High Foreclosure Rates: Good or Bad?

by John Evan Miller , March 6, 2007: 11:30 PM

A study by the Mortgage Bankers Association entitled, "The Residential Mortgage Market and Its Economic Context in 2007", stated that foreclosure rates will continue to rise and then peak at the end of the year. States where foreclosure rates are at the highest include Illinois, Colorado, Georgia and Nevada. With this kind of situation, the market obviously favors buyers over sellers. In 2006, there were more than 1.2 million foreclosure filings in the United States. The increase in foreclosure rate was said to have been caused by several factors including high interest rates, predatory lending practices and slow home value appreciation. The high interest rates would certainly affect those people who have mortgage loans with risky adjustable rate options and other subprime mortgages. Combine this with lenders who relaxed approval policies to accommodate borrowers who can not afford the properties in the first place; you have a recipe made for disaster. Once these homeowners face foreclosure for failure to pay mortgage dues, they would normally try to sell their homes as quickly as possible. Unfortunately, they would not have enough equity to be able to settle their mortgage debt. And even if they have, the sluggish market condition will make it more difficult. This sad scenario does not apply to buyers and investors. The large inventory of foreclosed properties provides buyers with a lot of choices. Lenders such as banks are slashing prices on all real estate owned properties. They would rather recover some of their losses rather than continue spending money on holding costs. Most lenders enter into listings contract with reputable real estate broker like Foreclosure Deals to attract more prospective buyers. So, depending whether you are a buyer or a seller, the high foreclosure rates will certainly have a different effect. Start your Search for:

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