086bcf68:GKiOACC2yBmvg7x093vff26F3wSjnm0iFkskK7Jfm054a7QxZznxoDFSQefHTXaHvwyKqEuKUFyQE7w%3D'><img border='0' title='Add to Newsvine' alt='Add to Newsvine' src='http://images.pheedo.com/images/mm/newsvine.png'/></a>
<br clear="both" style="clear: both;"/> Barack Obama: Solving the housing crisis - Salt Lake Tribune By barack obama
Published Feb 7, 2012 01:01AM MDT
In my State of the Union address, I laid out a blueprint for an economy that?s built to last ? an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values of fairness and responsibility. Over the past decade we strayed from those values and we saw what happened. Millions of families who did the right thing were hurt when the massive housing bubble burst. Folks who shopped for a home they could afford, secured a mortgage and made the... ... Pinole good Samaritan faces foreclosure - San Jose Mercury News: News Former East Bay Municipal Utility District plumber severely injured while stopping to help stricken man on freeway; faces mounting debts. DocX Faces Foreclosure Fraud Charges in Missouri - International Herald Tribune: Business The charges against DocX, which provided home foreclosure services to lenders across the nation, are one of the few criminal actions to follow reports of widespread improprieties against homeowners. Key states move closer to foreclosure-abuse deal - Salt Lake Tribune By DEREK KRAVITZ The Associated Press
Published Feb 6, 2012 06:41PM MDT
Washington ? California and New York, the key holdouts in a long-awaited settlement over foreclosure abuses, moved closer Monday to backing a deal with most other states that would force the five largest mortgage lenders to reduce loans for about 1 million households. But those states, along with a handful of others, had not joined the settlement by a Monday deadline set by the nation?s state attorneys general. And a deal might not be finalized for days. California still has ?significant sticki... ... Mortgage relief: Partial plan better than none - Yahoo! News Search Results for mortgage The architects of the joint state-federal mortgage releief plan believe it would be better for homeowners to get a partial deal than nothing at all, according to sources. Occupy Bernal, Petaluma zero in on foreclosures - SFGate: Business & Technology Occupy Bernal, Petaluma zero in on foreclosures OccupyMN Fences Off A Foreclosure-Free Zone In S. Mpls - WCCO: National <img width="150" height="112" src="http://cbsminnesota.files.wordpress.com/2012/02/occupymn.jpg?w=150" class="attachment-thumbnail wp-post-image" alt="(credit: CBS)" title="Occupy Minnesota S. Mpls Home" />The group Occupy Minnesota stepped up their efforts Saturday to prevent foreclosures. <img alt="" border="0" src="http://stats.wordpress.com/b.gif?host=minnesota.cbslocal.com&blog=15909630&post=211019&subd=cbsminnesota&ref=&feed=1" width="1" height="1" /> GOP candidates shy away from Nevada housing crisis - SFGate: Top Stories GOP candidates shy away from Nevada housing crisis Thousands of condo owners stuck in condos they can?t sell - Salt Lake Tribune By LESLEY MITCHELL The Salt Lake Tribune
Published Feb 3, 2012 04:46PM MDT
Pete Farley?s condominium is tidy, updated, clean and in a good neighborhood. And with a listing price of just under $175,000, it is affordable to most buyers. All of those things should make it an easy sell in today?s real estate market. Instead, the condo unit is largely unsellable. The problem is that Farley?s condo community lacks certification from the U.S. Federal Housing Administration. And without that seal of approval, buyers with FHA-insured loans ? and some with other types of loans ... ... Obama seeks to broaden reach of housing assistance - Salt Lake Tribune By JIM KUHNHENN and BEN FELLER The Associated Press
Published Feb 1, 2012 05:59PM MDT
Falls Church, Va. ? Conceding his earlier housing programs have fallen short, President Barack Obama on Wednesday proposed a vast expansion of government assistance to homeowners, aiming to make lower lending rates a possibility for millions of borrowers who have not been able to get out from under burdensome mortgages. The president?s proposal is laden with election-year politics and faces a difficult path in Congress. Obama wants to pay for the estimated $5 billion to $10 billion cost with a ... ...
If you have any questions/comments about today's verse, or if you have an issue that needs prayer, please email prayer@discoverthefacts.com.
