As 2010 began, there were some signs of stabilization in the housing market according to the CEO of Freddie Mac, Charles Haldeman, Jr. Federal tax credits, low prices and low mortgage rates were all expected to fuel the recovery. Still, Haldeman cautioned at the time, the recovery was fragile and there was the potential for a large wave of foreclosures. Unfortunately, Haldeman appeared to be right.
RealtyTrac, a leading foreclosure listing service, released its Midyear 2010 U.S. Foreclosure Market Report earlier this month. According to the report, over 1.65 million properties have received a foreclosure notice so far this year. Though this number is down from the previous six months, it is up 8 percent over the same time period in 2009.
Florida Hit Especially Hard
Florida had the nation’s third highest foreclosure rate, with 1 in every 32 homes receiving a foreclosure filing during the first six months of the year. Over 277,000 properties throughout the state have received a foreclosure notice so far this year. Florida trailed only Arizona and Nevada in terms of foreclosure rates and trailed only California in the total number of homes foreclosed.
Perhaps the biggest side-effect to high foreclosure rates is the drag on property values of homes not under foreclosure in the same neighborhood. During the first quarter of 2010, Florida had the second highest number of foreclosure sales in the country, with 35,410 homes selling for an average of just over $121,000, according to the Tampa Bay Business Journal. Hillsborough County alone had over 1,500 sales, with the homes selling for, on average, up to 25 percent under market value.
How Bankruptcy Can Help
Falling behind on mortgage payments is typically one symptom of larger financial problems. For many people, bankruptcy may be the best way to get their financial lives in order – and stay in their home.
The decision to file bankruptcy is not an easy one, but there are protections available in bankruptcy that you otherwise will not have. Both Chapter 7 and Chapter 13 bankruptcy offer the protection of an automatic stay. This stay prohibits creditors from pursuing or continuing any collection activity against you and buys you time to consider your options.
In Chapter 13, you pay a portion of your credit card debt back over a three to five year period. The amount not paid back during the three to five year period is discharged just like a Chapter 7 case. You also can pay back any arrears on your mortgage by spreading those payments out over the life of the plan. Chapter 13 can also help strip away and discharge second or third mortgages on your home.
In some cases, Chapter 7, which liquidates unsecured debt like credit cards, may be the best approach. Wiping out unsecured debt gives people some breathing room and allows them to use that money to help stay current on mortgage payments.
Whatever path you choose, it is important to discuss your concerns with an experienced bankruptcy attorney as soon as you feel you are falling behind. If you wait too long, it may be too late to save your home.