For 2013, one in 487 Maryland homeowners faced foreclosure proceedings according to Zillow.com. The state is experiencing a sustained high rate of foreclosure partly due to the the fact that it is considered a judicial state. This means that the lenders have to take homeowners to court in order to foreclose on a property. As the foreclosure issues surrounding faulty affidavits and other paperwork came to light, lenders in Maryland slowed or held back filing foreclosures while they ensured they straightened out the foreclosure process. This has meant that Maryland homeowners were probably spared foreclosure even though they were in default.
This delay in conducting foreclosures has dovetailed to the first wave of interest rate increases in HAMP modified loans. As you may know, HAMP modifications often consist of a interest rate reduction with with interest rates set to rise several years down the road.
Well, that time is upon us. How will homeowners who received these modifications do? Are they going to be able to afford their homes once the interest rates go back to where they were before? Washington Postsuggests that some payments may increase by as much as $1,000.00 per month! It is hard to imagine homeowners will afford such huge monthly increases considering that the economy is just humming along and the job market has not fully recovered. Keep in mind that approximately 30% of those who received relief have defaulted again as reported in the Post.
What are the options? Will they need another round of modifications in order to afford the loans? If so, are the lenders willing to go along? Do the politicians have the political will to step in again?
I submit that there will be immense pressure on lenders and the government to stop a wave of defaults for several reasons. One, the impact on the recovering housing market could be devastating. As you know, the housing market has been on a steady come back. But a wave of foreclosures could lead to a reduction of home prices.
Secondly, a weakened housing market will most likely negative impact the broader economy. If housing values begin to depreciate then you can expect consumers to be more tight-fisted with their dollars and considering our economy is 70% by consumer spending then the weak recovery could stall or reverse all together.
We are in new territory here. It was a grand experiment that could prove to be a sage move for the president or unravel with disastrous results. Essentially, it may have prolonged the inevitable. It is too early to tell. For all us, I hope the experiment works out.
Always consult a knowledgeable bankruptcy lawyer before taking action.
Joe Githuku
410-849-9529
Baltimore Bankruptcy Lawyer
Maryland Bankruptcy Lawyer
Disclaimer: This article is provided for informational purposes only and should not be construed in any way as legal advice. This article does not create an attorney-client relationship.
