Why Do We See Record Numbers Of Foreclosures

By; Bruce Lansford

Foreclosures are up 78% from last year and it appears these numbers will continue for at least the next 5 years.  There are several reasons for this;

(1)   The mortgage industry has and estimated $259 billion in ARMs that are becoming due.  Many homeowners who refinanced or purchased a home when the rates were running around 5% have seen their house payment go up hundreds of dollars a month with the rise in interest rates.

(2)   Lenders in recent years have been lowering their standards for borrows to obtain a home loan. Home buyers with a credit score as low as 560 many times can qualify for a home loan. 

(3)   With record appreciation in many parts of the country banks have been refinancing with a vengeance.  Consumers all too often will think I need a vacation or I want furniture for the living room, then charge it on their credit card.  Then when they run up a large balance many people rely on the equity and the appreciated value in their home.  They will refinance and pull money out of their home to pay off credit card debit.  The problem with this, if you don’t have the money to pay your credit card, how are you going to make a larger house payment? 

(4)   In the past 10 years this country has seen record home ownership, which with more owners means more chances for foreclosure.

(5)   The job market in some areas has led to a record number of foreclosures, one example Detroit where many high paying jobs were loss to plant lay offs in the auto industry.

(6)   Today you can get a 100% loan with know money down.  This doesn’t always give homeowners the determination to prevent foreclosure.  If you have put 10% down of your own money that gives you a strong motivation to try and save your home.  This could be a second job or professional help with managing your budget.

Foreclosures laws vary from state to state in both the foreclosure process and the home owners rights.  Tennessee law allows for foreclosure in one of two ways, judicially or advertisement.  Most foreclosures in Tennessee are by advertisement.  

Foreclosure by advertisement in Tennessee is used when a power of sale clause exist in a mortgage or deed of trust.  In the mortgage or deed of trust, where a power of sale exits, this is executed by the lender or their representative, many times called a trustee.

The trustee must advertise in a newspaper published in the county where the property is located at least three different times.  Once must be at least 20 days before the sale of the property.  If know newspaper is published in that county notices must be posted 30 days before the sale in public places.  One must be at the court house door, another in the neighborhood of the property and three other public places in the neighborhood. 

If a person thinks their in danger of foreclosure the sooner you start looking in to your options the better.  Typically it takes two months to go through the foreclosure process.  If you have a fair amount of equity, say 30% or more a refinance may be an option.  Just be sure you can make the payments.  If this option is chosen you need to try and remedy the problem that got you there to start with.

Many times your best option will be a Realtor with knowledge of foreclosures and short sales.  Your Realtor will try and get your home sold to pay the balance due.  This is far preferred over filing for bankruptcy.  This will save your credit, but you will need to rent till you back on your feet.  Many Realtors know of investors with homes to rent and will help you negotiate a lease.

Many times in these situations a first and second mortgage exit on the home.  If an offer to purchase can’t be obtained high enough to pay off the first and second mortgage your Realtor may be able to negotiate a short sale where you’re mortgage holders taking less than the amount due.

Tennessee law also allows for a period of redemption from 6 months to 2 years where you could pay all money owned and get your home back.  How ever most mortgages or notes have a clause where you waived this right.  The home owner can also pay all moneys owed up to 3 days prior the sale of the property and keep their home.

Another source of help is government agencies.  Go to the web site;

http://www.hud.gov/local/tn/homeownership/foreclosure.cfm

for more information.

The other type of foreclosure in Tennessee is judicially but these are rare.  The main difference is that in judicially the lender must file a complaint with the courts against the borrower.  A decree of sale from the court, if the borrower is found in default, will allow the homeowner to pay the entire delinquent amount plus any other charges.  If their not able to pay the court allows the mortgage holder to sell the property.

This a short over view of the Tennessee foreclosure proceedings, if you may be facing foreclosure, please feel free to give me a call.  Hopefully we can sit down and find the best solution for your case.

This article is not meant to give legal advice.