Michigan Mortgage Problems Mount as Borrowers Fall Behind On Payments

The Detroit area led the U.S. in homes in foreclosure in the third quarter, with one of every 80 households at risk, more than four times the national average, according to the Detroit News.

The Detroit area reached the top of the list with a staggering 42 percent increase in foreclosures over the second quarter. The metro area is defined as Detroit, Livonia and Dearborn.

Homeowners in the foreclosure stage are those who fail to make their Michigan home loan payments and are at risk of losing their property.

Michigan’s floundering economy and high unemployment rate (the second-worst in the nation) are clearly playing a role in homeowners’ struggles to make their mortgage payments. But cities across the country also are seeing huge spikes in foreclosure rates, a trend fueled by low down payments and ARMs.

“It used to be you had to come up with a 20- or 10-percent down payment so buyers had a serious ownership stake in the house,” said Furhad Waquad, president-elect of the Michigan Association of Realtors. “That made it much more difficult to walk away from a home when you hit hard times.”

Also making this unenviable list — ranking 29th in the nation — was the Michigan region encompassing Oakland, Macomb, Livingston, Lapeer and St. Clair counties.

In that region, 1 out of every 231 homes was in foreclosure in the third quarter, up 36.5 percent from the second quarter.

The increasing number of foreclosures wreaks havoc on an already volatile real estate market. The glut of homes means sellers are getting less for their houses than what they paid 4-5 years ago.

This is a huge issue in the Alabama housing market as well as Florida, California, and other states where a huge run-up in prices has left many borrowers out in the cold.

In Michigan, real estate agents aren’t optimistic things will change for the better.

“I recently sold a house in Warren for just $12,500 because it was in such poor condition. For this to change we need a total resurrection on how Michigan makes money and that’s not likely to happen for several years,” said Joel Root, a local real estate agent.