Foreclosure in 11358>Question Details

Peggy, Other/Just Looking in 11358

What is the most common cause of foreclosure?

Asked by Peggy, 11358 Wed Oct 1, 2008

Is it mainly because people don't allocate enough money as a reserve to deal with, say, adjustable rate mortgages? Or is it because people are more susceptible to unexpected situations than they think (eg. loss of job, illness/hospital bills, etc)?

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There are many different things that happen, the most common situation i have run into when selling foreclosures are people who purchase within the last 3 years and got 80/20 loans, no money down and have nothing invested in the house so it is too easy to walk away. they paid too much, financed their closing costs and now the property is worth 1/2 to 2/3 of what they owe.
Web Reference: http://www.ScottSellsNH.com
1 vote Thank Flag Link Sat Oct 4, 2008
From what I have read and seen first hand, it seems to be a combination of things including remortgaging/taking out a home equity line of credit and unusual expenses like medical bills. Home equity lines have adjustable interest and that has caused some problems but most of what I have seen in this area is that the homeowner got over extended and just can no longer meet the payments. The bank doesn't really want to foreclose and take the house back and may be willing to work out a short sale....meaning they will accept less than the amount owed on the mortgage as payment in full when the house is sold. The homeowner has to demonstrate to the bank that they have no resources to pay off the difference.
1 vote Thank Flag Link Wed Oct 1, 2008
Peggy,
I think it is all the above but especially that people's eye's are bigger than their wallets! They want big- big- big and don't figure in the cost of utilities, repairs and maintenance etc!
They especially don't consider how much their property taxes can increase or that they may be reassessed. In addition recently many mortgage providers allowed people to finance way beyond their means!
Web Reference: http://joliemuss.com
0 votes Thank Flag Link Sat Oct 4, 2008
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