Thursday, April 16, 2009

Who's winning - foreclosures or economic recovery?

Freddie Mac recently released a study that demonstrates that 43% of delinquent home loans are due to unemployment or curtailment of income (under employment). The report found that 25.5% of delinquent mortgages are due to illness or death in the family (over 47 million Americans are without medical insurance) and 16.2% of mortgage delinquency is due to excessive debt obligation.

Nevertheless, many lenders (loan servicers) continue to file foreclosure proceedings -- despite the fact that home owners have filed the proper paperwork to apply for modifications of their mortgages. And mortgage experts announced that Obama's latest options for refinancing or loan modification programs will not kick in for a few more quarters, leaving struggling, unemployed homeowners facing homelessness.

What is the result?

More bankruptcy filings.

Hence, unsecured creditors will receive little or nothing while bankruptcy attorneys attempt to prevent foreclosures on primary residences that have lost their value.

The lenders don't necessarily win either. A Chapter 13 can drag on for five years or longer before it is discharged. But a bankruptcy can help a family stay in their house with lower payments.

It appears, despite the president's best intentions, that we are caught up in a game of economic chicken. So, who do you think is going to blink first? The government or the lenders?

Free Foreclosure & Refinancing Counseling Free foreclosure and refinancing counseling is sponsored by the State of Washington

Making Home Affordable link to determine if you are eligible for a loan modification.

Nolo defines unsecured debt as:

A debt that is not tied to any item of property. A
creditor doesn't have the right to grab property to satisfy the debt if you default. The creditor's only remedy is to sue you and get a judgment. Compare secured debt.

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