Steps of Foreclosure

The Simple Truth About California Foreclosures

Lately there has been a huge upswing in the amount of California foreclosures being reported. One of the things that stand out the most in the mortgage industry is the California foreclosures.

The main problem is that most of the loans that have been issued for homes in California are simply not able to be paid by the people living there. Factor in adjustable rate mortgages whose rates increase over time and you have a recipe for disaster.

With the average home price in Southern California exceeding a quarter million dollars there is no way that working class citizens can keep up with their payments once the interest rate has started to adjust upward. If you do the math you can easily see why California foreclosures are on the rise.

Banks have lost sight of being responsible and by doing so have allowed the prices in California to be thrown completely out of whack for the homes actual value. In simple terms what this means is that the homes across California have become overvalued and the people living in them can’t afford them.

Most of the people that are in trouble with their mortgages are not living in humongous mansions, but rather small single story homes that they were forced to buy at inflated and overvalued prices. Now, with the interest rate adjustments it is impossible for them to keep up on their payments with a working person’s salary, so they are left with no other choice.

Another interesting effect of California foreclosures is that as each house goes into foreclosure it devalues the other homes in the neighborhood which in turn causes the entire market to spiral farther down. Eventually it will have to hit bottom and stabilize but that could be some time away as banks try to make adjustments to lending policies and current loans to help keep their customers from foreclosing on the homes.

The increase in California foreclosures was easily predictable if you looked at the market from an objective perspective. There were many factors that came into play but the most important one is the fact that banks did not loan out their money responsibly and allowed the prices in the market to spiral out of hand in an attempt to increase profits and margins. Hopefully the banks have learned from this alarming situation and the market will stabilize and settle down.