HUD Home Foreclosures on the Rise
According to a Raleigh-based advocacy group, HUD home foreclosures have gone up dramatically in many states. They say, this trend is further gaining momentum due to the ever-increasing mortgage lending rates.
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The figures for North Carolina, alone show a spike in foreclosure filings. While only 16,630 filings were recorded in 1998, the state saw 45,512 hud foreclosures, an all-time high and almost triple the 1998 filings in 2006! Even Durham was witness to an increase in filings from 520 in 1998 to 1,565 in 2006. The highest numbers of real estate foreclosures filings in the last 8 years!
The trend has been similarly disturbing across most states including Orange County, which saw 279 hud foreclosures last year, an increase from 88 HUD homes for sale in 1998.
The Reasons Behind the Boom
Interestingly, no one particular socio-economic strata, governs the foreclosures. The worst affected have been homeowners in less than up market areas, and those who have a bad credit history and have trouble securing home loans from the traditional money lenders. Desperate times call for desperate measures. Hence, these homeowners take help of finance companies or mortgage brokers. These moneylenders offer financing at adjustable rate loans starting at a low rate of interest that increase largely within two years. Such loans are also known as 'exploding' adjustable mortgage rate. For example - if the rate of interest was 7% at the beginning of the loan, within 2 years to can climb to as high as 11% to 12%, thereby playing havoc with the homeowner's monthly payment amount and budget. Since many people are not able to afford such a high rate, they put up their homes for sale.
The Role of Bad Mortgages
Also, some of these home loans are predatory in nature. Despite the homeowner paying regular monthly installments, the money goes only to pay the interest, not the principal for a specific number of years. Therefore, the principal loan amount remains unchanged and finally the homeowner is unable to pay such a large amount of money thereby foreclosing his home. This is because many people do not realize what they are getting into until it's too late.
The Future of Foreclosure Homes
So when you buy real estate foreclosures, it may be well to note that what your are cashing into today, was someone's home yesterday for which he was no longer able to pay for.
While some experts argue that non-traditional, loans are not responsible for causing the increase in number of real estate foreclosures, based on the fact that there is no direct evidence in support of this. Some others believe that legitimate lenders have no benefits in going into real estate home foreclosures. Therefore, it is important to enforce laws on the fraud perpetuated by non-traditional loan agencies.
Worrisome Statistics
Furthermore, some more disturbing statistics were disclosed by the report complied by Durham's Center for Responsible Lending. According to this report, over 6 million 'sub prime' mortgages have been made from 1998 until the third quarter of 2006. And, during this period, 2.2 million real estate homes in sub prime market have either gone through the foreclosure process or will witness it in the next few years.
Finally, the study concluded that one out of every five-mortgage loans that have been taken in the last two years would end up in repossession!
