Georgia housing and bankruptcy double-whammy

GDO Report

The number of home foreclosures, according to the Atlanta Journal-Constitution, is skyrocketing, and Georgia leads the country for the first quarter of 2006 with almost 25,000. More may be on the way. In Macon, according to RealtyTrac, there are 222 homes ready to be auctioned. Banks are trying to get rid of 99 and one is in pre-foreclosure. In Warner Robins there are 83 properties either for auction or bank sale.

What gives? Why are families having a hard time making ends meet? There are several reasons. Unfortunately, with the high cost of health care, if the primary bread winner is unable to work for a length of time finances can get shaky. And with more people working without health insurance, that situation is increasingly likely. But there are also more systemic reasons. Aggressive lenders are pitching mortgages that are more risky than the tried and true 30-year-fixed loan, and they are pitching them to people who may be less than qualified under normal circumstances. According to the Constitution, more than a quarter of all mortgages made in Georgia last year were adjustable rate. Couple balloon payments and rising interest rates and a bad brew of forces can come to bear on homeowners. Another reason the foreclosure rate may have spiked is the loss of jobs. Macon has seen its share of plant closures, but the Atlanta area has not yet been hit by the affects of the auto plant closings.

According to bankruptcyaction.com, Georgia is also one of the leading states for bankruptcy filings along with Tennessee, Utah and Alabama. Last year in the U.S. there were almost 2.1 million filings, and the trend line is almost vertical. The new bankruptcy laws have hardly slowed the pace.

For the most part those filing bankruptcy are not scofflaws, and statistics reflect back to the causes for foreclosure. Two out of three bankruptcy filings are due to job loss and half are because of serious health problems.

Admittedly, some people have found themselves in too much house for their income. In some states the housing market has been super-heated, leading people to get interest-only mortgages and betting against the calendar. Interest-only mortgages allow people to buy homes in a higher price range. A transient homeowner, thinking they will be long gone with equity in hand by the time the big payments start, is at risk if their timing is off by as little as 90 days.

So what to do if you find yourself in trouble? Seek help early. Start with your lender, but there are agencies that give pre-foreclosure advice. You don't want to be among the growing number of people facing the daunting task of restoring credit after a bankruptcy or foreclosure.