Job Loss Plus Another Factor Main Cause In Foreclosure

Today the Pennsylvania Association of REALTORS® released a new survey that confirms how closely the economy and real estate are connected.

About half of all homeowners falling into foreclosure in Pennsylvania either had someone in their family lose a job and take a big hit from medical bills. Job loss plus another lifestyle change was the key to many foreclosures in the area. The company that conducted the survey has coined the phenomenon the plus one factor.

Similar results were found in both Nevada and Florida. However, research shows that in Pennsylvania, lending practices are less to blame and the economy is the main factor people are falling into foreclosure in that state.

Read the full report of the survey from the press release below:


Few experiencing foreclosures had subprime mortgages, previously regarded as the main culprit in the meltdown of the U.S. housing market

LEMOYNE, PA (Aug. 4, 2010) – Job loss and unexpected medical bills are among the top factors contributing to home foreclosures in Pennsylvania, according to a survey commissioned by the Pennsylvania Association of REALTORS® (PAR).

Five hundred Pennsylvanians who encountered home foreclosure during the last 12 months were surveyed by Florida-based polling firm Strategic Guidance Systems (SGS) between June 22 and 27, 2010. Fifty-seven percent of the sample said their household had experienced a wage-earner’s job loss in the 12 months prior to their foreclosure, while 47 percent said they had been hit by unexpected medical bills. Thirty-six percent indicated they had other “unexpected bills.”

Subprime mortgages, which many regarded as the main culprit in the meltdown of the U.S. housing market, appear to have played a minor role in Pennsylvania foreclosures. Forty-one percent of survey respondents held prime fixed-rate mortgages and 12 percent had prime adjustable-rate loans. Only 14 percent carried a subprime mortgage.

“It’s clear that housing market conditions are closely tied to economic conditions, especially employment. Subprime mortgages have never really driven foreclosures in Pennsylvania,” said Austin Jaffe, Ph.D., PAR’s consulting economist and head of the Department of Insurance and Real Estate at the Smeal College of Business at Penn State University.

“The study represents a significant number of Pennsylvanians who have personally experienced foreclosure in some way. They’re people from all walks of life, various socio-economic backgrounds and all parts of the Commonwealth,” SGS pollster Joel Searby said.

Government Programs, Lenders Not Helpful

Many of those surveyed also did not know about the state and federal programs available to those undergoing the foreclosure process:

  • 67 percent of respondents “never heard of” the federal Home Affordable Foreclosure Program (“HAFA”)
  • 57 percent never heard of the federal Making Home Affordable program
  • 61 percent were unfamiliar with the Homeowner Equity Recovery Operation program of the PA Housing Finance Agency.

Ninety-one percent of those surveyed said they attempted to contact their lender about a solution to their pending foreclosure but 48 percent said their lenders were “not at all” willing to work with them. The 30 percent who worked with their lenders said it made no difference. Nineteen percent said it “made things worse.”

Most of the survey respondents were between the ages of 40 and 59.
At the time of foreclosure, 71 percent had lived in their home for more than five years. Forty-one percent of the sample personally experienced foreclosure; 57 percent narrowly avoided or are currently in foreclosure.

The survey has a margin of error of +4/-4 percent.

The association commissioned the study to understand the impact foreclosures have on individual Pennsylvanians, said Don Roth, PAR president.

The study was funded by a grant from the National Association of REALTORS®.