Fortunately for the housing market, experts think that a widespread foreclosure catastrophe like the one in 2008 is quite unlikely. The chief economist of First American, Mark Fleming, has this to say:
There won’t likely be a rise in foreclosures since lending criteria in this housing cycle have been significantly stricter and homeowners have historically high amounts of home equity.
The MBA’s statistics provide useful context for this discussion. There has been a dramatic decline in the percentage of homeowners who are at danger over time, as seen in the graph below.
It’s true that the number of people at danger of losing their homes to foreclosure is minimal, but a small fraction of homeowners still could be in that position right now. Being aware of what you can do to solve your own problems is important. Understanding the foreclosure process is the first step. According to Investopedia, it means:
When a borrower fails to make a certain amount of regular monthly payments, a default is often declared. To recoup losses on a defaulted debt, lenders can resort to foreclosure, which is the legal process of seizing and selling the mortgaged property.
The good news is that you may find alternatives to foreclosure to help you keep your home.
- Refinancing of Debt
- Short sale
- Reduction in price
However, before taking any of these measures, you should consider whether or not you have sufficient equity in your property to sell it and safeguard your investment.
It’s possible that you’ll sell your home with the money you’ve built up in equity.
Equity is the difference between the amount still owed on a mortgage and the current market worth of a house, taking into account things like price appreciation.
The recent uptick in property prices has left many Americans with a lot more equity in their homes than they would think. CoreLogic claims that
Average borrower equity is now above $300,000, a record high for this data set.
Is there any significance to this for you? It’s likely that the value of your property and your equity have increased significantly if you’ve been living there for a few years or longer. Also, the principal on your mortgage has been reduced thanks to your regular payments. You may be able to benefit from a rise in your home’s worth beyond the amount you still owe on your mortgage loan.
Market intelligence executive of ATTOM Data Rick Sharga highlights the benefits of equity:
Very few properties that have gone through foreclosure have been returned to the lender. We interpret this as a possible sign that homeowners are taking use of their equity to sell their homes before they are foreclosed upon.
Consult Professionals in Order to Determine Next Steps
Consult a real estate agent in your area to determine your equity. They will be able to offer you a ballpark figure for the potential selling price of your property by analyzing recent comparable transactions in your region. To prevent foreclosure, you might try selling your home.
Your agent can also advise you on what to do if it becomes clear that your first plan won’t work. In the event that selling isn’t your best option, they can put you in touch with housing counselors and other relevant specialists who can assess your situation and recommend next measures.
If you are a homeowner who is experiencing financial difficulties, you may want to seek the advice of a real estate agent to determine whether or not you can sell your property and so prevent foreclosure.