Mortgage lenders are being faced with an increasing amount of home owners who are simply giving into foreclosure instead of working out ways to repay their debt. The most common problem is the fact that many of the homeowners owe more than their homes are actually worth and they have no incentive to try to bail themselves out of debt. Many have overextended themselves with holiday loans and spent the money they received less than wisely, leaving them with no other alternative than foreclosure.
“I can’t get you to pay if you’ve got no skin in the game,” says Lauria, senior vice president of Popular Mortgage Servicing in Cherry Hill, N.J.. He reported that 14% of his customers who have subprime loans are currently in default and at risk for foreclosure.
Some homes have lost more than 30% in their initial value and consumers just don’t see the point in trying to keep up. They’ve spend the money for their holiday loans, they used their equity loans badly and now they just don’t care. “They say, ‘If I play my cards right, I can live here free for 12 months, maybe longer before the lender can foreclose,’” Lauria says. “Our challenge isn’t contacting the borrower. I can talk to them, but they stick their tongue out at me.”
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