Foreclosure in Texas
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Process in Texas
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You only have to go back a few years before
you begin to see a change in the numbers of foreclosures in
In 2000 and 2001, Texas had a foreclosure rate
that was much less than the US average. The rates began to
move upward as a percentage of loans began to foreclose. This
corresponded with record low interest rates and very aggressive
In 2003, we found that the foreclosure rates
exceeded that national average. This was due to the home price
increase being slow and the underwriting criteria being liberal
with low interest rates.
In Harris County, there are well over 1,000
residential foreclosures every month. Not all of these homes
go to auction, (we are doing our best :), but most do.
Texas, however, is different than many states.
In states such as California, Nevada and Florida, properties
sell at foreclosure and often times the individual is able
to make a profit and pay off their home loans. These states
are high-appreciating states while Texas does not see this
kind of appreciation.
In Texas, owners are not typically able to sell
the property at a high enough price to even cover the loan.
Many of the homes are also being bought by first-time
homebuyers who are qualifying for low interest rates loans
and are working with aggressive lenders. These people area
able to buy a loan and a house that are beyond their means.
They are then unable to keep up with their mortgage
payments due to the rise in property taxes, insurance and
other costs of owning a home that they are not prepared for.
The higher numbers of foreclosures in Texas
often indicate that the owner have shown that these individuals
are unable to sell their properties and cover their loans
because the prices of homes are not appreciating as quickly
as they do in other states.
The number of first time homebuyers has increased
in Texas. Lenders are offering these individuals a variety
of options so that qualifying for a mortgage loan is easier
through numerous private and government programs.
There are several Alternative-A loans, home
equity lines of credit, and negative amortization loans available.
Buyers are able to acquire homes with lower initial monthly
payments and reduced down payments.
Many new homeowners are quickly discovering
the reality of owning a home as they begin to experience changing
interest rates on their adjustable rate mortgages in addition
to taxes, maintenance, insurance and even homeowner association
fees for some neighborhoods.
It has been found that defaults and delinquencies
lead to foreclosure in the first few years of ownership, typically
less than five years, because new homeowners are not prepared
for the additional costs and the adjustable rate mortgages.
Lenders are finding that they are the ones that
really need to worry about the foreclosure rates in Texas.
They are the individuals responsible for taking on the risks
of clients with bad credit and they are making riskier loans
as they use liberal underwriting practices.
If the lenders continue making their risky
loans that get packaged in with second mortgages, the higher
priced housing market may not bail them out, even after foreclosure.
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