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How We Got Here – Snapshot of the Housing Collapse

Why so many foreclosures? A snapshot of the housing crisis

At the current rate, more than 7 million homes will fall into foreclosure this year and next. Because lenders have refused to deliver on promises of widespread mortgage modifications, a bankruptcy repayment plan remains the only certain way of stopping foreclosure and saving these family homes.

1995 – 2001: Home prices increase dramatically. Lenders relax lending standards and issue millions of mortgages based on the unrealistic expectation that home values can only go up.

2002 – 2005: Relaxed lending standards encourage homeowners to "use their homes as piggy banks" – and they borrow against the home’s increasing value to travel, buy cars and even consumer goods. As a result, Americans are now carrying historic levels of debt secured by home values.

2006 – 2008: Home values plummet nationwide – in some places by more than 50%. Overnight, millions of homeowners are left "upside-down" on their mortgages – owing more to the bank than the home is worth.

2008 – 2009: With the economy and home prices in freefall, the market for homes dries up. So cash-strapped homeowners can’t sell the house to pay off the mortgage. Nor can they borrow money on the home’s equity, because that equity has been destroyed by plunging home values.

2009: Fearing the effect of large-scale consumer and home loan defaults, cash-hungry banks tighten credit – slashing spending limits, raising interest rates and instituting scores of punishing fees and penalties.

With credit unavailable, consumers stop spending and businesses are devastated. Millions lose jobs or have hours reduced. Unemployment reaches more than 10%.

Reduced income and credit make it impossible for many to continue making mortgage payments. Mass foreclosures follow.

March 2009: Following a massive taxpayer-financed bailout of major mortgage lenders, the government allocates an additional $75 billion to pay lenders to modify mortgages for struggling homeowners. The program envisioned lender assistance to more than 5 million homeowners, but lenders actually offer assistance to a tiny fraction of that number. In most cases, modifications offered aren’t nearly large enough – and none address the underlying issue of homeowners owing more than the home is worth. Most experts agree that the housing market will not turn around until mortgage balances are adjusted to reflect the realities of the market.

Call DebtStoppers today at 312-913-0630 or fill out our free personal debt analysis form and find out for free if a DebtStoppers plan is a better plan for you.