Home Loan Modification Articles

Cause and Effect: How is Foreclosure Currently Effecting the United States?

We all may have a generic idea of what foreclosure is, and that it can be one of the most discouraging and life changing events; but what created this financial phenomenon? How did this problem then lead to further problematic events? How is foreclosure effecting millions of Americans in the U.S. Today? We can answer all of these questions with confidence, knowing that foreclosure is now considered a widespread financial pandemic. Millions of Americans are facing the problematic events of foreclosure, and many of them fail to properly guide themselves; thus causing the pandemic to worsen.

There are multiple ways foreclosure can begin its course. Generally, foreclosure begins with the homeowner's inability to make monthly payments on their house, regardless of what type of hardship initially caused the homeowner problems. In addition to how foreclosure begins, there are multiple effects foreclosure can have on a homeowner including:

• Loss of residence (at a minimum, loss of equity in the home)


• Delinquency on credit and/or default on credit (ultimately gouges credit score)


• Inability to borrow in the future


• Increase in taxes (due to the included loss of the lender)


• Lawsuits (collection agencies or the IRS)


• Potential loss of employment (employer's standard of credit)


• Increase in stress and rash decision making (caused by the emotional process of foreclosure


• Bankruptcy

Even more staggering than the effects of foreclosure, are the statistics of foreclosure. The rapid growth of foreclosure rate is something that wasn't foreseen by many individuals, and has been equated - by many - to the 1940's, when the United States hit “rock bottom.” Here are a few statistics, published by the FDIC:

• Every three months 250,000 new families enter into foreclosure.


• Mortgage Bankers Association


• A slower real estate market translates into falling prices and home values. As a result, homeowners who opted for adjustable rate mortgages may now find as their mortgage rate adjusts higher, their home value falls and therefore refinancing is no longer an option.


• Six in 10 homeowners wish they understood the terms and details of their mortgage better.


• Freddie Mac/Roper poll of 2,031 U.S. homeowners, conducted 2005.


• If home foreclosure affected you, what best describes how you would feel?


• 38% Scared


• 35% Depressed


• 9% Angry


• 8% Embarrassed


• 9% None of these


• Harris Interactive poll of 1,334 U.S. homeowners, conducted October 5-7, 2005.




• 43% of American households spend more than they earn each year.


• Homeownership Preservation Foundation data of 60,000 homeowners


• 52% of employees live paycheck to paycheck.


• The MetLife Study of Employee Benefit Trends


• One foreclosure can result in as much as an additional $220,000 in reduced property value and home equity for nearby homes.

As of July 16, 2009, foreclosure filings reached a record high. According to a Bloomberg article, in the first two quarters of 2009 (January - June), more than 1.5 million foreclosure notices were filed. In the first quarter of 2009 - alone - there were 803,489 foreclosures filed. That equates to one in every 84 American homes. Clark County Nevada (which includes Las Vegas), is by far suffering the worst. According to the Bloomberg article, the foreclosure rate in Clark County is much higher than anywhere else in the nation. One in every 13 homes or properties has received a foreclosure notice, that's 8%. “I don’t see any turning of the tide,” said Donald Haurin, an economics professor at Ohio State University in Columbus. “The effect of more foreclosures will be continued downward pressure on house prices and lead to difficulty making mortgage payments that are continuing to reset.”

With the increased amount of foreclosures comes the need for more modifications. Statistics show there are many different routes one can take to avoid foreclosure, but statistics also show that approximately 60% of homeowners don't truly understand the terms and process of modifying their mortgage. Similarly, homeowners don't understand the initial terms of their original mortgage agreement. Knowledge and communication is power in the business of home loans and loan modifications, as it is anywhere else in life.

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