Foreclosure Numbers Increasing
It was expected: as interest rates went up, some folks were going to be caught in the squeeze. Well, the squeeze is considerable. Look at the numbers: August foreclosures are up a whopping 24 percent from July. For just this year alone, (and without the last quarter's data), we're looking at a 38 percent increase for 2006. Even more astoundingly, foreclosures are up over 50 percent compared to last year at this time!
Some analysts are blaming this trend on riskier mortgages, in combination with the tendency to have smaller downpayments and higher leveraged loans. Then there are interest-only loans, which look good when prices are steadily climbing. However, if you are paying only the interest and your home value shrinks, your mortgage could become larger than your home's value. You can't sell your way out of that situation, without coming up with the money to cover the difference between what you got and what's left on the mortgage. In cases like this, a problem could mean not just foreclosure, but bankruptcy.
If you are having problems making your mortgage payment, don't ignor it! Talk to your lender. You may be able to make some arrangements with that lender; after all, a foreclosure (in a dropping price environment) doesn't work in their favor either. They may be willing to restructure or refinance the loan. If not, get credit counselling as soon as possible. You could avoid having to lose your home, and your credit rating. Know your rights.
Once the foreclosure process has started, you could still be able to hang onto your house. If the foreclosure is not handled properly, including procedural and lender errors, you may be able to stop the process. This can give you a second chance.