Loss of Income Cited as Leading Cause of Foreclosure

December 11, 2009 No Comments »

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Job loss or reduced income has been cited as the number one reason why homeowners are facing foreclosure, according to a new report from NeighborWorks.

The organization, which administers the National Foreclosure Mitigation Counseling (NFMC) Program, said 54 percent of homeowners who received counseling via the program reported reduced or loss income as the primary driver of foreclosure.

“For the last year this nation has witnessed the highest unemployment rate and the largest number of job losses in over a generation,” said Ken Wade, CEO of NeighborWorks America, in a release.

“Our report proves what many already believed to be true – no longer are mortgage payment increases, or even health issues or divorce, cited as the top reason homeowners are facing foreclosure.”

Loss of income was cited as the top reason for foreclosure by 41 percent of homeowners in the October 2008 report, 45 percent in the February 2009 report, and 49 percent in the June 2009 report.

“With the unemployment rate steadily increasing over the last year, it’s no surprise that reduced or loss of income is now the primary reason countless homeowners are facing foreclosure.”

To date, more than 75,000 families have received foreclosure counseling via the NFMC program, with those that did 60 percent more likely to avoid foreclosure than homeowners who didn’t receive assistance.

The report also found that 56 percent of NFMC clients had fixed-rate mortgages, with 43 percent holding fixed mortgage rates under eight percent.

House Financial Services Committee chairman Barney Frank is reportedly working on a bill that would use interest collected from TARP to fund a program for unemployed homeowners unable to pay their mortgages.

Home price depreciation has also been cited as the leading cause of foreclosure, with more and more underwater borrowers now electing to simply walk away.

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