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Indianapolis Distressed Properties to Surge, Cause Concern

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By : John Cutts    99 or more times read
Indianapolis distressed properties are expected to surge, as the number of mortgages in default in the area keeps soaring.

A research firm recently reported that almost 8 percent of homeowners with mortgage loans in the ten-county Indianapolis metropolitan area are in default by more than three months, as more borrowers lose their sources of income.

Additionally, according to the Fort Wayne Area Association of Realtors, more homeowners are getting hit with default notices from their lenders, but most of them are not actively seeking assistance.

The federal government has been trying to craft foreclosure prevention initiatives to rescue distressed homeowners, but these initiatives have not been able to stop the flow of foreclosures substantially.

Treasury Department records show that only around 150,000 mortgages have been modified nationwide since the launching of the Home Affordable Modification Program. The number is so small compared to the estimated 4 million homeowners across the country who are about to lose their dwellings to foreclosure.

According to H. James Litten, head of the housing division of real estate firm F.C. Tucker, distressed properties in Indianapolis accounted for about 30 percent of houses sold in the metro area in 2009, far above the 6- to 8-percent share of distressed sales during normal times. Litten added that the employment situation needs to improve before the share of distressed sales declines.

Indianapolis has been cited many times in the media as among the most affordable cities to buy a home for investment or for own use. Seen in positive light, the decline in home prices is good for housing affordability, but when analyzed further, continued price declines could be signifying deeper reasons, such as high default rates due to record job losses.

Lender JP Morgan Chase, which is a major lender in Indiana, reported that its losses from bad home loans and equity loans could reach $2.5 billion per quarter this year, much higher than the $1.78 to $2.2 billion charge-offs per quarter in 2009.

To help prevent a flow of foreclosures in Indiana and other states, Chase has increased its personnel dedicated to foreclosure prevention from 2,000 to about 6,000 staffers. Homeowners who are in default by more than 5 months are now being offered the option of deed-in-lieu of foreclosure and short sales.

Fifth Third Bank, based in Cincinnati, has also stepped up its loan modification efforts to help stem the surge in Indianapolis distressed properties. The bank now considers more short sale proposals than in the past.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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