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Joel Maher, Real Estate Pro in Salisbury, MD

What are the statistics on Strategic defaults in the United States and what is the likelyhood of them increasing in the next few years?

Asked by Joel Maher, Salisbury, MD Mon Jul 12, 2010

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* The delinquency rate for all mortgages on one to four residential units was 10%
* 4.6% of all homes are in the process of foreclosure
* More than one out of every eight or 15% of all American homes with a mortgage are either in default or in the foreclosure process
* In May, 94,000 homeowners lost their homes to foreclosure, for an annualized rate of 1.1 million homes
* The percentage of home mortgages that are 90 days or more past due or in the process of foreclosure is 9.5%
* Almost 25% of homeowners owe mortgage debt exceeding the value of the home
* Banks and mortgage investors are now sitting on an estimated inventory of 550,000 homes that have been repossessed through foreclosure and need to be sold into a weak market
http://problembanklist.com/governments-effort-to-stop-soarin…
1 vote Thank Flag Link Tue Jul 13, 2010
BEST ANSWER
Biggest Defaulters on Mortgages Are the Rich

"More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent."
http://www.nytimes.com/2010/07/09/business/economy/09rich.ht…


Average Homeowner In Obama Foreclosure Program Deeply Underwater, Drawing Calls From GOP To Cut Off Help

"The average beneficiary of the Obama administration's flagship homeowner-assistance program owes their mortgage lender more than $1.50 for every dollar their home is worth, which means they fall into the stratum of homeowners most likely to simply walk away from their mortgages, recent government data show.

This little-noticed statistic was disclosed in a June 24 report by the Government Accountability Office. Citing government data collected through mid-April, the report found that even homeowners who receive lower monthly payments through the administration's Home Affordable Modification Program are still struggling "under water," meaning they owe more on their mortgages than their homes are worth.

A recent study by Federal Reserve economists shows that underwater homeowners are, not surprisingly, much more likely to default on their mortgages. Moreover, borrowers who are deeply underwater -- like those in HAMP, who average negative 50 percent home equity -- are far more likely to default willingly; that is, to give up on trying to overcome their growing mountains of debt, and just stop paying at all."
http://www.huffingtonpost.com/2010/07/06/hamp-foreclosure-un…

Can discuss it and accuse this person of doing this or being that but the Bottom line is it's happening and what Market signs are you seeing that would suggest it will stop or get better?
1 vote Thank Flag Link Tue Jul 13, 2010
I love it when I read comments that criticize borrowers for "being worthless" as if those borrowers were the only ones at fault. At this point, it really doesn't matter who's at fault. We all need to work together to fix the situation.

Besides, there's a double standard. Companies modify the terms of their agreements all of the time, and that's called good business. Yet, when regular consumers seek to make similar kinds of changes, then it's called 'not honoring the terms of the contracts'.

Anyway, there are several alternatives for those borrowers instead of simply walking away, but many of them simply opt to walk away without even checking into the other available options.
1 vote Thank Flag Link Mon Jul 12, 2010
Thank-you for the Best Answer Joel...it is very appreciated
0 votes Thank Flag Link Tue Jul 13, 2010
The further underwater a house gets the more likely it is that buyers will walk away from the property.
Somewhere I found an article that said the further underwater a house gets the more likely it is to be defaulted on. I wish I could recall the numbers.

May 21, 2010
41 Percent of borrowers would strategically default
http://immoralhazard.housingstorm.com/2010/05/21/41-percent-…

Survey: 59% of Borrowers Would Not Walk Away if Underwater
http://www.dsnews.com/articles/survey-59-of-borrowers-would-…
0 votes Thank Flag Link Mon Jul 12, 2010
"Strategic Defaults" I love the new terminolgoy that people are using for being worthless. You signed a contract you need to honor it if at all possible.

With that said I know that doesnt answer your question. Given that the job market has not rebounded and home values are not moving I feel most homeowners are going to find themselves in the same LTV/DTI issues for a couple of years at least. I think there is also a strong possibility it could get worse as I believe there is another wave of foreclosures and shortsales on the way. Homeowners are still defaulting but many state and federal regulations are tying these properties up and keeping them off of the market to give the homeowner a chance to work it out. Most of these chances will fail and the homes will make it to the market anyway suppressing value even longer.

The longer we have buyers upside down in homes the more likely it is that they will end up defaulting be it "strategic" or not.
0 votes Thank Flag Link Mon Jul 12, 2010
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