Home Owners Are Heavily Hit By Foreclosure Consequences

Home Owners Are Heavily Hit By Foreclosure Consequences

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It is no exaggeration to say that the foreclosure consequences have hit the US country as a whole millions of home owners forfeiting their equity to the foreclosure fiasco; Real Estate markets becoming sluggish with mounting inventories of foreclosed properties; housing prices plummeting to levels unforeseen; age-old mortgage lending Institutions and banks closing their shutters permanently and the US Government is feeling the pinch by the extraordinary burden on the financial markets on the one hand and redressing the grievances of their affected citizens on the other.

It all started with a Real Estate boom during the years 2000 to 2005. Buying a home of their own is the common dream of many Americans. Compared to other countries, US Real Estate markets were sailing smooth in fulfilling this dream. Added to this, successive US Governments proclaimed their policy of providing homes for the homeless citizens. Towards implementing this policy, they were concentrating on creating Government sponsored agencies like Fannie Mae and Freddie Mac, apart from Department of Housing and Urban Development (HUD) and Federal Housing Administration (FHA).

Home buying activity was at its full-swing during the boom years, what with easily obtainable home loans from Banks and financial institutions just on the stated income of the barrowers. Laxity in checking with the repayment capacity of the barrowers prevailed, in issuing disproportionate amounts to barrowers. Also along with these prime lending tactics, mortgage lenders in the sub-prime lending markets cashed in on high-interest loans to people with questionable credit history. The backbone of all these juggleries was the soaring prices of properties and the misplaced belief that the properties pledged by barrowers will offset any default in repayment of mortgage loans.

Experts now say on post-mortem of the foreclosure consequences, that all these laxities together with predatory lending practices on the part of some sub-prime lenders, culminated into the devastating foreclosure tornado. In a strong and stable economy like the United States the interest rates on barrowings withheld, but when once the US economy took a down-turn towards the end of 2005, the bubble was burst.

With the result, the floating interest rates on mortgage loans swelled beyond expectations. As a majority of home loans availed by millions of American home owners were under Adjustable Rates Mortgages (ARMs), with teaser rates in the beginning and adjusting over years to higher amounts, this was the starting point of the chaos that followed. Many American families found the repayment installments swell beyond their monthly budget and had to raise their hands in despair, walking away from their housing properties.

The direct consequence of foreclosure crisis is the number of foreclosure filings default notices; auction properties; and repossessions after foreclosure sale public auction are mounting month after month in almost all States. The brighter side of this misfortune for many home owners is the never-before opportunity offered by foreclosure listings to home buyers. Prime locations for home buying like California; Florida; Nevada; Michigan; Texas; New Jersey; North Carolina and South Carolina have hundreds of thousands of formidable properties made available for distress sale at prices well below their real market value.

So it can be said that the foreclosure consequences are bitter for home sellers, but brighter for home buyers.

About the Author:
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