Real Estate Blog

What Happens if You Don't Pay the Mortgage?

2009-12-27T11:23:00.000-08:00

We all talk about what ifs. One big "what if" that many homeowners have today has to do with mortgages.

About one-third of South Florida mortgages are underwater, meaning the homeowners owe more than the home is worth at today's depressed prices, according to First American Core Logic. Some homeowners are certainly wondering why they're sending in the payment on, say, a $300,000 mortgage, when the house today would sell for only $210,000.

Your options: Keep paying or try to change your loan's terms.

But some people wonder, what if I just stop paying the mortgage? It may be a tempting idea, but it quickly leads to trouble.

Here's what could happen if you don't pay the mortgage.

Report to the credit bureau

If your payment does not arrive, your lender or servicer will report this late payment to the credit bureau by the first day of the next month. This can happen in as little as two weeks from due date and put a negative mark on your credit report. Your credit score drops.

The late payment report whacks your credit rating. Your credit score starts to drop, by up to 200 points, if this is your only late or missed payment.

Cards are closed, rates rise

In the next 30 days, you can expect your other creditors to take note of the late payment and to take action. They can raise your interest rates, shut off your credit card entirely, or lower your credit limit. You also could face other changes in your financial life, because auto insurance, student loans and other forms of credit are pegged to your credit score.

Tightening of credit lowers your score

Credit scores feed on themselves. If your credit card limits are lowered and you are carrying a balance, you are then using more of your available credit, something known as your utilization rate. When that goes up, it lowers your score some more.

The negative mark stays on your credit report for seven years. But the impact on your credit score lessens over time. The biggest impact is for the first two years.

Lender response

The phone will start ringing. Your lender will try to contact you, try to persuade you to go into a loan modification of some kind.

But after 90 days, you cannot just start making payments again. The lender may actually send your payment back, if you send it this late and have not been in contact.

What happens next

After four months of not paying your mortgage, you will likely be served with a foreclosure notice.

If you don't respond within 20 days, then the lender, in the following 60 days, will ask a court to issue a judgment against you.

A county sale will be arranged 50 to 120 days after the judgment. Next, 120 days after the sale, the sheriff will be at the door. Ten days after that, you’ll be thrown out of your home.

(Tip: This schedule is a general one. Courts are facing a backlog of foreclosure cases and could take longer to go through these steps. If you hire a lawyer and fight the foreclosure, you may be able to delay the sale for many months or avoid it altogether.)

Mold in the Home

2009-11-14T09:12:00.000-08:00

Home troubles grow when mold moves in

Mold is a fact of life in subtropical areas like Central Florida. But homes in foreclosure or suffering hurricane damage are especially vulnerable to mold contamination.

In a hot, humid house with no air circulation, it takes just 48 hours for mold to start growing and spreading. If the air conditioning is off and the house is not airtight or leaks exist, the growth will be rampant.

When buying a home that has been closed for any length of time without air conditioning, it may be worth having a mold test done - especially if you can see or smell mold. The cost for an inspection depends on the size of the home but usually runs from about $400 to $1,600. Homeowners insurance against mold that is unrelated to accidental water damage is not available in some areas, including Florida.

What is mold?

Mold is a fungus. It reproduces through tiny spores, which can remain suspended in the air for a long time. When inhaled, the spores can trigger a variety of respiratory-health problems.

When conditions in a home are warm, damp and still, the spores settle and start to grow. The mold dissolves and ingests organic matter such as fiberboard, drywall, carpet backing, paper, wood and cloth. On exposed surfaces, mold may be seen or smelled, but often it is hidden and difficult to detect. Once entrenched, mold is a challenge to eliminate.

Health problems

About 15 million Americans are allergic to mold. The most common reactions are flulike symptoms and asthma.
Those with chronic lung or immune problems are at risk for more serious reactions, according to the Centers for Disease Control and Prevention.
Although indoor mold is not a major health hazard to most people, it can cause irritation of eyes, skin and throat, said Vincent Hsu, an infectious-disease specialist at Florida Hospital in Orlando. Reactions will be more severe in asthma sufferers and people with a sensitivity to mold. In people with decreased immune systems or chronic lung illnesses, mold could cause serious lung infections, sinusitis or hypersensitivity pneumonia, said Hsu.
There are no specific tests to determine whether an ailment is mold-induced, he said. If symptoms are aggravated when you’re around mold, but diminish when you’re not, then mold is the likely cause.

Cleanup

Eliminating a sizable mold infestation is a job for professionals. Ordinary household cleaners will not solve the problem. Using a fan to dry the mold will simply spread the spores.

The cleanup process includes the following steps:

Remediation experts wearing protective suits and masks erect containment barriers made from sheets of plastic around the contaminated area to prevent the spores from spreading to other areas of the home.
Baseboards and drywall are removed to check for the source of leaks.
Contaminated material is cut out, bagged inside the containment section, then removed and destroyed.
The area is treated with an antimicrobial product, then dried and sealed with Zinsser mold- and mildew-proof sealant.
To remove airborne spores, an air-scrubber machine with three different HEPA filters is operated in the space for three days.
A mold-clearance test is conducted 24 hours after the air scrubber is removed. To pass the test, levels of mold inside the decontaminated room must be lower than in outside-air samples.

Insurance coverage

In the past, mold contamination resulting from accidental water damage - a burst pipe, storm damage to a roof, etc. - was covered by homeowners insurance. But that changed after the devastating hurricanes experienced this decade.

If mold insurance is offered in Florida, it is limited to a separate endorsement to a homeowner's policy, with a separate premium. Most policies exclude coverage for mold altogether, or they give a token amount, usually $10,000. And it is only covered when the primary cause of the loss from mold is water.

Senate Panel OKs Extension for Home Buyers' Credit

2009-10-29T16:10:00.000-07:00

Oct. 29, 2009 - Senators reached a compromise to extend the $8,000 tax credit for first-time home buyers, a boost the housing industry expects will help it pull out of its two-year-old downturn.

Lawmakers in Washington also added a $6,500 tax credit for other primary-home purchasers and raised the qualifying income limits to $125,000 for single taxpayers and $225,000 for joint taxpayers, housing-industry sources said.

Under the Senate compromise, buyers must have sales agreements in hand by April 30, but they will have until June 30 to go to settlement, the sources said. The measure still faces votes in the full Senate and the House.

The current tax credit did little for the new-home market in September, the Commerce Department reported - news that took many industry analysts by surprise. Sales fell 3.6 percent from August and 7.8 percent from September 2008.

Industry observers had expected a fifth consecutive monthly increase in new-home sales, believing that the tax incentive for qualified first-time buyers - credited with 357,000 sales of previously owned homes so far this year - would do the trick.

Instead, sales of typically more expensive newly built houses slipped.

As the Senate worked on the compromise, third-quarter data were released showing that the burden of foreclosure filings in the post-bubble market continued to shift from the subprime-ridden "sand" states (California, Nevada, Florida and Arizona) to areas with rising levels of unemployment and adjusting rates on the "exotic" mortgages prevalent in high-cost metropolitan markets.

Yet Las Vegas remained the toxic-loan capital, according to the third-quarter survey by RealtyTrac Inc., of Irvine, Calif. - its rate of foreclosure filings was seven times higher than the national average.

Record Streak Continues for Pending Home Sales

2009-10-01T14:05:00.000-07:00

Oct. 1, 2009 - Pending home sales have increased for seven straight months, the longest in the series of the index which began in 2001, according to the National Association of Realtors®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in August, rose 6.4 percent to 103.8 from a reading of 97.6 in July, and is 12.4 percent above August 2008 when it was 92.4. The index is at the highest level since March 2007 when it was 104.5.

The Pending Home Sales Index in the Northeast jumped 8.2 percent to 85.3 in August and is 12.0 percent higher than August 2008. In the Midwest the index rose 3.1 percent to 90.8 in August and is 7.6 percent above a year ago. In the South, pending home sales increased 0.8 percent to an index of 104.6 and is 8.2 percent above August 2008. In the West the index surged 16.0 percent to 130.5 and is 22.3 percent above a year ago.

Florida Home Insurance Rates on Rise Again

2009-10-01T11:45:00.000-07:00

Oct. 1, 2009 - The respite from rapidly rising insurance rates is ending for Florida homeowners.

State regulators approved an average 19 percent statewide increase for Federated National Insurance. The insurer, a subsidiary of 21st Century Holdings in Lauderdale Lakes, has 30,889 policies in Florida.

Northern Capital Group was approved for a 10 percent hike on the policies it has taken out of Citizens Property Insurance, the state-run insurer.

Both companies said the rate increases will cover higher reinsurance costs and make up some of the revenue they've lost due to higher wind mitigation credits they must provide.

Nearly half a dozen companies have applied for rate increases or are working on filings.

United Property & Casualty has asked for a 12 percent average statewide increase. Southern Fidelity and its sister company, Capitol Preferred, have requested a 7.2 percent average statewide increase.

In July, Citizens began to submit its filing for its first rate increase in three years. Its rates have been frozen since 2007.

Citizens is limited to a 10 percent increase, due to a new law passed in May.

But its initial staff analysis found that some areas of the state could be due rate decreases.

Home Sales Rise 13%

2009-02-17T11:42:00.000-08:00

Sales of existing single-family homes in Florida rose 13 percent in fourth quarter 2008 compared to the same period a year earlier, with a total of 30,163 homes sold, according to FAR's latest housing statistics. It marks the second consecutive quarter for increased existing home sales; sales activity rose 5 percent in 3Q 2008 compared to the same period the previous year. Existing condo sales increased 3 percent in the fourth quarter compared to 4Q 2007.

INTERNATIONAL INTEREST UP

The Association of Foreign Investors in Real Estate (AFIRE) reports that foreign real estate lenders could grow lending by as much as 58 percent in the United States this year, with interest in cross-border property investing especially robust. In a recent AFIRE member survey, the top five most attractive U.S. cities in terms of investment dollars were the District of Columbia, New York City, San Francisco, Los Angeles and Houston. Meanwhile, 53 percent ranked the United States as the nation providing the most secure property investments. Respondents also listed multifamily housing, office space, industrial properties, retail and hotels as the top five preferred property types.

When will prices bottom out?

Housing prices will hit bottom in the fourth quarter of 2009, predicts Moody's Economy.com in a new report.
"Despite the darkening national economic outlook and the weak conditions in the housing market, some positive signs give hope that a bottom in the housing market is coming into view," the report says.
On average, home prices will decline 36 percent from the peak in the first quarter of 2006, the report says.
By the end of the housing downturn, nearly 62 percent of the nation's 381 metropolitan areas will have experienced double-digit-percent declines in house prices, peak-to-trough, says the report.
The declines will exceed 20 percent in about 100 metro areas, according to the report, and the recovery will be "lackluster."
"A number of uncertainties in both the housing and economic outlooks remain, and the risks tilt to the downside," says Moody's Economy.com Chief Economist, Mark Zandi.