There was a huge spread in today's scandal rag about foreclosures. It seems that the local area has had a big jump in foreclosures and the majority have one thing in common: a big second mortgage. That means people were pulling the equity out of their houses for whatever and then the strain of making the payments caught up to them. The lenders are putting a pinch on those who are applying for mortgages, unless you are perfect or nearly so they aren't lending. It sounds harsh to the 'social engineering via government' crowd, but that's the way it should have been all along. I had to jump through all kinds of hoops to buy my first house, why shouldn't others? The only 'breaks' I got: the builder was willing to help with closing costs and the down payment was 10% instead of 20% because it was new construction. I had to answer all KINDS of nosy questions about my financial history.
Many of the foreclosures down here also share another common factor: the bank and the owner had tried a 'short sell' (where the bank agrees to take less than the mortgage balance to avoid a foreclosure and the owner walks away from the sale with nothing) but there were no takers. That goes back, I think, to the mortgage credit crunch.
FWIW, there's a foreclosure that's right around the corner from me, these folks were spending every dime they had to keep their son in college. The investment advisor my wife and I hired some time back had one really big piece of advice: start a 529 education savings plan while she is young, add to it if we could but do not make it priority 1. His advice was to make our 401's and other long term investments #1, and to have her get student loans etc when it came time for college. It seems harsh, but think of it like this: there's all kinds of student loan and scholarship programs out there, why should we eat cat food while she goes to college?
