Consequences of Foreclosure

The consequences of foreclosure are extensive and can impact even those who do not lose their homes. Other consequences include losses for lenders, reduction in property value for neighboring homes, and high costs on the local governments where the foreclosure occurs. For those going through include losing their home, damaged credit, loss of any equity they had built in their home and many negative emotional reactions.

A typical foreclosure involves a 20 to 60% loss for the lender and on average will result in a $50,000 loss. Between the filing costs associated with foreclosure, paying employees who work on them and the lower than market sale prices of most foreclosed homes, lenders experience tremendous liability with respect to foreclosures.

However, mortgage companies and banks are not the only ones who suffer financially as a result of foreclosures. Municipalities have an average cost of $34,000 associated with each foreclosure. This includes inspection, court costs, unpaid utilities and increased police and fire costs. Furthermore, neighboring homes can lose as much $220,000 in property value after a foreclosure.

The more well known consequences of foreclosure relate to the homeowner, however. Losing your home is a difficult and stressful experience that results in anxiety and depression. Unfortunately, if your loss is the result of a foreclosure, the consequences can extend much further. It will stay on your credit report for a period of seven years, during which time it will be much more difficult to get a line of credit or mortgage and will likely be at a much higher interest rate than you have previously had. Any payments you have made and equity you have accrued will be lost.




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