Special offer

'Walkin away..........'

By
Mortgage and Lending with www.JakePlanton.com 209327
The rate of foreclosure in the United States is really high right now. Not as high as some in the media would like us all to think, but still up there. They say foreclosures are up 57%, or something like that, and people think that the sky is falling. When one finds out that 96% of those carrying mortgages are paying on time, there is pause. Think about that, about 4% of those that have mortgages are not paying, or paying late. There is a definite disconnect here. It does make for a good story for CNBC to report this, because it is dramatic, and causes people to stop and watch the news. But, come on, put this into context, PLEASE! Now, let me take a look at those that are not paying their mortgage. A small portion of these people are not paying because of the 'subprime crisis.' A large portion of them have become part of a new movement of people 'walking away.' What does that mean? Well, it is pretty self-explanatory; they just pack up their stuff, stop paying the mortgage and walk away. Why do people do this? A few reasons. The first is if there is no investment in the home. If someone got a 100% loan, and the value of their home is going down, people do not care about what this will do to their credit report, they just do not care. A lot of these people are speculators. Investors who, during the boom time, saw property, and bought it up. Usually with nothing down, hopeing to turn a quick profit. Another reason is that they know that in a few years, they can get into another home. Well, that is about to change.... Fannie Mae, and Freddie Mac have determined that if you get a foreclosure on your record, it will stay on your record, and you will not be able to buy a home for 5 years, 5 years!! That is a long time! And, they will want you to bring in at least 10%, and have a credit score of at least 680. Part of me thinks this is great; if you walk away from your home, that someone else has invested in to make it so you could BUY that home, you should be punished. Luckily, there are ways to try and dispute the 5 year deal; but it still makes it so you can't buy for another 3 years. Keep in mind that this is Fannie Mae, and Freddie Mac we are talking about, or conventional loans. There are other lenders out there that MAY be able to help sooner, but you will pay for it! So, what are some options for people then?? If their home is losing value, and they can not refinance, and their ARM is about to adjust, they can do a short sell. This may be the best option for people who are headed in the direction of foreclosure. Remember, foreclosure is forever. You have to check the little box on a mortgage application that says you have a foreclosure on your record somewhere, and that automatically puts a red flag on your file when I run it through an automated system. Negotiate with your bank, see if they can modify the loan, or short sell. It is always better than a foreclosure!

Comments (2)

Carrie Heath
REMAX Affiliates - Chippewa Falls, WI
I agree - the media totally sensationalizes the entire issue!  In my area especially, where fewer than 2% of home sales are foreclosure or short sales (I think last quarter it was at 1.6%).  Not a bad market, at all. 
Apr 16, 2008 08:05 AM
Charles G. Hennebeul
AMERICAN CASH SOLUTIONS INC - Melville, NY
I think FHA allows foreclosures but score must be higher than 620 and 2 years must pass. In Europe, like France you have to put down 50%-there is no 5% or 3%.
Apr 20, 2008 07:49 AM