Here’s a misnomer and term that will undoubtedly give more than a few of our readers in Texas and elsewhere pause: positive-equity foreclosure.
The home foreclosure process has always been centrally associated with negative equity, that is, properties in which homeowners’ outstanding mortgages exceed the estimated market value of their homes. A phrase commonly used to depict that reality is “underwater mortgage.
That underwater mortgages — especially those with notably high negative equity — would be particularly susceptible of foreclosure is hardly surprising. That a person with a home value exceeding the amount owed on the property would be in the foreclosure process and at dire risk of losing the residence likely strikes most people as counterintuitive.
How could such a case ever arise?
An executive with the national real estate data firm RealtyTrac has an explanation. He notes that many property values that plummeted during the housing collapse that commenced several years ago have since recovered an appreciable amount of value.
That is, they are no longer underwater. Notwithstanding that happy turn of events, many of those properties are still at risk, given that foreclosure can be a slow and lengthy process.
Moreover, many owners aren’t even aware that their homes now command positive equity. Some owners simply walked away from their properties when they went underwater. Some believe that, once begun, the foreclosure process proceeds to an inevitable ending.
Despite such a national anomaly, RealtyTrac notes that seriously underwater properties continue to liberally dot the country’s landscape. Reportedly, more than nine million homes across the country continue to be “seriously” underwater.
People in Texas and elsewhere who continue to struggle with depreciated home values should know that a sound and timely solution is potentially at hand. For strapped homeowners across the country, filing for Chapter 13 bankruptcy brings immediate legal relief, resulting in an automatic stay that bars creditors’ collection actions.
Filing for bankruptcy can enable a homeowner to continue staying in the family home by paying back past-due mortgage payments over an extended period of time, often with reduced interest payments.
A proven bankruptcy and foreclosure defense attorney can provide additional information.
Source: The Washington Post, “More homeowners no longer need to be in foreclosure, and they may not even know it,” Dina Elboghdady, April 18, 2014