A recent Associated Press article suggests that home foreclosures are expected to outpace the torrid pace of 2010. Unless you are looking for extra supply of homes, this is likely not good for most Americans. Quite simply these foreclosures will likely mean an increase of homes on the market. This increase in supply, with the general recessionary economy, signifies a continue decrease in home prices will follow. Again, good for those in the market, but not so good for everyone else.
One reason some individuals are seeing their house foreclosed upon is that it simply makes no sense to keep the house. For example, if you bought a house in Gilroy in 2006 for $800,000 and the house now has a market value of $400,000 it may seem like a poor decision to keep making payments that will never be applied to any true principal. In many situations homeowners, after trying to make their home payments, are simply giving up.
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The good news is that prices appear to be stabilizing. (See Graph )
One potential solution may be through bankruptcy. Through Chapter 13, a homeowner has the potential to strip a second mortgage off the house. There are some limitations to a Chapter 13 plan, and to "lienstripping," but it may be an alternative to simply letting a special piece of property go. The key to lienstripping a primary residence is that the second mortgage must be completely outside of the home value. For example, a property may qualify if the home value is $500,000 and the first is $550,000 and the second is $250,000. However, if the home value in that same situation were $600,000, the second could not be removed.
Talk to a bankruptcy attorney if you are considering keeping your home and your mortgage payments are simply not bearable.
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