According to a report released by mortgage data company RealtyTrac the number of US homes facing foreclosure has doubled in the third quarter. See the article at Foreclosure Filings Soar in 3rd Quarter. You have probably seen news reports regarding this problem over the past year and it appears only to be getting worse.
While foreclosures are a problem nationwide, I don't think they are affecting Alabama as bad as other states. Why? The foreclosure problem is two fold. First, many people were enticed into adjustable rate mortgages with interest only payments or very low introductory interest rates. Because of the lower payments at that time they could afford nicer larger homes. However, when it came time to start making regular interest and principle payments or when the introductory rate ended, the monthly payments became unaffordable. This leads to immediate foreclosure or the supplementing of income with credit cards or other high interest loans and then most likely to bankruptcy and/or foreclosure.
This has been an issue across the nation, including Alabama. I see the damage the higher payments cause on a daily basis. Often through a Chapter 13 bankruptcy we can create a budget and a plan to stop a foreclosure. It is very important to note however, that although we can create a plan to "catch up" the payments you are behind, after filing the bankruptcy you will be required to recommence making your mortgage payment at the amount due under your mortgage. That is if your mortgage calls for the interest rate to increase and your payment to rise, then you WILL have to make that higher payment.
The second problem leading to the national foreclosure crisis is the big drop in the housing market. If you cannot afford your house payment, it's simple, just sell your house and then find one you can afford. But what if your house will not sell for what you owe on it and your monthly payments are still coming due and you cannot pay them? The answer is foreclosure.
Luckily for Alabamians, our housing market is still strong in most areas. Therefore, most home owners can still sell their homes for at least what they owe on them and escape foreclosure.
Moving out of a home you enjoy and downsizing is not an easy decision, but if it avoids foreclosure and bankruptcy, you will be much better off in the long run.
Do you have questions or comments regarding this topic? Please email me.
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