Rate of Foreclosure Increasing At Rapid Pace

Posted on August 10th, 2007 by hinson

The rate of foreclosure is taking place is increasing year by year. This trend is also evident from the increasing number of listings that indicate the foreclosed homes being put on auction. From January to July 2007, there has been 292 such kind of listings, which are nearly 100 more as compared to what it was during the same period of time in the last year. In the month of July only, there were near about 57 listings for foreclosed homes. The number has almost doubled from the previous year.

It has become quite common to see people becoming homeless overnight. Derek Egeberg, the mortgage adviser of First Magnus Home Loans says that, the factor that can be held responsible for creating such an awful situation is that, the people have started turning to non traditional means to obtain loans for buying their house. In the year 2002, about 72% of the population of the city of Yuma in Arizona used to go in for a regular loan, for which they were required to demonstrate their capacity to pay back their loans.

In 2006, 40% loans that were taken had an uncertainty of being paid back. Therefore, the interest rate of the non conforming loans was pretty high. The high rate of interest can be attributed to the greater risk involved. It is also likely that people who opted for such loans might have got the rate of mortgage adjusted in such a manner that the initial rate of interest would be low, however it would increase substantially in the years to come. To say for example, on a loan amount of $200,000, the initial rate of interest is $898 per month, but within the certain period of time, it increases to $1,330 per month.

The inflation in the value of houses has virtually come to a standstill. This is predominantly because of the slow moving market, where people at default find it all the more difficult to refinance their house, as they can’t bear the burden of making higher payments. On the other hand, they are not very willing to sell their house below its market value or perhaps at the breakeven price. Ultimately, the bank foreclosure takes place. There are a few people who hand over the responsibility of taking care of their house to others in a respectful way. Majority of people who face the consequences of foreclosure desert their house. Many people take out the light fixtures and sometimes even the sink of the kitchen, which is highly depressing.

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