Pretty much anyone would agree that foreclosure isn't exactly a good thing. That doesn't mean that nothing good comes from it however. According to research conducted by the Federal Reserve Bank of Philadelphia, the foreclosure crisis may have unintentionally served to help many Americans pay off much of their debt.
When the recession hit in 2008, you could say millions of homeowners were handed a lemon. Because of sudden job loss and cut wages, many fell way behind on mortgage payments and eventually found themselves facing foreclosure. Even homeowners whose income wasn't affected by the recession still experienced hard times. As house values plummeted many people ended up owing more on their mortgage that what their house was currently worth. For these Americans, foreclosure was the unavoidable outcome.
Because the recession caused such a spike in foreclosures, the process became bogged down. At the peak of the housing crisis in 2009, the foreclosure process could be stretched out as much as three years in some states. Even in states where the process was faster homeowners were still involved in the foreclosure process for months.
This is where the research findings get interesting. Freed from the burden of paying a mortgage but still living in their homes, you might think that these homeowners used that extra money irresponsibly, but the study found that these homeowners facing foreclosure were much more likely to get current with other debts as opposed to those that weren't facing foreclosure. Though in the process of losing their homes, many Americans choose to use the extra money to pay off other debts. When the foreclosure process was complete and they had to start fresh, they had an easier time doing so.
An unfortunate stigma
Foreclosure carries with it an unfortunate stigma, that those who lose their homes through foreclosure are financially irresponsible and entirely to blame. Often, foreclosure is the result of circumstances outside the homeowner's control and as the research suggests, many homeowners are genuinely trying to get out of debt.
If you are facing foreclosure, rather than weighing yourself down with self-blame, do your best to make the most of a difficult situation and start working towards a fresh start.
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