Buyer beware: foreclosures up

Homeowners looking to enter into a mortgage loan agreement should weigh all the facts carefully before signing on the dotted line.

Foreclosures are up, and although there are a number of economic factors that cause this, it’s the buyer who ultimately pays the price.

DataQuick, a company that reports on real estate news around the country, reported in April that foreclosures have risen dramatically. In fact, it hit a decade-long record in the first 3 months of 2007 with over 46,000 default notices served to homeowners. This is up 148% from the previous year, when just over 18,800 default notices were filed in the same quarter in 2006 and almost 25% higher than the per-quarter average of 33,800 default notices. While not nearly as bad, the Los Angeles area alone has seen a 110% increase in Notices of Default.

How does something like this happen? Industry analysts suggest that foreclosures occur within a window of time, about 1.5 to 2 years from the time the mortgage was initiated. Today’s foreclosures are occurring primarily to mortgages that were acquired during the heady lending frenzy of 2005 and early 2006.

Since those days, things have changed:

• Those unbelievably low teaser rate periods have ended and people who once forecasted that they could afford the mortgage are now finding interest resets to be higher than they expected or budgeted for.
• Appreciation in house values has not climbed as high as many homeowners had hoped for and, in some cases, has remained flat.
• House sales have slumped, which has an impact on resale prices, and it also means that people who hoped to buy a home at a low price and sell it at a high price may be finding it tough to move that house.

Homeowners who find themselves a little worried about that next mortgage payment, shouldn’t make the mistake that many people make: Often, people ride it out, hoping that they can beg or borrow or charge the money to carry them to better times. But that may not happen. Homeowners should be proactive and explore their options before defaulting. They can do this by talking to their banker about refinancing opportunities and by talking to a realtor as well. It’s best to get the “lay of the land” now, while they are still meeting their monthly payments rather than to wait until they cannot make any more payments… and suddenly find that they also have fewer solutions available to them as well.

Source: http://www.dqnews.com/RRFor0407.shtm

Los Angeles Real estate & City Information