Newspaper article The Christian Science Monitor

Foreclosures, Though Few, Are on the Rise with Bankruptcies Rising and Many Housing Markets Down from Their Peaks, Some Homeowners Face Crunch

Newspaper article The Christian Science Monitor

Foreclosures, Though Few, Are on the Rise with Bankruptcies Rising and Many Housing Markets Down from Their Peaks, Some Homeowners Face Crunch

Article excerpt

Perhaps no financial word has such an underlying tragic sting in American society as "foreclosure" - losing one's home through inability to make required mortgage payments.

Unfortunately, foreclosures have been rising as many families have been caught up by job loss or other adverse financial circumstances.

"We're at a point now in California where for many families, almost anything bad that occurs" can result in foreclosure, says Michael Drawdy, vice president of loss mitigation at Weyerhaeuser Mortgage Company, in Woodland Hills, Calif. "Ten or 15 years ago, that just wouldn't have been the case."

What happened in many California communities, and some housing markets elsewhere in the United States, is that property values dropped sharply. If a family suddenly has to sell a home because of difficult financial circumstances, it often can't make enough through the sale to satisfy the remaining balance on the mortgage. Thus, often the only way out is for the homeowner or lender to move to foreclosure.

Bankruptcies, which are not necessarily linked to home foreclosures, are also up. More than 1 million filings are expected in 1996, an all-time high, according to the American Bankruptcy Institute.

"Total {mortgage} delinquencies have been rising" and will probably continue to do so for the next few years, says Douglas Duncan, senior economist at the Mortgage Bankers Association, a trade group in Washington.

As of March 31, 4.46 percent of all single-family home loans were delinquent - meaning a mortgage payment was 30 or more days late. A year earlier, the delinquency rate was 3.94 percent, near a 22-year low. The rate is based on a survey of 40 percent of all mortgage loans in the US.

Foreclosures occur less often than delinquencies. A little less than 1 percent of all outstanding loans are in foreclosure. Lending agencies started foreclosure paperwork on 0.38 percent of all loans during the first three months of the year. …

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