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Repossession Houses Surged in Lafayette, Indiana due to ARMs

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By : John Cutts    99 or more times read
Repossession houses are still increasing in number in Lafayette, Indiana due to a collusion of several factors such as unemployment.

However, according to local analysts, the preponderance of adjustable rate mortgage loans in Tippecanoe County is among the major causes of defaults and foreclosures in the area. They noted that before the housing downturn in 2007, foreclosure activity was already surging in the Lafayette area.

Sharon Morrissey, a loan officer with First Republic Mortgage Corporation, said that a lot of unqualified borrowers were able to borrow during the heydays of housing because ARMs provided them with a way to buy homes with so little money.

Foreclosure filings have been rising in the county over the past 5 years, posting over 50 percent of increase from 457 filings in 2004 to 699 filings in 2009.

Statewide, a total of 41,405 filings were posted in 2009, equivalent to one foreclosure for every 67 housing units in the state. In January, the state of Indiana posted 4,622 filings, equivalent to one foreclosure for every 605 housing units. Both in the 2009 and in the January 2010 foreclosure charts, Indiana ranked 18th according to foreclosure rate.

Out of the more than 4,600 filings statewide in January, a total of 1,261 units were bought back by banks and recorded in their listings of repossession houses. Some of these will be sold through their agents and selected investors; others are set aside for future releases. Lenders have been known to ration out their foreclosure releases to prevent sudden home price falls.

The rise in foreclosure activity in Greater Lafayette has been matching statewide trends, according to Stephanie Reeve, head of the Indiana Foreclosure Prevention Network. In the fourth quarter of last year, 4.3 percent of all mortgaged homes were in foreclosure, she said.

According to real estate firm owner Sherrie Cocanower, foreclosure properties lower home prices in two ways: overloading the market with lower-priced houses, and cutting down the values of neighboring nondistressed homes, especially when they fall into dilapidated conditions.

Marie Morse, head of Homestead Consulting Services, said record numbers of distressed homes are not getting saved because homeowners give up so easily early during the foreclosure process. She explained that if loan modifications are not approved, the properties can be sold through short sales with the help of distressed property experts to prevent the properties from becoming repossession houses, which can drastically cut down credit scores.

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