NEW YORK (4/6/09)--A report released last week confirmed bad news for homeowners: Prices in the worst-hit metropolitan areas have plummeted nearly by half, and the worst may not be over (The New York Times
April 1). The Standard & Poor’s Case-Shiller Home Price Index, considered an authoritative monthly gauge of big-city home prices, focuses on 20 metropolitan cities. The January report released March 31 cites Phoenix home prices down 48.5% from its June 2006 peak. Home prices in Las Vegas, Miami, San Francisco and San Diego have dropped more than 40%. Dallas received the best rating of the cities in the index with a decline of “only” 10.8% from its peak. Nationwide, average home prices were down a record 19% and appear to continue on a downward spiral (DallasNews.com
April 1). Real estate professionals urge caution because not all housing markets are severely depressed; some indices may be tilted by an overabundance of foreclosed homes in any one area. When the value of your home declines, typically your equity declines, too. Many families who tapped a home equity line of credit are now upside-down in their mortgages--they owe more than the home is worth. Add to the equation some adjustable-rate mortgages that came due when rates were higher, as well as the depressed economy, and consumers may be facing a record number of foreclosures (RealtyTrac
2009). If you’re facing or worried about the possibility of foreclosure, take immediate action (University of Florida IFAS Extension, March 4):
* Get organized. Create a statement of income and expenses, as well as a list of all obligations you owe. * Seek local help. Your credit union, Housing and Urban Development-approved counselors, or local Cooperative Extension service may offer help developing budgets, action plans, or financial statements. * Contact your lender. Show paperwork detailing a picture of your current financial situation. Discuss options before the situation worsens.
Your lender may offer any number of options to avoid foreclosure:
* Grace period. This option allows you to get caught up on your payments over a certain period of time. * Contract renegotiation. You may be able to change the monthly payment amount or payment schedule. * Payment foregiveness. Your missed payments from the past are forgiven, but you’re expected to make all future payments on time. * Mortgage modification. Your past-due payments are added to your unpaid loan balance, which extends the time it takes to pay off the loan amount, as well as total interest payments. * Special forbearance. The lender may agree to reduce or suspend your regular monthly mortgage payment. Or, you may be required to increase your payments for a period of time to get caught up on past due payments. * Sell your home on your own. * Short sale. The lender may agree to let you sell your home for less than your mortgage balance, but you’ll be required to pay back the difference between what you owe on the original debt and the short-sale proceeds. This option may be better than foreclosure, but remember that you’ll owe income taxes on any amount your lender forgives.
If you abandon your home, you may not qualify for assistance, so talk through all options with your lender or a qualified counselor. Visit hud.gov/foreclosure
for the U.S. Department of Housing and Urban Development’s “Guide to Avoiding Foreclosure.” For more information, read “Touch Times Series: What to Do When Your ARM Is Due” in Home & Family Finance Resource Center