Foreclosures are present at every stage of the market; from in expensive homes to multi million dollar waterfront mansions, and most of the distress properties are in a price range under $500,000. Foreclosures of mortgages on residential real property are destabilizing property values as well as disrupting the financial wellness of families, neighborhoods, communities and municipalities. Foreclosures have accelerated not only due to a downturn in the economy that's affected home sales, but because many homeowners were talked into adjustable-rate mortgages that moved to higher payment levels that they could not afford. Personal bankruptcies and foreclosures are major influences on credit scores, but it is becoming increasingly more common that late payments due to lost jobs or reduces hours are also affecting credit scores. Many individuals took out home loans that they didn't understand and bought homes that they couldn't afford. There has been a current trend of walk-a-ways, those family that abandon their home before the foreclosure process has been completed or decided to live in their home without making their mortgage payments until the banks do finally foreclosure which depending in which state they live can take upward to two years. Homeowners that are facing financial difficulties should approach their mortgage lenders as soon as they expect that they might start to fall behind and see what options are available including a loan modification. Because foreclosures impose extra costs, including legal and administrative as well as the costs of leaving the property vacant for a possibly extended period, both the borrower and the lender often are better off avoiding foreclosure. Beware the rise in foreclosures has created predatory practices because "foreclosure rescue" has become a lucrative business venture for scammers. There is no quick fix and often a homeowner is left with a daunting financial mess with few options. Even mortgage modifications take time and many are never approved. Even worst are those homeowners that get approved to only find that they still end up in default months later as they purchased a home they couldn't afford. In the event there is a foreclosure there can possibly be tax issues as the lender will report the foreclosure to the Internal Revenue Service and you will be issued a 1099 A, 1099 S or both. Depending on the tax rules in place at the time of the foreclosure the taxpayer could owe taxes on part of the unpaid balance of the mortgage. Congress passed a bill back in 2007 to exempt taxpayers from having to pay taxes on the personal residence defaults up to and including 2010. Check with your tax adviser to see if there has been additional relief to this tax rule.
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