More than Half of Foreclosures Triggered by Job Loss

Courtesy DSNews.com

According to a study released Friday by NeighborWorks America, 58 percent of homeowners who’ve received assistance through its national foreclosure counseling program reported the primary reason they were facing foreclosure was reduced or lost income.

NeighborWorks was created by Congress in 1991 as a nonprofit organization to support local communities in providing its citizens with access to homeownership and affordable rental housing. In January 2008, with the foreclosure crisis raging, Congress implemented the National Foreclosure Mitigation Counseling (NFMC) Program and made NeighborWorks the administrator.

The organization says that over the course of the NFMC program, the percentage of homeowners who’ve cited wage cuts or unemployment as the primary reason they were facing foreclosure has steadily increased.

In November 2009, 54 percent of NFMC-counseled borrowers reported reduced or lost income as the main reason for default. Six months earlier in June 2009, it was 49 percent; in February 2009, 45 percent; and in October 2008, 41 percent.

These steady increases parallel the nation’s unemployment rate, which until the November 2009 employment report, had marched upward since October 2008.

“With unemployment numbers not likely to dip below nine percent in 2010, our report proves what many already believed to be true. Unemployment and reduced income are having a devastating effect on our nation’s homeowners,” said Ken Wade, CEO of NeighborWorks America.

The administration recently announced changes to its Making Home Affordable program to provide assistance to unemployed homeowners by temporarily reducing or suspending mortgage payments for a minimum of three months. The initiative becomes effective July 1, 2010.

The federal government has also awarded additional funding to states where unemployment is high to support localized mortgage relief programs for homeowners who are out of work.

Lawmakers too are on a push to help homeowners who’ve lost their jobs. Congress’ financial reform package includes a measure that uses $3 billion from the Troubled Asset Relief Program (TARP) fund to make loans of up to $50,000 to unemployed homeowners to be used to make their mortgage payments for up to 24 months while they are looking for a new job.

Wade said, “While Congress and state governments have stepped up and extended unemployment benefits to help families survive this tough economic climate, it’s time for mortgage servicers and investors to make meaningful accommodations for homeowners facing foreclosure. If they don’t, we’ll see even more empty houses and devastated neighborhoods in our communities.”

NeighborWorks also noted in its report that 62 percent of all NFMC clients held a fixed-rate mortgage, and 49 percent were paying on a fixed-rate mortgage with an interest rate below 8 percent.

Nearly one million families have received foreclosure counseling as a result of NFMC Program funding. According to NeighborWorks, NFMC clients are 60 percent more likely to avoid foreclosure than homeowners who do not receive foreclosure counseling.

The Magic of Compounding!

Here is an absolutely Mind Boggling post from a friend, Gary Johnston! Adults - make your children take heed!

Good morning!

Graduates….

Yesterday, one of my jobs was to shake the hands and congratulate high school graduates as they received their diplomas. They were ready to tackle the world and full of smiles. One of the many thoughts that ran across my mind as they walked across the stage was the lesson they probably didn’t learn while they were in school. Oh how I wish that they understood the power of compounding and the big influence that time has on the equation. My friend, Danny Williams, calls them compounding periods. The vast majority of these young kids have a significant number of compounding periods.

If they can earn 12% on their money, it will double every 6 years. In 48 years (18 to 66), invested money would double 8 times (48 / 6). If they started out with $1000 from graduation and a summer job, it would grow-up to be $256,000 over those 48 years. If they would add $100 a month over that same 48 years to the initial $1000, they would have $3.38M! (They would contribute $58,600.) Time is a great ally in their financial future. It can be powerfully harnessed or let slip by.

No matter how old we are, we have compounding periods in front of us that can be harnessed. Are you taking advantage of them? Would you do a favor for me today? Please find a graduate or young person in your life and share the power of compounding and the big influence time has with them? It is one of the most critical lessons they will ever learn.