By Melissa Geiser, CCCSOK.org Research Specialist
For many Oklahomans, the American dream is unraveling.
Too many Americans are losing or voluntarily forfeiting their property. The national foreclosure rate now stands at 1.2% for all homes with a mortgage, and 3.3% of all mortgages are either delinquent or in foreclosure. One in every 1,725 homes in Oklahoma is in some stage of foreclosure. These numbers have been steadily improving nationwide but the reality of over 448,000 homes being in foreclosure is still grave.
In most cases, homeowners end up in foreclosure due to the loss of a job or a confusing mortgage agreement with an interest rate that resets so high the homeowner can no longer afford to keep up the payments.
However, there are some homeowners who can afford their mortgage, even if making the payment is a struggle, who may be tempted to abandon their homes in search of a financial fresh start. Walking away can have dire and lingering financial ramifications, experts say.
“Unfortunately, people can often be most victimized when they’re scared about their financial well-being”, says Stephanie Bittner, community education and outreach coordinator for Consumer Credit Counseling Service of Delaware Valley.
One of the biggest casualties of any foreclosure is a homeowner’s credit score. Missed mortgage payments and defaults wind up on your credit report where they remain for seven years, says Barry Paperno, consumer operations manager at Fair Isaac Corp., which computes credit scores for reporting agencies Equifax and TransUnion.
The negative impact is huge.
Even if you start with great credit, walking away from your home can cause your FICO score to plummet “by at least 100 points,” Paperno says. Interestingly, a homeowner with less than stellar credit won’t get hit quite as hard by walking away because, credit score-wise, they don’t have far to fall. However, the basic end result will still be the same. “Either way, you’ll wind up at the bottom,” Paperno says. “In a nutshell, it’s serious.”
Foreclosures and short sales not only sink your credit score today, they’ll also prove to be a substantial road block to stabilizing your life and finances tomorrow. If you plan on renting after you walk away from your home you may have to convince a future landlord that you will be a reliable tenant – not an easy task if you’ve left your mortgage lender with a major unpaid debt.
Future landlords aren’t the only ones who may balk at your past credit history. Employers may also check the credit reports of potential employees, especially if the position requires managing or handling money.
“Someone with poor credit may not be seen as trustworthy,” says attorney Dianne Coscarelli, a partner with Thompson Hine in Cleveland who chairs the American Bar Association’s mortgage lending committee. “To an employer, they may steal money or not make as good an employee as someone without that financial baggage.”
Foreclosure statistics are alarming but what is often overlooked is the effect of foreclosure on school-aged children. How are they affected by being uprooted and leaving their home and neighborhood? Whether a family is low or middle income the impact of a foreclosure is the same.
Even before losing their home, the stress that parents are feeling over their financial difficulties including fear, anxiety, and depression has an impact on the entire family, most notably the children. Children look to their parents for safety, reassurance, and security and when a child’s parents feel that those very things are being threatened in their own world, it can have a negative effect on a child. And all of this is happening before moving out of the house.
Edie, who is 18 called into a show about the effect of foreclosure on children with her unique perspective. She not only went through her family’s home being foreclosed, she also witnessed the effect it had on her younger sister.
First, there was the embarrassment of being asked why they were moving; she either had to explain that it was because of foreclosure or just not answer the question. She and her sister both had a rough time with school due to stress and a new environment. The family tried to look at the positives such as having a roof over their head, even if it was a rental, but it was hard to lose their childhood home and a lot of the memories that came with it. Edie says that the experience was hard and made her and her sister feel sad. She added that foreclosure is something that she wants to make sure that she and her own future family never has to experience again.
Alternatives for better outcomes
CCCSOK.org understands the impact that foreclosure has on the entire family and we’re here to help. There are too many companies who charge $500 or $1000 or more for services you can get for little or no cost. If you aren’t able to make your mortgage payments or need to move quickly from your home, there are alternatives to foreclosure or short sale.
At CCCSOK.org, we understand that your home is important to you and your family. Our counselors are HUD certified and trained in housing issues to help you weigh your options, develop a plan and make the best choices for you and your family. We can help with:
- Delinquent Mortgage Counseling
- Reverse Mortgage
- Pre-purchase counseling and information
- Special Housing Programs
- Classes to help you become a more educated home buyer and owner
We are also approved to provide housing counseling by the U.S. Department for Housing & Urban development (HUD), Fannie Mae, and Freddie Mac for any type of mortgage such as FHA, VA, or conventional.