steve leblanc

Why am I in Foreclosure in Brockton, Massachusetts?

In the mid 2000’s it was so easy to get a mortgage on your property. The house had value and the banks would on occasion even lend more than you were actually paying for the property. Of course when your loans are not backed by any type of collateral and the time comes to collect on the loan it is tough to get reimbursed for money that has been spent with nothing to back it.

For many years the bank would generally loan you 90% of the purchase price of the property. That way you have some skin in the deal and it will be harder for you to walk away from your hard earned money. For most people to come up with $10,000 to buy a $100,000 house it will take them a long time saving which makes it difficult to give that up if you have to.

Since the over inflated values of properties have come crashing down and back to a realistic value, over the last 5 years and the mortgages on 61% of the properties are for more than the property can be sold for which leaves a gap between the mortgage amount and the actual value. For example if a house worth $220,000 got a mortgage for $200,000 in 2005, the actual value of the property could be only $120,000 here in July of 2011. This means that even if the homeowner has been paying for the six years consistently the amount of the principle has not been significantly reduces because early in the loan most of the payment is interest and the longer you have the not the more each payment cuts into the principle. After paying four years the actual amount still owed could be $185,000 depending on the type of loan. This means that there is a $65,000 gap between what is owed to the bank and what the home is actually selling for on the market today.

What can you do? The first thing you need to do is get a handle on how much money you have and what you are spending it on. Most of the people I meet with have enough money they are just not spending it wisely or their mortgage got to a ridiculous rate and if it were back to reality they could afford it. If you are happy with your home and can make the monthly payments, just wait out the storm. By the year 2020 your house will be worth more than your mortgage especially if you can make some extra principle payments such as $100 per month extra over and above the payment. This will significantly reduce the number of years you will pay on your mortgage and will also reduce the principle faster.

For everyone else who either has to move or you are in a position where you can’t pay your mortgage and are behind, you will need to work out an agreement with the bank. There are many ways to do that but the most common is a short sale in which there is a buyer who is willing to buy at a fair value based on what houses are selling for and the condition of your house. They get approval from the lender to purchase the property at the new reduced price and the lender is able to write off the difference in losses. It is a little more complicated than that but that is basically how it goes. There are other options and if this is something you would like to learn more about feel free to call me and we can discuss your options.