The US is in the grip of a deep Recession. Unemployment is at an all-time high and hence people are unable to make mortgage payments. Subsequently, foreclosures are common. Now housing experts are of the opinion that the crisis will worsen further before the situation improves.
The Mortgage Bankers Association has found that the number of defaulters is high. Six million loans have already passed the default stage or in the process of being foreclosed. This is the highest ever being recorded by the association. What is worse is not just loan defaults. Unpaid taxes on property have also accumulated over the years. That is responsible, to a large extent, for the rising number of foreclosures. Many homeowners are current on the mortgage payments but have fallen behind on payment of property taxes.
Many local bodies who are cash-strapped have sold the unpaid tax bills to private agencies. These firms are charging a very steep interest rate and fees from the homeowners. They also have the right to take over the homes that have fallen behind on payment of taxes. It is very tough to collect dues. When a private agency is given the onus to collect dues, it usually does not have the public interest in mind. It will never consider that the rise in foreclosures will lead to abandoned spaces.
The government will also foreclose if taxes have not been paid. But actually, they will not do so out of concern for the plunging property value. The Lucas County auditor has sold above 3,000 tax liens for an astounding sum of $14.7 million. He observes that the cost will be higher if regions are riddled with foreclosed and abandoned homes. Then home values will plunge further.
There should be a few changes that will reduce the risk of foreclosures. During the real estate boom, the lenders had deliberately kept the monthly mortgage payments low by not taking insurance and taxes into consideration. These loans are generally Alt-A, sub-prime and jumbo loans. Experts say that the homeowners were in the dark that the amount was not included in the mortgage amount.
The rule was hanged soon after the bust. The Federal Reserve passed a regulation that required taxes and insurance to be included in the sub-prime loans as well. The requirement has now put many homeowners at risk. This has thrown up the need for safety regulator for loans and mortgages.
The Mortgage Bankers Association has found that the number of defaulters is high. Six million loans have already passed the default stage or in the process of being foreclosed. This is the highest ever being recorded by the association. What is worse is not just loan defaults. Unpaid taxes on property have also accumulated over the years. That is responsible, to a large extent, for the rising number of foreclosures. Many homeowners are current on the mortgage payments but have fallen behind on payment of property taxes.
Many local bodies who are cash-strapped have sold the unpaid tax bills to private agencies. These firms are charging a very steep interest rate and fees from the homeowners. They also have the right to take over the homes that have fallen behind on payment of taxes. It is very tough to collect dues. When a private agency is given the onus to collect dues, it usually does not have the public interest in mind. It will never consider that the rise in foreclosures will lead to abandoned spaces.
The government will also foreclose if taxes have not been paid. But actually, they will not do so out of concern for the plunging property value. The Lucas County auditor has sold above 3,000 tax liens for an astounding sum of $14.7 million. He observes that the cost will be higher if regions are riddled with foreclosed and abandoned homes. Then home values will plunge further.
There should be a few changes that will reduce the risk of foreclosures. During the real estate boom, the lenders had deliberately kept the monthly mortgage payments low by not taking insurance and taxes into consideration. These loans are generally Alt-A, sub-prime and jumbo loans. Experts say that the homeowners were in the dark that the amount was not included in the mortgage amount.
The rule was hanged soon after the bust. The Federal Reserve passed a regulation that required taxes and insurance to be included in the sub-prime loans as well. The requirement has now put many homeowners at risk. This has thrown up the need for safety regulator for loans and mortgages.