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Foreclosure Markets? - Where!Looking at the Foreclosure Markets, there is now a new record: one million homes in foreclosure! That is amazing. It is also indicative of several interplaying factors: 1. the changes in the lending industry (i.e. predatory lending practics) 2. increased home-building rates 3. market booms turned busts 4. economy issues (i.e. job loss) Analysts feel that the number of foreclosures will get worse before it gets better. Research shows that more than one-third of the foreclosures were a direct reflection of #1 above. Specifically, 39% of foreclosures were due to subprime adjustable rate mortgages (ARMs). Lenders gave out loans to persons with what would traditionally be considered weak credit ratings. Moreover, lenders gave loans to people for houses that were clearly out of their budget to afford. However, by making the loans adjustable rates or interest only, the initial year or two of monthly payments were affordable. $1500 for Rent or $1500 to Own.... Hmm?Why wouldn't individuals who had been paying $1500 per month in rent now spend that same $1500 if they could get out of an apartment and into their own home. They possibly didn't have anything to lose and so much to gain.Where are these Foreclosure Markets, anyway? 1. California (of course) 2. Nevada 3. Arizona 4. Florida 5. Ohio 6. Michigan California is duly expected to have high foreclosure rates considering the boom that was experienced here for the early-to-middle parts of this decade. Remember, homes put on the market on Monday had more than five offers on them by Tuesday morning. Townhomes purchased in May of "the boom year" for $495,000 were sold for $750,000 in September of that same year (San Diego). Later, many folks trickled next door to Nevada to purchase property. Or, they went to Arizona to scoop up homes at way cheaper prices than in California. Take your profit from the sale of your California home and buy two or three pieces of property in Nevada or Phoenix, Arizona. Keep one for you and make the others rental properties. In foreclosure markets like Ohio and Michigan, the increased foreclosure rates are due to job loss and subsequent economic hardship, which are considered the more traditional reasons for foreclosure.
Foreclosure and Bankruptcy LawWith the new bankruptcy law of 2005, homeowners are no longer able to file for bankruptcy and get a stay on home foreclosures. The new law requires that prior to homeowners filing for Chapter 7 or Chapter 13 protection, they must first undergo credit counseling.Unfortunately, credit counseling is typically geared toward disputes of non-payment with credit card companies not mortgage companies. Also, there is a time requirement of 180 of counseling before bankruptcy is filed. This means that most foreclosures will have begun, gone to auction and become REO's before the time requirement is complete. Thus the loophole of filing for bankruptcy to stop the bank from taking your home will no longer work as well. I find this interesting that it occured in October 2005 and... ...coincidentally?!?!?less than two years later began the greatest foreclosure up-trend in history. I guess it could just be a coincidence that we would experience a vast number of foreclosure markets across the country after such a sweeping piece of legislation is passed just a year and a half prior. |