Why Do Subprime Investors Wind Up in Foreclosure?

David Gaffen at the Wall Street Journal’s MarketBeat blog found some information showing why subprime borrowers lose their homes via foreclosure. The data is from a Countrywide presentation at the Bank of America investing conference, courtesy Peridot Capitalist:

Causes of Foreclosure (July 2007)

58.3% Curtailment of income
13.2% Illness/Medical
8.4% Divorce
6.1% Investment property/Unable to sell
5.5% Low regard for property ownership
3.6% Death
1.4% Payment adjustment
3.5% Other

Now admittedly with a big wave of subprime resets hitting next year, we are bound to see an increase in the amount of foreclosures triggered by payment adjustment. But I have been told by former Countrywide employees that the bank routinely contacted borrowers well before their resets (not the proactive six months, but two or more years in advance) to sell them into more expensive products relative to their current mortgage. So Countrywide’s sample may show a higher level of payment adjustment than other banks.

Regardless, however, look at the causes. Paulson’s plan will do nothing for a fall in income, medical problems, or divorce. Currently, death is more than twice as large a cause as payment adjustment. You’d have to see a more than five-fold increase in payment adjustment as a cause for it to approach the top three in importance.

That in turn says if the Treasury program does lead to a significant number of mortgages being adjusted, many will be free riders.

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  1. Barbara Ann Jackson

    subject: Foreclosure Fraud, Wall Street, FREDDIE MAC, Judicial Corruption, etc.
    Any representation to Wall Street Investors by FREDDIE MAC that FREDDIE’S reported $2 billion losses are due to people defaulting on their mortgages must be weighed against the fact that (in states such as Louisiana), Freddie Mac is paying DEBT COLLECTION firms needless, outrageous litigation costs for corporate lawyers to outmaneuver –and even persecute people when they oppose unlawful foreclosures. In Louisiana, long before Hurricane Katrina, the entrenched real estate and mortgage fraud racketeering scheme has been in operation. But thanks to federal authorities such as U.S. Attorney Jim Letten and U.S. Attorney David Dugas, real estate racketeers in Louisiana have nothing to worry about. Verification of what I have written is posted on my http://www.lawgrace.org website.

    *Also, posted on NEWSBLAZE.COM, see this article: “Mortgage Mess, Foreclosure Fraud and Impediments to Justice:”

    Most critical to the Foreclosure Crisis is FORECLOSURE FRAUD, which enables MORTGAGE LENDERS to ILLEGALLY FLIP properties. In Louisiana, 2 particular mortgage companies which benefit from fraudulent foreclosures are Wells Fargo and FREDDIE MAC! It is HIGHLY COMMON for a DEBT COLLECTOR attorney to file a foreclosure: (i) in the name of a DEFUNCT mortgage company;(ii) in the name of a mortgage company which is NO LONGER holder of the security interest (the promissory note); or (iii) file a foreclosure and AFFIX a “ransom” amount (the collector’s fee) far exceeding what the promissory note “Acceleration Clause” authorizes.

    Despite a property owner’s entitlement to Challenge CONTRARY-TO-LAW loss of his / her home, most property owners LACK consumer and legal knowledge; the Court System is REFRACTORY; and there are limited attorneys with acumen to pursue Consumer Law. Also, when borrowers sue for “Unfair Debt Collection Practices,” damages, the collector gets to make more $$ through prolonged litigation, as co-conspirators enjoy the foreclosure pie.

    Investors need to become more astute about how mortgage servicers’ misdeeds hurts borrowers as well as siphons incalculable amounts of money from what Investors should reap. (See “Limiting Abuse and Opportunism By Mortgage Servicers,” AND “Private Property Rights Deferred: Has Predatory Mortgage Servicing Destroyed The American Dream” by Rawle Andrews, Jr., Esq.,and Leroy Jones, Jr., J.D. Visit: http://www.msfraud.org/index.html.)


    Barbara Ann Jackson
    Law & Grace, Inc.

  2. Info Is

    If you are in foreclosure and do not know what to do just say out loud Jesus I believe and I receive you in my heart please help me I know a really good website its at leroyjenkins.com

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