Florida Families After a Foreclosure: What Happens to Florida Households Post-Foreclosure? Good News as Foreclosures Don’t Block New Home Mortgages

Posted By on February 4, 2014

The impact of a foreclosure upon a family and its financial future has been the subject of many studies over the last several years, particularly after the recent Housing Crisis hit the United States. (For example, read the 2011 study by a Federal Reserve economist about “The Post-Foreclosure Experience of US Households.”)

The logical thing to think, is that it will be difficult, financially speaking, for a long period of time for anyone who has been through a foreclosure. Surely, a person who has been through foreclosure will be forced to live in a rental and be prohibited from pursing the American Dream of home ownership for several years, right? Well, maybe not.

Foreclosure Is Not a Bar to Home Ownership in 2014

In 2014, research is showing a bright future for Florida families who have been through a foreclosure and have lost their home to their mortgage lender for financial reasons related to their home loan payments. The head economist at Trulia.com, Jed Kolko, released the website’s residential real estate market predictions for 2014 recently, and among its predictions are that this year (2014) will be the “year of the repeat home buyer.” These buyers include those buyers that are otherwise known as “boomerang buyers” and they seem to be most welcome in the current housing market.

In fact, a recent poll by lenders and realtors had industry professionals reporting that:

  • 79% of those who lost their homes during the crisis are interested in buying again.
  • 65% report that their income is either the same or higher than when they first purchased.
  • 63% report that their other debt obligations are lower (30% said “significantly lower”).

Foreclosure Victims May Be Vital to Economic Stability and Growth for Florida Housing Market

Today, the same people who were being unceremoniously removed from their family homes through foreclosure and short sales under the threat of imminent foreclosure are now being courted as being important, perhaps even critical, to the recovery of the real estate market that has been crushed economically in recent years.

That’s right: yesterday’s delinquent borrower that lenders didn’t bother inviting to the party are now, in 2014, the party’s prom queen.

Why? These families are “boomeranging” back into the residential home market as buyers who have saved money for nice down payments, who have less debt, and who have rebuilt solid credit records.

The boomerang buyers are seen as vital to real estate markets now because investors aren’t as keen on buying residential real estate now as they were several years back. With Baby Boomers retiring and moving forward into consideration of their advancing years (like assisted living facilities and other elder-care lifestyles), residential real estate will be experiencing a buyer-gap that these boomerang buyers can fill.

Florida Needs The Boomerang Buyers to Buy Residential Real Estate and Boost Housing Market

How fast can a buyer boomerang from foreclosure back into home ownership? One year’s time is not an unrealistic prediction.

The federal government is supporting the recovery of the U.S. Housing Market by offering its “Back to Work” initiative through the Department of Housing and Urban Development. If you qualify for this program, then the Federal Housing Administration may be willing to loan you money to buy a home even if you have a bankruptcy, a foreclosure, or a short sale on your credit history.

How? For those who meet the federal qualifications, and can show they have had a “significant loss of income due to circumstances beyond the borrower’s control” which caused an “economic event” in their lives, then they may be able to get a FHA mortgage even if they suffered this financial setback within a year of filing their loan application.

What is the “economic event” here? It’s defined as:

  • Short sale
  • Deed-in-lieu of foreclosure
  • Foreclosure
  • Chapter 7 bankruptcy
  • Chapter 13 bankruptcy
  • Loan modification
  • Forbearance agreement

What is the “significant loss of household income due to circumstances beyond the borrower’s control” under the program?

This is a 20% minimum loss of the total combined household income. This could happen for several reasons: unemployment, loss of job, death of husband or wife, medical health care crisis, etc. Essentially, it means the applicant can show some serious and life-altering event outside of the borrower’s control that caused them to loss at least 20% of their income for over six months time.

What does this mean to the foreclosure victims here in South Florida?  It means that the hope of a family home with the pride of home ownership and the freedom of living subject to the landlord is a real possibility now, not years into the future.  Foreclosure is not the stigma that it once was, and for many Florida foreclosure victims, the hope of owning their own home may become a reality, which is a wonderful thing.

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Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com, or (954) 458-8655. If you have a specific or personal situation, please call or email Larry because he can’t answer specific fact questions in general comments.

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