Nearly 11.5% of Indiana homes with mortgages are either behind or in foreclosure. That strikes me as an enormous number.
A drop in income — whether through a lost job, divorce, death of a spouse or health problems — is the No. 1 reason people fall behind on their mortgages and lose their homes.
The association’s latest national delinquency survey, released Friday, shows damage from the housing crisis worsening as the source of trouble in the market has shifted from subprime loans made to borrowers with poor credit to homeowners who had solid credit but took out loans with ballooning monthly payments.
A buddy of mine in Arizona who works in the real estate industry tells me that the banks he works with tend to be penny-wise, pound foolish in these situations. They refuse to compromise much, if at all, on their loans and so they end up losing out entirely on the notes — at least to the extent of the difference between the value of the home in a foreclosure sale and the value of the note.
My own experience in the collection industry is that the individuals working the account tend to have every incentive, in terms of their own jobs, to refuse to compromise a bill and very little incentive to take a big picture approach and maximize the amount of return on the account by compromising. If an account goes under because of a bankruptcy, the person working the account has a nice, clean reason to close it without having to explain to his or her manager. If, on the other hand, the account manager takes 60% and closes the account, he or she has to defend the judgment call, and probably going to get negative reviews if he or she has a lot of these sorts of compromises in his or her portfolio.
I don’t really know how wide spread these sorts of incentives are and whether it’s the same in the mortgage industry, but I wouldn’t be surprised if it was pervasive.
The national number (behind on payments or actually in foreclosure) is above 9% also.
And it looks like all your freddie and fannie are belong to us now, too. Us being the taxpayers. Details pending, of course.
Probably we’ll just get their liabilities. Their assets will probably go to someone more deserving.
Glad I work for a credit union right now, rather than a bank. Seems like credit unions have been far more conservative when it comes to their lending practices. While we’re not immune to the number of defaults, we’re not nearly in the same brand of trouble as many of the banks.