Causes of Foreclosure – Part 2

Save Your HomeForeclosure is a big problem in the United States, with millions of foreclosure filings listed each year.  The following list contains common reasons why properties are foreclosed:

  • Divorce.  What was a manageable monthly house payment with two incomes may not be manageable on one payment.  After divorce, the person left with the mortgage obligation may find they cannot afford to maintain the property.  If they are able to sell the property quickly then foreclosure may be avoided, but in this housing market that is not always possible.  Divorce is a common reason properties are foreclosed.
  • Homeowner is relocated for a job.  If your employer was to tell you that you are moving across the country for your job in one month, could you sell your home in that amount of time?  If not, you have the option of making two house payments a month or defaulting on your mortgage payment here.  Most of us don’t have enough disposable income to make a second house payment each month, so that may not be an option.  If the homeowner can’t sell the property quickly then a default is likely in their future, which means a foreclosure as well.
  • Unexpected expenses.  I’ve said it before on this blog and I’ll say it again, house payments should be a top priority amongst monthly expenses, whenever possible.  I get upset when I hear that a client didn’t pay their house payment because they had to pay their credit cards.  That is never the best option.  However, I do understand that a debtor might prioritize repair of their vehicle before a house payment.  If they don’t have a working vehicle then they may not be able to get to work.  If they can’t get to work then they can’t earn money, so I understand prioritizing that type of expense.  I’ve had clients who have had transmissions go out on their cars or engines that needed to be replaced, and the cost of repairing the breakdown was in the thousands of dollars.  That type of expense can create real problems for a budget.