Underwater does not mean Foreclosure

Recently, yesterday there was an interesting article written by Karen Blumenthal in the Wall Street Journal detailing the reasons for and the stats regarding the foreclosure market and the number of people who are "upside-down" or "underwater" on their loans. 

It is estimated that 1 in 6 to 1 in 8 homeowners find themselves in that position.  This worries most economists as this is the first step towards foreclosure.  The reasons for this number seem obvious to most of us,  home values across the country have dropped, and many have taken equity loans on their properties which have only exaggerated the problem.

All the news in the article wasn't bad.  There are many homeowners who find themselves in this position who don't have to sell, who will be able to weather the drop in value and find themselves in a better equity position down the road. I am still on the hunt for the crystal ball that will illuminate for me, when this turn around will happen. Those homeowners who have a low-interest fixed rate mortgage will find they have a valuable asset that will be hard to replace in the current lending market.  Cutting back on expenses and tightening the household budget to keep that loan current is the best advise that can be offered to these folks.  penalties for defaulting can be harsh.  Lower credit scores and all that accompany them in today's credit world will follow a default or foreclosure. 

The longer a homeowner can stay in their home, the better the chances of them making it throughthe down turn we find ourselves in.  Again, the crystal ball would tel us when that will be, experts seem to think that 5-10 years is a reasonable time frame.  Some markets might begin to rebound sooner as the credit and money become more available. 

Most lenders are not going to consider renegotiation of loans just because values have fallen.  Being able to prove distress might get a lender to listen to you and consider renegotiation.

There are a number of programs and resources mentioned in Ms. Blumenthal's article.  If you would like infomration on those resources or a copyof the complete article please let me know at: anthony.malafronte@floridamoves.com and I will get you this information.