Archive for August, 2009

Underwater Las Vegas Mortgages Drive More Foreclosure Homes

Monday, August 10th, 2009

More distressed homeowners in Las Vegas are likely to let their houses become foreclosure homes than in the other cities, according to researchers at Northwestern University and the University of Chicago Booth School of Business.

The researchers found that 17 percent of homeowners in Las Vegas would default deliberately if their negative equity increases to 50 percent even if they have the money to make the monthly loan payments.

Nationwide, 26 percent of all delinquent home loans are considered intentional or strategic defaults.

One of the major reasons, according to the researchers, are the record numbers of foreclosures pushing down home prices in Las Vegas, putting the city on top of foreclosure charts and price decline charts.

Aside from significant price declines, the social stigma of foreclosures is no longer restraining homeowners from letting their homes go into foreclosure because most of them know of neighbors and friends that have gone into foreclosure.

The stigma of foreclosure has been declining in neighborhoods where foreclosure is the norm rather than the exception, according to the researchers.

The median sales price for Las Vegas houses has dropped by more than half since June 2006.

Based on another data of home loans, 67 percent of homeowners with home loans in Las Vegas are underwater and over 80 percent of mortgages taken out from 2005 through 2007 are now underwater.

The researchers found that homeowners who know another borrower who has lost a home to foreclosure have an 82-percent probability of letting their homes go into foreclosure. They found from their survey that more homeowners in zip codes filled with significantly bigger number of foreclosures are willing to default.

Luigi Zingales, a University of Chicago professor who conducted the survey with 2 other professors, said the actual number of Las Vegas borrowers who will deliberately walk away from their home loans will be determined by how homeowners perceive the direction of the economy and pace of recovery from price declines. Loss of hope from housing recovery will push them to walk away.

Jeremy Aguero, head of research company Applied Analysis, said there are a lot of houses in Las Vegas whose prices have dropped from $400,000 by 50 percent to $200,000.

Additionally, the researchers found that homeowners will not intentionally walk away if their negative equity is lower than ten percent.

Homeowners Use Bankruptcy to Avoid Repo Homes Lists

Wednesday, August 5th, 2009

Due to the continued rise in unemployment rates and difficulties in obtaining loan modifications, homeowners in Georgia are turning to bankruptcy to prevent their homes from entering repo homes lists.

According to bnkrauptcy attorneys in Georgia, out of the 50,385 consumers who underwent counseling for bankruptcy filing from April to June, 10,682 clients said their primary reason for seeking bankruptcy protection was foreclosure prevention.

The other major reasons for bankruptcy filings were job loss, divorce and major medical expenses, according to Ed Boltz, a bankruptcy lawyer and member of the board of directors of the National Association of Consumer Bankruptcy Attorneys.

Boltz said that typically consumers who file for Chapter 13 bankruptcy protection are able to reorganize their debts and create an affordable loan repayment plan over a longer period of time.

He also added that home loan terms are not changed by the bankruptcy court, but troubled borrowers can reduce their other personal debts such as credit card loans and auto loans so they can save amounts to make their monthly home loan payments.

Distressed homeowners could have obtained the right to modify their loans in bankruptcy this year if a bankruptcy revamp legislation was passed last April. The House passed it, but the Senate rejected it.

The Making Home Affordable Program was offered to distressed borrowers and was even enhanced to reach out to more homeowners, but the mortgage lenders were not carrying loan modifications as efficiently as expected by the public and the federal government.

Suzanne Boas, president of CCCS of Greater Atlanta, said the loan modification program is not working out for a lot of troubled homeowners, so these homeowners turn to bankruptcy to give them some breathing space and reduce their overwhelming level of stress.

Boas also said that mortgage lenders have not been doing something to adjust their systems so they can accommodate the large number of borrowers applying for loan modifications. As time passes and the foreclosure process moves, distressed borrowers are forced to consider bankruptcy even if bankruptcy filing was not in their original plans.

Another major factor for bankruptcy filing is the continued layoffs and the continued rise in unemployment. In Georgia, the seasonally adjusted unemployment rate surpassed the 10-percent rate in June, hitting 10.1 percent, and analysts expect the rate to climb higher.

According to Boltz, distressed homeowners turn to bankruptcy protection even if loan modification was their first choice.