The Foreclosure Spiral

The foreclosure of the properties all around the US has brought in new problems for the already struggling families and this couldn’t have come at a worse time for Maria Simmons, who with 18 year daughter in the grip of bone cancer and a husband who came back after a long war in Afghanistan and Iraq with different medical problems. Somehow with her own problems Maria had no notion about way they had to move in the middle of the holidays and the problems faced by his landlord. The experts in the field of economy and statistics have long argued over the defaults in the mortgage market but no one could come forward with the solution for this economic giant until we had to see this bubble burst. The economists are rather pleased that we deal with the problems in the mortgage market now than later and that this bubble was to burst sooner than later.

Still for someone like Maria and his landlord Oertel this couldn’t have come up at a worst time. Oertel once owned more than 10 rental accommodations spread over the whole city, these included multi-story buildings to small house and the payments of these houses and apartments varied from $1000 to $1600 depending on the suburb and the type of accommodation. These properties were acquired over different types of risky loans that started from as low as 6.53 percent and would go up as high as 12.35 percent. These rates were recalculated and formulated to 9.53 percent and would be adjusted accordingly every 6 months until they hit their limit of 12.35 percent. Oertel considered himself to be one of the smart persons in the town, taking a slice of the economic boom and never did he think about the potential rundown in the economic market.

One of the most important features of the rental market that Oertel failed to understand were the hassles involved in the rental property management. The biggest hassle in the management is that it can take up to 6 months to evict a tenant for the non payments of the rent. In other words you are stuck with no rental income to pay of the mortgage on the property. As most of us now understand that the non payments on the mortgage mean that the interest rates on these properties will increase sharply and these payments might even rise above the rental value of the property.

The same thing happened with Oertel when the payments on one of his properties went above $2600 when the rental value of the property was only $1300. This meant that Oertel had to come up with an extra $1300 just to keep up with the mortgage payments of the property, let alone making some kind of profits off these properties. This brought him into a downward spiral of debts and he ultimately had to sell off all his properties to repay his mortgage debts.

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