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Charity Barn…, Real Estate Pro in Flowood, MS

Why are there so many foreclosure on the rise?

Asked by Charity Barnes, Flowood, MS Thu Aug 9, 2007

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Too many 100% or 100%+ loans that were given to people who barely qualified for them. They were also put in loan products that were not explained to them correctly or they just didn't listen. While few talk about it I also see high divorce numbers and lack of health insurance a problem as well. Most of my customers need both incomes to make the household work. If they split-then the remaining person can't afford the house. Sometimes they try and try to make it work, but can't. Sometimes they're spiteful and want it to go to foreclosure....also if they get sick and don't have health insurance that can be a burden that ends in foreclosure.
Web Reference: http://www.teamlynn.com
2 votes Thank Flag Link Thu Aug 9, 2007
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
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You have asked 4 questions on foreclosure and answered all of them. Your profile is a commercial for foreclosure. HMMMMMM! Sound kinda like a commercial to me~
Web Reference: http://carriecrowell.com
1 vote Thank Flag Link Tue Aug 21, 2007
1. Easy lending standards.
2. Less equity participation by borrowers.
3. Less stable households (marriage/relationships)
4. Less stable jobs (less lifetime employment)
5. ARM or interest only balloon mortgages that are now escalating in price that buyers can pay.
6. Agressive builders/builders lenders that did not include proper escrow for property taxes.
1 vote Thank Flag Link Tue Aug 21, 2007
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
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Wow! Another question....answered by the poser of the question!
Web Reference: http://www.cindihagley.com
1 vote Thank Flag Link Fri Aug 10, 2007
Cindi Hagley…, Real Estate Pro in San Ramon, CA
MVP'08
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I think foreclosures are on the rise because there were too many 100% financing loans given out, hand over fist to people that just shouldn’t have qualified. Additionally, to buyers they maxed out on interest only loans, with no way of ever being able to contribute more than the minimum due. And adjustable rate mortgages that are now maturing. I have also experienced fraudulent or unethical practices by the loan originators too. Recently, I helped a buyer out of a jam. She was approved for 100% interest only loan with a 64.88% debt to income ration! The loan originator falsified her car payment and stated there was additional income that didn’t exist; essentially knowing she would now be at an 81% debt to income ration, but not disclosing it to the lender. A potential travesty…

Melissa Mancini, Realtor, CBR, GRI
Web Reference: http://MelissaBMancini.com
1 vote Thank Flag Link Thu Aug 9, 2007
So far everyone has hit the main topic right on the head. I read a recent article that gives the building industry partial blame. They financed homes for their buyers; and some actually entered fraudulent information about the buyers income.

One case in particular: the buyer of a #### home was financed by the same and is now in a double foreclosure situation. #### builder stated that the buyer had "rental" income from their existing home. The buyer caught it and advised #### that it wasn't the case; but #### said, don't worry we do this for everyone.

Long story short the buyer never was able to sell the existing home; moved into the new one (which they couldn't afford either way) and now both are going on the chopping block. Who's to blame? Greed goes both ways...
1 vote Thank Flag Link Thu Aug 9, 2007
Too many marginal loans made at 100% financing, teaser interest rates or arms, B paper loans and refinances betting on appreciation. The market changed and borrowers were not left with many choices.
1 vote Thank Flag Link Thu Aug 9, 2007
Pam Winterba…, Real Estate Pro in San Ramon, CA
MVP'08
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Foreclosures are on the rise because the market turned and people that bought their home with teaser rates in the height of the market are now getting adjusted to a higher rate and cannot afford the monthly payments. This is especially true of those borrowers that put little or no money down, and now have less equity in their homes than the outstanding mortgage.
0 votes Thank Flag Link Wed Aug 22, 2007
Low interest rates combined with sub prime lending such as zero down loans, adjustable rate mortgages, interest only loans etc. Helped people get into homes. However most of those mortgages are now mature and the rates have adjusted leaving the borrower with a payment they cannot afford, combined with the market taking a beating in several areas, people find themselves living beyond their means and when they cannot get refinanced into a better loan or sell the property the bank takes possession and really the owner has no choice but to allow foreclosure as they cannot sell it, they cannot refinance, and they do not have cash to save the home. It is a sad thing as so many home buyers were tempted by these loans and not really given explanation of the implications and possibilities. More coaching should have been done to explain to these people that Adjustable rate mortgages , interest only and zero down loans should be used as a catalyst to put you into the home but planning and process to set the home and yourself into a more favorable loan or position is key to making these types of lending options good and workable. If borrowers had used the time on the adjustable rates to save enough for a down payment, cleaned up their credit scores, and reapplied prior to the maturity date there would probably be less foreclosures. It's not fair to blame the banks, the market, the people...it's a combination of all things considered and perhaps we have learned that we need to fully understand what we are getting into before we agree to an offer that seems too good to be true.
0 votes Thank Flag Link Thu Aug 9, 2007
Predatory lending practices,fraud mortgage companies,and poor money managing skills.
0 votes Thank Flag Link Thu Aug 9, 2007
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