San Diego foreclosuresIf you are a real estate investor or a home owner, you know that foreclosures are a popular topic in today’s housing market. The down economy has produced the kind of climate ripe for home foreclosures and bank repossession. Whether you’re chasing distressed properties or trying to avoid getting trapped in one, it’s a good idea to understand the economics of why these things happen. A little bit of knowledge can go a long way in the real estate market. Consider these three top reasons for property foreclosure and gain a more well-rounded understanding of the housing market and the structural forces that influence its daily movement.

Bad loans

If you are a homeowner or simply a living, breathing human being then you’ve heard a lot about subprime mortgage lending practices in the last few years. Widely credited with bringing about the great recession, irresponsible mortgage lending practices are rampant in our economy. Before the crash of 2008, potential buyers with bad or no credit were able to get a government backed mortgage loan with unfavorable terms. Lenders compensated for this credit risk by adjusting rates and placing homeowners in lousy economic standing.

Personal debt

Sometimes foreclosure is not the fault of the homeowner, but rather the result of unforeseen circumstances. Many foreclosures occur because homeowners incur some other kind of debt in their lives that they are unable to handle. The weight of this new source of debt is too much to bear and the mortgage payments begin to lapse. It’s a common story. Medical treatment is the most common source of unforeseen personal debt.

Hyper-investment

Many real estate investors get over zealous with their credit lines. All it takes sometimes is one bad bet to send an entire real estate portfolio spiraling into foreclosure. After bad loans and personal debt, overleveraged real estate investments are the largest source of home foreclosures.

This is filed under Foreclosures.


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