The Mortgage and Repossessed Homes

Repossessed or foreclosed homes are posing a great threat to the socio-economic structure of many communities in the US. This happens when a home owner is no longer able to pay the underlying loan on their mortgage and the bank is compelled to repossess the property in order to recover the debt owed to them in terms of the loan.

Banks which have unwisely granted mortgages under bad lending practices are over-burdened with many thousands of these and recent figure indicate that regardless of government intervention 1 in 84 US homes have foreclosure filings. This does not mean to say that all these foreclosures will take place, many may be stopped, but it has reached epidemic proportions.

Banks and lenders to not have the capability to deal with so many defaulted mortgages, and the property they have had to repossess is also threatening the security of banks. They are non-performing assets and the bank is in the business of dealing with performing assets such as loans, not dead weight real estate. Real estate prices are being brought down to disastrous levels and home owners are finding themselves owing more on their mortgage than the property is worth, as well as losing equity.

The real estate market is being flooded with undervalued foreclosures and although this is good for buyers, there are too many of these available at very low prices to stimulate the economy sufficiently. Real estate sales have picked up but it is still too early to tell if this foreclosure market is bottoming out or not. However experts have said they don’t believe this demand for housing, cure the problem for a couple of years yet.

One of the most important factors a prospective home buyer has to take into consideration when applying for a mortgage, it that is should be affordable, no matter what economic changes take place. Many property owners don’t think about home ownership as an equity building tool and this is how it should be looked at, as an investment. If it is unaffordable or might be any time in the future, then they have defeated the object of growing equity and long lasting wealth. It is not about having a house that is bigger and better than the Jones’, it is about having one you will be able to afford no matter what the circumstances.