The foreclosure process is a long, scary journey that no one wants to experience in their lifetime. Unfortunately, sometimes we find ourselves in a situation where it cannot be avoided. The good news, trends show that foreclosure rates overall are going down. If you do find yourself going through a foreclosure, just know that you’re not alone and there are ways out. Keep reading for some interesting facts about foreclosures and you just might learn something that could help you someday!
Causes of Foreclosures’
The underlying reason for foreclosure is always falling behind on payments, but there are many causes that get people to the point. Common causes for foreclosures are unemployment, divorce, medical expenses, adjustable-rate loans, credit card debt, or sudden relocation.
The End of the Moratorium
The Biden administration’s extension on the moratorium of foreclosures ended on July 31, followed by the ending of the extension of the evictions moratorium on foreclosed borrowers which ended on September 30.
This has caused the number of foreclosures in the US to jump dramatically from the second quarter to the third quarter in 2021. According to CNBC, there was a 32% increase. Compared to the third quarter of 2020, there was a 67% increase.
These numbers seem dramatic because of the forbearance programs initiated during the pandemic, dropping foreclosure rates to very low numbers. The programs allowed borrowers that were struggling to make payments to delay payments for up to 18. months.
Forbearance Programs
Although the forbearance programs put in place by the government have come to an end, you can still work something out with the institution you borrowed from. Typically, banks don’t want to foreclose on a home and will work with borrowers to come up with a plan to avoid it. The key here is to reach out to them before a missed payment.
Lenders can agree to temporarily reduce or defer mortgage payments, helping you to get back on your feet during a short-term financial hardship. Forbearance programs can last anywhere from 3-6 months, and typically can be extended if you need more time.
Foreclosure Stats for Q3 2021
In Q3 2021, the US Foreclosure Market Report shows that there were 45,517 properties with foreclosure filings, with 19,609 filing in September 2021, according to PR Newswire. Nationwide, that’s means there was one foreclosure for every 7,008 properties.
Major Cities With the Highest Rates
According to the same PR Newswire article, out of the major metropolitans in the US, the cities with the highest foreclosure rates were Atlantic City, Peoria, Bakersfield, Cleveland, and Las Vegas. If we’re looking at the number of homes in foreclosure, the greatest number were in New York, Chicago, Los Angeles, Miami, and Houston.
Two Types of Foreclosures
Depending on what state you live in, banks will have to follow a different process to foreclose on your home. There are judicial foreclosures and non-judicial foreclosures. For a judicial foreclosure, the bank must go to court to start the foreclosure process. In a non-judicial foreclosure, they do not. This means it is quicker and easier for the lender.
Length of the Foreclosure Process
The foreclosure process can be very lengthy, and the exact time it takes varies greatly case by case. A bank will typically begin the process after somewhere between 3-6 months of missed payments. From there, the proceedings could take up to a year or even more.
Stopping a Foreclosure
You have until the day that your property is sold at auction to stop the foreclosure. . If you want to keep your home, you will have to figure out a way to catch up on payments. Another option is to sell your home and use the proceeds to pay off the rest of your mortgage. You’ll want to make sure that you will make enough money through the sale to pay off the rest of your loan.
Short Sales Are Another Option
While not the most ideal solution, your lender might agree to a short sale. For a short sale, you work with the bank to come up with a solution to avoid foreclosure. This is done by selling the home for less money than you owe on the house. This typically happened when a borrower is underwater, meaning you owe more money than the property is now worth. The bank will end up taking a loss on the property. Despite being a frustrating and long process, a short sale will not affect the borrower as negatively as a foreclosure will.
Foreclosures Go on Your Credit Report
Foreclosures are already a stressful situation, but to make matters worse, it’s going to follow you around on your credit score for 7 years. Unfortunately, foreclosures have a significant impact on credit score and can lower it dramatically. According to Experian, your credit score will start to drop as soon as you miss your first payment. Missed payments have the highest impact on credit scores. Not only that, but lenders may be unlikely to approve you for another loan later down the road.
Buying a Foreclose Home Could Save You Money
According to Investopedia, foreclosures homes are commonly sold well below market value. You can buy homes at any stage of the foreclosure process. With pre-foreclosures and short sales, the seller is trying to sell the home as quickly as possible to avoid foreclosure, meaning they’ll likely take a lower bid. Seized homes are also likely to be sold as quickly as possible. Foreclosed homes are sold “as-is,” meaning you’re taking a risk that the home may have issues you don’t know about or costly repairs.
Overall, Foreclosure Numbers Are Going Down
Although the numbers are much higher this year than last year, this is due to the covid moratoriums that allowed people to defer payments to the end of their loan. Since 2010, foreclosure rates in the United States have steadily declined year over year.
