Foreclosure can be just the beginning of money woes

11.03.09
By Timothy Lewis

People who go through the foreclosure process are often caught in a financial worst-case scenario that can last for years after they lose their property.

A recent report in the Boston Herald noted that some people who are foreclosed upon can remain on the hook for unpaid second mortgages. One man featured in the report received $550,000 on a $650,000 first mortgage, but has yet to resolve a $200,000 second mortgage that has already racked up $10,000 in penalties.

The newspaper added that some people can face liens over unpaid second mortgages and related debts for as long as 20 years, and in some cases, an additional two decades from what is known as a deficiency judgment.

A recent report from RealtyTrac said that Boise City-Nampa, Idaho, and the Salt Lake City area were among the places to see significant upswings in foreclosure activity recently. Otherwise, foreclosures have remained at their highest in the states that were most prone to price run-ups during the housing boom.

The national foreclosure leaders continue to be California, Nevada, Arizona and Florida, although other areas suffering from high unemployment, such as Detroit, have also consistently been hit hard.

"Rising unemployment and a new variety of mortgage resets continued to gradually shift the nation's foreclosure epicenters in the third quarter away from the hot spots of the last two years and toward some metro areas that had avoided the brunt of the first foreclosure wave," said RealtyTrac CEO James J. Saccacio.

The market also has a considerable way to go before settling, with some longtime foreclosure leaders finally seeing their activity level off, only to be replaced by increases in new cities. Still, people with sufficient credit scores may be able to benefit from low real estate prices brought on by the high number of foreclosed properties on the market.

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Foreclosure can be just the beginning of a financial headache.