American home mortgage loans that end up foreclosing come
mostly from the midsection of the U.S. Even though figures
for foreclosure were down in 2004, according to
Foreclosure.com, this news doesn’t show how certain parts of
America are increasingly filing for foreclosure. Granted,
foreclosure statistics have finally leveled off after
several years in the downward direction. In fact, this
leveling is attributed to a better economy in the U.S.
according to Mortgage Bankers Association of America.
However, this picture leaves out the fact that the
midsection of the US is experiencing foreclosures at an
alarming rate. Why is this happening in just these parts?
To understand this problem, you first should recognize that
foreclosure statistics are pretty accurate gauges of what’s
happening to household incomes and the economy. Experts use
these statistics to measure the economy’s health and if
household income is keeping up with inflation. When these
two areas are in check, foreclosures numbers are low. But,
when a household’s income is stagnant or doesn’t increase
enough to match inflation, then more homeowners are forced
to resort to foreclosure to solve their financial troubles.
This reason along with several other behind-the-scenes
reasons also forcing people in the middle part of America to
file foreclosures:
* Lots of job cuts force the newly unemployed homeowner to
fall behind in mortgage payments and to eventually turn to
foreclosure.
* Over-inflated home prices usually entail big monthly
mortgage payments. Too big of a monthly mortgage compared
to income often means high risks for foreclosure.
* Lending practices are often the cause behind increased
foreclosures. Homeowners that otherwise wouldn’t qualify
for big home loans are able to qualify for second mortgages
and other types of loans that are very difficult for this
homeowner to responsibility afford and eventually look for a
way out through foreclosure.
To an investor who specialized in foreclosures, these trends
are like gold in the bank. Many times, when an investor
approaches someone who’s about to face foreclosure, the
investor’s deals seem like a win-win situation. However,
today’s foreclosure market has some increasing problems;
many of these properties are not desirable. The condition
of these properties are so neglected that many investors
don’t want to put in any capital to improve them.
Additionally, too many of these "fixer uppers" are located
in places that many people don’t want to live. Although
many people think less than highly of foreclosure investors,
these agents many times pick up the economy and help people
in a bind. After negotiating with banks about selling the
properties to them at less than prime market price, the
investor gains a profit and the bank doesn’t have to keep
upping interest rates to cover these losses.
Most foreclosure problems are clustered in major U.S. cities
in the midsection of the nation. Below are the top 5
counties according to CNN Money Real Estate Online:
1. Wayne County, Detroit area (Michigan)
2. Cook County, Chicago area (Illinois)
3. Marion County, Indianapolis area (Indiana)
4. Dallas County, Dallas area (Texas)
5. Shelby County, Memphis area (Tennessee)
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