In what may be good news for West Virginia families, a recent survey from Lending Processing Services found that across the nation, the number of Americans involved in the foreclosure process has fallen by almost 25% since April 2012. Likewise, delinquency rates have fallen below 6.5% for the first time since 2008.
The reason is credited to a rise in home prices and home sales as the financial crisis recedes into memory. At the same time, the decrease in foreclosures is linked to “record low” mortgage rates and government programs designed to help American families refinance their mortgages. Americans found that they could afford to make monthly payments if the amounts were several hundred dollars lower.
In addition to the Lending Processing Services survey, the National Association of Realtors reported that distressed homes — homes lost to foreclosure or in a short sale to avoid foreclosure — had declined from 28% of sales in April 2012, to 21% in March 2013, then finally to 18% in April 2013.
At the same time, all may not be as rosy as these surveys suggest. Economists claim that with fewer foreclosures, fewer houses are on the market, driving up home prices across the nation and preventing a more solid recovery. While buyer interest has gone up 31%, home sales have only risen 10% in that time. Several believe that the only way to put a damper on price growth is to increase the amount of home construction.
Regardless of what the drop in foreclosure rates means for the nation as a whole, it is undoubtedly good news for families in West Virginia and elsewhere that they don’t have to give up their homes. An all-too-common feature of the financial crisis was that many were tricked into purchasing homes based on mortgages that they could never afford. While the mortgage companies were then able to package the mortgages and sell them to third-party investors, many families soon defaulted on their mortgages and wound up owing far more on their loan and interest than the house was worth. These families then either lost their homes to foreclosure or filed for bankruptcy to avoid losing their homes.
When a family hires a West Virginia bankruptcy attorney and files for bankruptcy, an automatic stay goes into effect, which acts as an injunction against any further attempts to collect on debt. So a mortgage company that attempts to foreclose upon a home would be barred from doing so. A family that wants to keep the home usually files a Chapter 13 bankruptcy, which allows them to keep their home, and other valuable items such as a car, as long as they can make their plan payments. Plan payments involve filing a payment plan that lasts three to five years, which must be certified by the court before it can move forward. The plan payments are more manageable than the previous loan payments in that they are based on the homeowner’s income, what he or she can afford to pay. If the homeowner cannot afford to make the payments, the bankruptcy may then be converted to a Chapter 7, which could help the homeowner get out of debt, but would make the home vulnerable to foreclosure once more. Although it is good to have the option of bankruptcy, it is even better to be able to avoid bankruptcy altogether, which is why the foreclosure news is so promising.