Hold on! It’s not what you think! While it may carry the same stigma and shock as it’s four letter cousin,
the F word I am referring to is Foreclosure.
For as long as there have been home loans, there has been the risk of foreclosure. Somewhere along the way most of America made the shift from an “austere nation of savers” to a “live today and not worry about tomorrow” society. This shift created a consumer base that was all too happy to accept loans that probably weren’t within their spending limit. Don’t get me wrong there was no shortage of foul play on the other side of the table, and we all know that it is easier to be talked into something that you want than something you don’t.
But I digress; the reason for this article is not to analyze the impetus behind consumers but rather to discuss the situation that these consumers are finding themselves in currently: Foreclosure.
Sadly, I have talked to many homeowners who are so discouraged by their current situation that they are ready to walk away and let their home foreclose. I understand that they have been shut down time and time again with their attempts to modify (or even worse have been strung along by the bank’s never ending requests for bank statements and paystubs, only to get further behind on their payments), but I think there is a certain degree of ignorance when it comes to foreclosure, and its ramifications!
Here are the top six repercussions of foreclosure:
- Public humiliation. Everyone in your neighborhood will know that your home has been foreclosed on (think about your kids and how they may be affected by this before saying that you don’t care).
- Inability to purchase, let alone rent. Fannie Mae is currently requesting five years of responsible credit reporting prior to lending to a victim of foreclosure; but the worst part is how it will affect your housing in the near future. Many people are finding it hard to rent an apartment after a foreclosure as landlords are simply not willing to accept the risk that they may be defaulted on as well!
- Credit card interest spikes, or account closures. Companies that extend credit to customers frequently analyze the risk involved of doing so. A result of them finding a foreclosure on your credit could be them adjusting your interest rates up to 30% for the next couple of years, and in extreme situations cancelling your cards.
- Inability to find a new job and/or being let go from your current job. Many jobs such as ones involving banking and cash require credit checks. Finding a foreclosure on your credit represents financial irresponsibility, and is a major obstacle to obtaining these types of jobs. Furthermore many government jobs do not tolerate poor credit, as it makes employees more vulnerable to engaging in unsavory activities (i.e. taking bribes etc.).
- Tax ramifications and deficiency. Many of the safety nets that are put in place to help homeowners, who are acting in good faith and trying to be responsible, through programs such as short sales and underwater refinances (HARP), are not afforded to homeowners who walk away from their property.
- Emotional toll of being evicted. Somehow there seems to be a rumor spreading that you can just stay in your property indefinitely after foreclosure. Unfortunately I have to be the bearer of bad news: this is not true at all. Once the property is foreclosed on the new owner will show up with a three day notice to pay or quit. After that he will change the locks. After that the sheriff will walk you out, you won’t even get a chance to change out of your pajamas, and your belonging will be impounded in a storage unit. (which may or may not end up on “storage wars” or a similar tv show!).
Believe me when I say that the list goes on, and that foreclosure is to be avoided at all cost! On a more macro (and meta-world-peace) level, by allowing your property to be foreclosed on you are just furthering the downward spiral of the housing market; and slowing recovery.
There have never been more options available for distressed homeowners, and while it may be easiest to walk away, you will be haunted by that decision for years to come.
JohnHart specializes in foreclosure prevention and would love nothing more than to have the opportunity to discuss your options with you. Take a look at some of our success cases by clicking here, and keep in mind that in all of these cases the homeowners owed more on their property than it was worth.
They made the intelligent decision and avoided foreclosure; give us a call at 818.246.1099 to find out how we can help you do the same!