TIPPING POINTS
Tipping points that put homeowners over the edge:
• 32% experience a job loss • 25% experience a health crisis • 85% have already missed one mortgage payment • 50% have already missed two payments • Most have no savings, no available credit, and their extended families have limited resources. • Most have first-time loans, and most loans are less than three years old. • They may have already refinanced two or three times. Notice in the statistics above that most of the homeowners who risk going “over the edge” have had their first-time mortgages for less than three years. According to a Freddie Mac/Roper poll of more than 2,000 U.S. homeowners, 60% of respondents wished they understood the terms and details of their mortgage better. The “legalese” of a mortgage contract can be intimidating, especially for those who are new to homeownership. There are different reasons that could cause someone to default on their home loan. The number-one reason for foreclosure differs by state and region. Few choose to go into foreclosure voluntarily. It’s often an unpredictable result of a host of reasons. Let’s take a look at some of the current economic theories for the distressed housing market. As we discussed earlier in this book, when the economy collapsed some years ago, foreclosure became a fact of life for millions of Americans. About 250,000 new families enter into foreclosure every three months, according to the Federal Deposit Insurance Corporation (FDIC). The Great Recession showed us how bad 18
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