The good news for Arizona homeowners is that foreclosure rates declined significantly. And according to reports, there are now fewer Arizona homeowners who are seriously late on their mortgage payments. The report considers houses that are not yet listed for sale, but that are more than 90 days delinquent on mortgage payments and in process of foreclosure, to be “shadow inventory.”


The not-so-good news is the decline may not signal an economic recovery, particularly in the housing sector, as much as it does an increase in loan modifications and short sales by homeowners struggling with debt. Chapter 13 bankruptcy filings to stop foreclosure and create a plan of manageable payments may continue as the solution some people with financial challenges turn to for debt relief.


Short sales and loan modifications as alternatives to foreclosure are an indication of the financial challenges many homeowners are facing. A short sale occurs when a homeowner receives an offer from a buyer that is less than the mortgage debt owed on the property. If the homeowner does not have the funds to pay the difference, the property cannot be sold without the consent of the mortgage lender. Lenders usually condition short sale approval on the homeowner agreeing to remain responsible for the unpaid mortgage balance after the sale.


A bankruptcy attorney can offer alternatives to short sales and foreclosure. For instance, filing a Chapter 13 bankruptcy results in an automatic stay to stop foreclose. The bankruptcy attorney works with a bankruptcy trustee and the debtor’s creditors to structure a plan to repay the debt with manageable payments. Chapter 13 is just one alternative a bankruptcy attorney may suggest to help a person resolve financial challenges and achieve a fresh financial start.
Source: Phoenix Business Journal, “Arizona seeing far fewer homes in ‘shadow inventory’