Minneapolis pre foreclosures are expected to affect even homeowners with high FICO scores because of continued employment problems and sharp home price declines, according to a study recently released by FICO, the company that developed the FICO credit scores.
The FICO scoring system is the one most used by consumer reporting entities in the world. Individuals with FICO points of 760 or higher are considered bankable borrowers and get the best loan rates. Borrowers with scores of around 720 are considered prime. The 720 score is actually the lowest score considered by lenders when they are giving their advertised rates.
Throughout the country, the home loan default rate for homeowners with FICO scores of 760 to 850 from May to October last year was 0.32 percent while the default rate for credit card holders with the same level of FICO scores was 0.12 percent.
According to Rachel Bell, head of analytics at FICO, the default rate of 0.32 percent is far below the nationwide mortgage default rate of 4.5 percent, but it is worrisome because it marked the first time that the home loan default rate for bankable borrowers surpassed the default rate for credit card holders.
It is in this line of thinking that Minneapolis pre foreclosures could surge for homeowners with strong FICO scores because of the continued weakness of the economy and the steep declines in home values.
According to an online real estate firm, almost 39 percent of owners of single-family homes in the Minneapolis-Saint Paul area were underwater in the final quarter of 2009. Residential property values in the area climbed up over the four-year period to 2006 by almost 34 percent, but these price improvements were wiped out by the sharp price declines over the next years.
The pace of foreclosures in the Minneapolis metro area soared by 58 percent in 2009 to more than 29,000 foreclosure filings, equivalent to 2.2 percent of all mortgaged housing units in the area. As many of these homeowners lost their jobs, they did not have the financial capacity to pay their accumulated arrears and to prevent their properties from entering homes auctions in Minneapolis.
In February of this year, foreclosure filings were still surging in Minnesota, posting a total of 3,007 foreclosure cases, including a large percentage of Minneapolis pre foreclosures. Of these figure, a total of 1,669 units were already listed in the REO books of lenders.
Search pre foreclosures :