Why this month seems to have the highest foreclosure in California?
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Answer:
A couple of years ago thousands and thousands of people were buying and refinancing homes. Many of them signed up for interest only loans. There payments were very low as they were not paying a dime toward the actual cost of the property. Some were even reverse amortized allowing the loan principal to grow. Now it's payback time, the loans are beginning to convert and the owners are having to pick up principal payments as well as the interest, tax and insurance. All of these people have seen their house payment rise sharply. Many have seen increases approaching $1000, some well in excess of that and one man I heard about had an increase of almost $3300. Most people just can't meet the payments. Add to the payment increase the fact that home values have dropped several percent from the price many paid and they find themselves owing more on the home than they can sell it for. When these factors come together foreclosure may be the only realistic way out.
Many people saw this coming, including me. I warned several people I knew about what was coming if they went "interest only" but most ignored me and others with the same message. Now several of them are in foreclosure.
BTW, you haven't seen the end of the trend yet. Some of those loans went out farther than 1 or 2 years. I haven't heard of any specific ones beyond 4 years but I wouldn't doubt they exist...
I din't know that this was happening but my guess would be because the price of housing is so inflated that people just couldn't afford the unbelievably high mortgages that they were having to pay.
Real estate investors got carried away with the market the last 2 years and over paid and over borrowed and now can't afford to carry the properties. Very typical of a market that is cooling. There are always those who over extended. But it provides opportunity for those who were patient...
Regards,
Joe Ballarino
http://www.AmerivestRealty.com
This is happening not only in California but all over the country. The worse is still to come. If you visit this site often, you will see a large number of people still seeking to get rich quick by do the zero money down, foreclosure properties etc. Basically you have a bunch of armatures who got caught in a frenzy and get into the speculation game in real estate. Those real estate seminars do not help either. Most of them are scams. Every one is a hero when the market goes up and up and then the balloon burst and that is what you are seeing. Real estate is a long term investment. Flipping is speculation and extremely risky.
Because their were a lot of idiots who were spending way above their means on credit and got home equity loans to pay off credit cards back when the rates were "good" and now they are paying the price for living above what they could afford. Buy now-pay later? BAD DEAL!
This is happening all over the country.
Brokers and banks talked people into buying houses that they couldn't afford, using interest-only and ARM loans. Now that they have to pay the full price, they can't afford it.
I had a broker tell me that I could afford the $750,000 apartment on my block. They way it looked on paper, I could. In reality, I would be out on the street.
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