Home Foreclosure up 34% From 2005

The story of Mary N. is common; she bought a dream house that was a little out of her pay scale, but worth the pinch. She then became ill, and had to quit her job. An auctioneer has showed up for the last two months trying to sell her house for the liens she cannot pay off. Her home state of Massachusetts has a foreclosure rate that is up 34% from last year. Some of this statistic has to do with the trend of the past five years of interest-only and no down payment loans, a danger in this type of mortgage market.

In November 2005 alone, Massachusetts had more than 10,500 foreclosure filings. Sub-prime loans, or loans to high risk borrowers for a small down payment, but higher rates, are now creeping up and losing money – for the homeowner and the banks. In the past five years, property in Massachusetts has appreciated by 67%, one of the highest in the country. Even still, rising value means more equity, which equals a down payment on a larger house, or refinancing at higher rates for home improvements. When borrowing against equity, or not understanding the terms of an interest-only loan, the results can be foreclosure.

Massachusetts may look like a high rate state for foreclosures, but 34% is fast becoming normal. In states where the median property increase was less, foreclosures on sub-prime loans rose. This includes Ohio, Oklahoma and Indiana, states that have a much lower median property value than Massachusetts. On regular mortgages the highest foreclosure statistics were in Georgia, Colorado and Ohio.