Job Loss Combined With Medical Bills Main Cause in Foreclosure
In June, more than 500 homeowners encountering foreclosure in the state of Pennsylvania in the past year were surveyed. According to the Pennsylvania Association of REALTORS, Pennsylvania has an unemployment rate of 9.2 percent and a foreclosure ranking of 34 out of 50 states.
The survey revealed that “57 percent of Pennsylvania homeowners encountering foreclosure said their household had experienced a wage-earner’s job loss in the 12 months prior to their foreclosure and 47 percent said they had been hit by unexpected medical bills.”
Joel Searby, Executive Vice President at SGS Strategic Guidance System (the company that conducted the survey) says the main takeaway from the survey is that people must understand “it’s not just about the individual type of loan you enter into but the overall strength of the economy.”
He also applauds the Pennsylvania Association of REALTORS for seeking out information about their area, “while elected officials and economist and experts have gathered to discuss this issue, the Pennsylvania Realtors decided they needed to give voice to the people who have experienced foreclosure and they implemented this survey.”
The Plus One Factor
“Most domestic factors [that led to foreclosure] we found were job loss, unexpected bills and change in personal relationships. It was never just job loss. It was always job loss plus something else, we call that the plus one factor.”
The plus one factor may offer some people a sense of relief.
In the plus one factor scenario, losing your job doesn’t mean you are headed toward foreclosure, it’s when another major change is added on top of that job loss that people find themselves in trouble.
Don’t Blame Bad Loans
In addition to providing new information about the plus one factor, the survey also dispelled some previously held myths about the cause of the real estate burst.
“We found folks from all income brackets, age groups, ethnic groups and communities in Pennsylvania [lost their homes to foreclosure],” Searby says, “this is not a problem for young, naive minority types, as we so often hear, it is a situation affecting all homeowners, a problem tied to the economy.”
Additionally, the commonly blamed culprit of the foreclosure crisis has been bad lending, but in Pennsylvania that simply isn’t the case.
Of those surveyed, 41 percent had prime fixed loans, and only 8 percent had Adjustable Rate Mortgage (ARM) loans. Searby points to those numbers as proof that the economy is at the center of the problem.
More Interesting Stats
Other interesting statistics from the survey:
- 70 percent of those surveyed had not heard of Home Affordable Foreclosure Alternatives Program (HAFA)
- 60 percent had not heard of makinghomesaffordable.gov
- 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.
To read the full press release go to our blog Economy Cause of Foreclosures, Not Bad Lending Says New Survey