Lisa Simpson
Feb 21,2010
In: Foreclosures

Rising Unemployment is the Primary Reason Behind Foreclosures

Rising unemployment is the primary reason behind foreclosures.

Foreclosures are at an all-time high in the US. The Federal Government had come up with a program to stall foreclosures. As part of this program, the loans of homeowners are being modified, first on a temporary basis, and then permanently after a period of three months.

Yet foreclosures have not been stalled, not because borrowers have taken sub prime mortgages but because of rising unemployment. This is a trend that is happening across the nation.

In Kendall and Kane counties, the unemployment level is 11 per cent. However, the federal programs have had a good impact – they have allowed people to resort to loan modification.

The Executive Director of Consumer Credit Counseling of Aurora, says, "In late 2007, it was tough to get lenders to modify. However, with the launch of the program, "we’ve found that most lenders are open to working with us."
Many people have been saved from foreclosures. Take for instance, Ana of Aurora. She said that she did not know that the loan which she taken in 2005 was a risky one. She realized that it was risky when her monthly mortgage payment suddenly increased to $2,200 from $1,200. She, however, did not give up and her brother also assisted her. However, things changed for the worse when her brother lost her job in ’08. Ana contacted the lender. She wanted to revise the monthly mortgage payment.

"I was waiting and waiting. I even called (the company) and they told me they were taking care of everything," she said. Then she heard about Making Home Affordable program from someone. Now she is paying $1,700.

"I worried every day that I’d come home to see my stuff outside and my kids out, too," she said. "Somebody serious helped me finally."
However, this program is not for all. The vice president of Woodstock Institute, Geoff Smith says, "It’s not that the program hasn’t done anything, but it hasn’t been as big of an impact that folks would’ve hoped." This is not for those homeowners whose homes are under water – meaning they owe more on their homes than what they are worth. Also people who do not have any income will not be eligible.

Smith says that the situation should change from April onwards. Arrangements will be made for those whose homes have a negative equity. The government will arrange for short sale of their properties.