Foreclosures Essay

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Foreclosures. A foreclosure is a situation in which a homeowner is unable to make an interest or principal payment on the owned mortgage. If this is the case, the lender, often a bank or a building society, can seize and sell the property as stipulated in the terms of the mortgage contract. Bad mortgages, recklessly given out by banks and financial institutions to homeowners that could not afford them, induce defaults on mortgages and foreclosures (1). As triggering factor of the 2008 financial crisis, this type of dangerous behavior has devastating consequences for individual house holders in debt, and for the whole housing market, at large. The American housing market never fully recovered from the losses in property value experienced, starting in 2006(2). Foreclosures numbers in the US, have nearly quadrupled in three years since the fat housing bubble stared deteriorating. According to the Mortgage Bankers Association, at the end of 2006, over a half million residential mortgages were in foreclosure, representing 1.2 percent of all such loans. Just three years later, end of 2009, more than two million residential mortgages were being foreclosed upon, or 4.6 percent of all such loans. The current instable economical situation, combined with an enormous increase in foreclosures available to the public, is holding down all property prices(3). As the problem became more widely spread, New York State has developed the best and most defined laws regarding foreclosures and foreclosure alternatives, with the intent of safeguarding the borrowers. Regulations help borrowers avoiding defaulting. Due to the slow and expensive process of foreclosing, a lot of lenders would rather opt for alternatives, refinancing or short-sales, to get their money back. Setting deadlines and boundaries to the way foreclosures are managed, allow many borrowers to stay in their

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