According to RealtyTrac today, the number of U.S. homes lost to foreclosure surged in July in yet another sign that lenders are moving more quickly to take back the keys.
In all, lenders repossessed 92,858 properties last month, up 9 percent from June and an increase of 6 percent from July 2009.
What’s more, in the bigger picture, RealtyTrac estimates more than 1 million American households are likely to lose their homes to foreclosure this year. Ouch,
In the meantime, here’s another great story on housing bubble’s seamy aftermath.
It seems some borrowers are unwilling to become debt slaves….
From the New York Times by David Streitfeld entitled: Debts Rise, and Go Unpaid as Bust Erodes Home Equity
“During the great housing boom, homeowners nationwide borrowed a trillion dollars from banks, using the soaring value of their houses as security. Now the money has been spent and struggling borrowers are unable or unwilling to pay it back.
The delinquency rate on home equity loans is higher than all other types of consumer loans, including auto loans, boat loans, personal loans and even bank cards like Visa and MasterCard, according to the American Bankers Association.
Lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and because the value of the homes, the collateral backing the loans, has often disappeared.
The result is one of the paradoxes of the recession: the more money you borrowed, the less likely you will have to pay up.
“When houses were doubling in value, mom and pop making $80,000 a year were taking out $300,000 home equity loans for new cars and boats,” said Christopher A. Combs, a real estate lawyer here, where the problem is especially pronounced. “Their chances are pretty good of walking away and not having the bank collect.”
Lenders wrote off as uncollectible $11.1 billion in home equity loans and $19.9 billion in home equity lines of credit in 2009, more than they wrote off on primary mortgages, government data shows. So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter.
Even when a lender forces a borrower to settle through legal action, it can rarely extract more than 10 cents on the dollar. “People got 90 cents for free,” Mr. Combs said. “It rewards immorality, to some extent.”
Utah Loan Servicing is a debt collector that buys home equity loans from lenders. Clark Terry, the chief executive, says he does not pay more than $500 for a loan, regardless of how big it is.
“Anything over $15,000 to $20,000 is not collectible,” Mr. Terry said. “Americans seem to believe that anything they can get away with is O.K.”
“I am not going to be a slave to the bank,” said Shawn Schlegel, a real estate agent who is in default on a $94,873 home equity loan. His lender obtained a court order garnishing his wages, but that was 18 months ago. Mr. Schlegel, 38, has not heard from the lender since. ‘The case is sitting stagnant’ he said. ‘Maybe it will just go away.’”
Needless to say, this is going to be a huge problem going forward since the equity stake has been wiped out in nearly every second mortgage in the country.
The scandal is that the banks are still holding billions of these loans on their books at par hoping that “maybe they will all just go away”.
Good luck with that one.
Related Articles:
“Home-Debtors” Continue to Buy and Bail
Used Home Sales at a 3-Month Low
Trulia: The Sellers Are on the Run
Meredith Whitney Predicts a Housing Double-Dip
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