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Filings of home foreclosure have surged in 2007, as increases in home price revered or slowed, leaving borrowers unable to make on-time payments when their adjustable rates started resetting at higher levels.
According to RealtyTrac, an online foreclosure properties marketer, the number of home foreclosure filings soared, in comparison with the last quarter of the year 2006, to 27% during 2007's first quarter. The study disclosed that there were over 430,000 home foreclosure filings all over the United States, at a ratio of one per 264 households, and encompassing default notices, auction sales, bank repossessions and everything in between.
The state of Nevada recorded the highest home foreclosure rate of one per 75 households. Colorado accounted for the next highest home foreclosure rate, at a ratio of one per 111 households. Studies reveal that many homeowners in Colorado have faced unaffordable loan rates in the recent years. Meanwhile, California and California have had the highest number of filings, the report said.
Analysts expect the home foreclosures to continue to rise throughout 2008, given the numerous mortgages that were written in 2004 or 2005, that are subject to adjustable rates and will have their first resets and interest rates will increase by three or more percentage points. The resets are expected to make loans “totally unaffordable” for most borrowers, thereby effecting default. The U.S. Commerce Department also reported a 0.6% dip in housing sales as of June 2007.
In an apparent case of domino effect, the mortgage defaults of homeowners in the United States push homes toward the epidemic of negative equity, where a home's worth becomes much less than the mortgage. Statistically, some reports say that roughly 2,400,000 Americans are under the threat of losing homes from mortgage rates in the coming years.
The United Kingdom is not spared as well, as homeowners are said to be at the risk of dipping into the negative equity state if prices of houses drop, according to Experian, a credit ratings agency.
The Debt Settlement Option
There are several strategies to settle debts. For one, debtors may approach their credit agencies or banks for lower interest rate, pursuant to the government's announced policies. This will mean all credit cards that are unsecured will soon cease to become burdens. It will also be wise to close other credit card accounts, if any, and keep one for use to help track expenses. However, if the debt is huge, leaving debtors unable to create financial plans, debt settlement companies may prove helpful.
Debt settlement has been practiced years ago, but became prominent in the U.S. in 1980s and 1990s when deregulation of banks took place, effecting loosened practices in consumer lending practices.
Essentially, debt settlement involves a third party that settles or eliminates debts through settlement with creditors through a plan that is executable and not requiring the payment in full amount. As a rule, debt settlement companies do not handle their clients' funds to avoid impropriety.
Technically, on behalf of their consumer-debtors, debt settlement companies assist in the clearing of their clients' debts by directly negotiating with the creditors to facilitate repayment. If negotiations are handled appropriately, debt settlements effect handsome reductions on debts. In some cases, most creditors ultimately accept less than the client-debtor's full balance in an effort to settle their outstanding debts.
Debt settlement can provide certain benefits, such as negotiation with creditors, easy payment terms and reduced debt in the overall, and in most cases, fixed payment terms on regular installment such as on a monthly basis, while taking into consideration a debtor's financial position.
A major benefit of utilizing the services of a debt settlement company is freedom from creditor and collection agency harassment and litigation threats. As part of debt settlement companies' services, their main business is to handle the debt issues, rendering the client free from harassment and lawsuit woes.
According to the Association of Settlement Companies, debt settlement companies' basic aim is to lower or lessen the debt amount. The company also works on reducing interest charges on principal amounts, and reduce payments on tenure in the process. Settlement companies target good practice of debt settlement in the industry without compromising protection of consumer-debtor's interests.
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