Foreclosure Crisis In Madison County

Posted in Foreclosure, July 6th, 2007 |

Predating realtors cashed in on the ordinary man’s hunger for his own roof above his head. More and more business concerns rushed into the sub-prime loan market creating confusion. They tempted borrowers with dreams of impossible homes. Little did the new house owners realize that soon they would have to choose between bread or bricks to stay afloat.

In 2006 the Civil Department of the county sold 1,082 units through sheriff-sales. This year too it will be the same. When borrowers default in payments for more than three months the process of a sheriff-sale kicks off. The legal arm of the bank goes into the foreclosure process. There is a hearing in which the bank is given a hearing. The judgment is recorded in the clerk’s office and the bank’s attorney signs the formal paper (praecipe) asking the court to issue foreclosure notice. The house is then up for sheriff-sale wherein anybody can verbally bid for the house. The bank makes the first noise. Anyone outbidding the latter wins the day. A guaranteed cheque has to be submitted there and then.

The Madison County sheriff-sale went up from 46 in 1995 to double the figure in 1998. It shot up to 957 in 2005.

Bankruptcy lawyers opine that mortgage foreclosures have led to some bankruptcies being filed but the number is nothing to sing about. This is because of laws passed in 2005 are penalizing bankruptcy in a more strident tone than before.

Combinations of factors lead to this default. Individuals may get sucked into adverse situation affecting their income. Rising interest rates and unemployment makes the situation impossible. The jump in interest sometimes occurs every six months rising to over 11% or 12%. The conventional mortgage rate, remains comfortable at 6% to 7%.

The problem is not confined to Madison County alone – it is striking at every corner of the country. CNNMoney.com has listed top 500 casualties. Ohio tops the list followed by Michigan, Illinois and Indiana. There was an article in The Wall Street Journal about sub-prime lending. It noted that nearly 13% of sub-prime loans are under foreclosure. Tens of thousands of homeowners are under its cloud. The Centre for Responsible Learning has predicted that 20% of sub-prime borrowers who had availed of the scheme during the past two years would face foreclosure. 2.2 million people would be dispossessed in the process.

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