Some experts believe home loan delinquencies will peak during the middle of 2010. The reasons given are unemployment still at high levels, number of mortgages 90+ days late are rising, and Alt-A & Option-Arm loans are set to reset in high numbers. There are many factors contributing to default, but mainly we can focus on 4 reasons.
1) The first is predatory lending which was common place for many years. This refers to approved loans given to buyers without the necessary financial resources to pay on the debt and loan originators who failed to inform the buyers of factors such as ajustable mortgage rates.
2) The second is increased debt of homeowners. Many people make the mistake of maxing their credit cards and other lines of credit including home equity. The banks share in this fault by appraising homes far above their actual value. These debts accumulate and create monthly payments beyond what the homeowner can afford.
3) The third is unemployment. This one is easy to understand. We all know someone who has lost their job recently. Unemployment insurance is often not sufficient to compensate for lost wages, and bills start to be missed.
4) Finally, declining home prices exaserbate the situation. This is more of an effecto of the other 3 factors. When banks take back property they often have to sell at deep discounts. These sales are factored into future appraisals of comparable properties bringing the entire market down.
What other factors do you see? Please comment.
Regards,
Michael Collins – Broker
Rock Realty
Rock Solid Real Estate Strategies
PO Box 2444
Janesville, WI 53547-2444
c: 608.921.8536
f: 877.774.7625
Mike@RockRealtyWI.com
http://www.rockrealtywi.com/
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