Analysts predict that the outlook for foreclosures will remain significant, owing to rising interest rates and the ongoing recession. Indeed, many believe that foreclosure rates will reach record levels in the coming years and will be even higher in the coming years. Nationwide, 92,845 homes are in foreclosure, up from 87,945 in 2009, according to a recent report from the U.S Foreclosure Market Report. The report also points to a marked increase in foreclosures in recent months, from 1,843 in July.
The Underlying Factors Behind Foreclosures
Why are so many consumers behind on their mortgage payments? These people took out home loans without the intention of defaulting the loan. As a Debt Management Company, we understand that while high interest rates and inflation have a negative impact on homeowners in general, personal matters like these play a much larger role in foreclosures.
Income losses: According to the American Association of Realtors, the nation’s leading mortgage broker, nearly 41 percent of all foreclosures are attributed to job losses and reduced overtime pay. The same study found that family illness, followed by family death, accounted for a whopping 60% of all foreclosures in the US.
Personal Savings: Larger housing loans take more money out of your pocket every month and this results in a lower level of individual savings. Generally, personal savings act as a buffer zone during difficult financial times. Without this protection, many are unable to pay their mortgage payments during short-term financial setbacks.
The Housing Boom: The US housing market has experienced an exponential growth in recent years, and we are only just beginning to understand how this tremendous growth is impacting the US foreclosure rate. Many consumers took out large residential loans in the first half of the year, using attractive financing options. In addition, many consumers bought large houses and bought houses with high mortgage debt to take advantage of attractive financing options and secure mortgages. As a result, they have had to stretch their finances to make monthly mortgage payments. However, when they could no longer afford their payments, they had no choice but to give up their home.
Persona Savings: Consumers obtain large housing loans which drains their pocket every month and this results in a lower amount of savings. Savings serve as a buffer zone during difficult financial times. Without this protection, many will be unable to pay their mortgage payments during short-term financial setbacks.
Ways to Avoid Foreclosures
Contact your creditor: If you are experiencing a short-term financial setback and cannot afford your mortgage payments, call your lender and explain your situation. Lenders usually appreciate a straightforward approach and can give you extra time or even delay certain payments until your finances are back on track.
Use Your Private Mortgage Insurance:
Consumers with a down payment of 20% or less are most likely to be persuaded to take Private Mortgage Insurance (PMI). Faced with financial difficulties, PMI lent them the money to cover shortfalls and save the house from possible foreclosure. This serves as a fallback for the lender against future foreclosures, if possible.
Get Professional Debt Counseling: Consumers who are in arrears with their credit card payments should seek professional help from a personal financial expert. Seek advice from an experienced financial planner, such as CreditGUARD of America to help you organize a personalized and strategic budget plan by consolidating your bills into a single lower monthly payment.
Call 800-500-6489 today to schedule a no-obligation debt counseling session online. We offer nonprofit debt advice and debt management plans tailored to your individual needs. Take a look at https://creditguard.org to know more.