Defaults in Mortgage Payment Amount to Loss of Ownership

Countless Americans are on the verge of losing their homes to foreclosure due to a delay or default in payment of their mortgages. It all started with a high and steady leap in the interest rates of subprime mortgage and a corresponding fall in the real estate market thereby lowering the prices of houses all over the country.

During the boom in the real estate market, housing prices were soaring high above their current prices, and the market was doing very well since many Americans bought houses during that time. Those who were not financially strong took support of adjustable-rate-mortgages i.e. ARMs, option-AMRs or interest-only mortgages. ARMs helped owners to extend financially and acquire a property. Lower interest rates of ARMs allowed homeowners to pay less every month. However, none of them estimated the move of the Federal Reserve Bank. The increase in the rates by reserve bank shattered their dream house project.

As per the records of the Mortgage Bankers Association of America, the outstanding loan amount grossly appears to be more than $8.6 trillion. One fourth of the amount out of these unpaid loans is due to ARMs. Experts from Moody’s Economy.com estimate that this year the rates of $2.1 trillions loans could be reset. If this happens, then there are chances that the crisis will extend even further if the rates keep on changing for the worse.

The California based company, RealtyTrac, keeps track on nationwide property markets. They provide information on various groups like homes entering into foreclosure processes, houses facing foreclosure and the homes that have been repossessed by the banks. RealtyTrac says that this year in America foreclosures have increased drastically over the last year\’s figures.

Foreclosure does not mean that all the people facing it have become homeless. Actual foreclosure is a long process. It generally begins when the owner makes three defaults consecutively in their monthly mortgage payments. Lenders then send a notice of default to the owner. This process takes about seven to fifteen months. In the mean time, owners can sell their homes for profit, or can go in for refinancing. Many owners also work out the deals in their favor or opt for the short selling technique which is carried out by the lender. In some states, if the owner can prove his bankruptcy in a court of law then the foreclosure proceedings against him stop.

RealtyTrac data says that half of the owners missing their mortgage payments, out of the total against whom foreclosure filings are prepared actually face foreclosure.

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