Monday, August 18, 2008

Unreported: "Shacking up" and Divorce make Big Impact on Foreclosures

As some of you know and other do not, I have my house on the market...for two years now. The reason being I am now "officially" retired (from my past employee, certainly not life!) and my "big plan" was to RV full time in a 21 ft Bigfoot Travel Trailer ( all Rvs are called rigs in the RV world) pulled by an American made Chevy 5.3L Silverado, reg cab, 3.73 axle, HD trailering package with tranny cooler.

Oh I could sell my house, if I wanted to give it away but I don't so I wait. So while I wait for a bottom I pay attention to the real estate market, visiting some blogs dedicated to the current real estate correction, which is historical in its scope and size.

While visiting HousinDoom I ran across a poster discussing a factor contributing to foreclosures that I have yet to see in any reporting about the housing market.

And that is how shacking up and divorce have a huge impact on foreclosures. The poster states;

The situation will continue to worsen if the increase in cohabitation continues.
This line of thinking is supported by an interesting paper “Mortgage Default among Rural, Low-Income Borrowers” printed in the Journal of Housing Research in 1995 and [ironically] apparently funded by Fannie Mae.
It is quite an old paper and may not be entirely relevant. But I think it is indicative that potential changes in lifestyle have not been factored in sufficiently to lenders’ thinking. It includes: “On average change in marital status increases the risk of default 4.5 times”.

This is supported further by other research, “Why have a rising number of Americans defaulted on their mortgage payments in recent years?

When economist Darryl E. Getter of the U.S. Department of Housing and Urban Development set out to answer this question, he discovered that the problem was often not chiefly financial, but rather marital: many of the American homeowners who fall behind in their mortgage payments are experiencing the economic distress occasioned by divorce or separation from a spouse ....

Whether looking at all households or just at those with “normal and unusually high” incomes, Getter finds unusually high default rates for home mortgages among Americans who are divorced/separated ……… (Source: Darryl E. Getter, “Contributing to the Delinquency of Borrowers,” The Journal of Consumer Affairs 37.1 [2003]: 86-100.)

In “Research Into Mortgage Default and Affordable Housing: A Primer”, [2002] Charles A. Capone, Jr., Ph.D, Congressional Budget Office, Center for Home Ownership, Local Initiatives Support Corporation writes, “….. statistical results are reported as multiplier ratios. These ratios give the relative strength of various influencing factors on incentives to default. Deviations from a value of one (1.0) tell direction and strength of effects. For example, the ratio reported for marital problems is 4.48. That means the incentive to default is 4.48 times as high for families experiencing marital problems than for those without such difficulties.

This is not quite the same as saying probabilities of default will be 4.48 times as high, but it is close.”

Cohabiting couples break up at a much faster rate than married ones. The situation is unlikely to improve until this is understood by both borrowers and lenders.

And what happens to the children of the divorced and/or separated cohabitators?

Why does the liberal media ignore this very real destructive outcome of the cultural decline of morality in America?

I don't see any Dateline, Nightline, John Stossel reports on this very real contributor to forclosure rates

I think we all know the answer, don't we?


Nick Gulliford said...

Did you see

apackof2 said...

No I had not, thank you. Excellent analysis

Again it proves that citizen investigative bloggers are covering topics that the big liberal media won't touch