Residential Foreclosures in the City of Buffalo, 1990-2000 - Federal ...

Chapter 6: Borrower Circumstances at Foreclosure
Although an examination of lenders and lending trends helps to shed light on the nature
of foreclosures, it is also important to understand the circumstances of borrowers that can
lead to foreclosure. In this chapter, we analyze the difficulties faced by borrowers that
likely influence their ability to meet their loan obligations. Section I looks at the age of
the loan and the length of time for which borrowers own their property until foreclosure;
Section II examines the level of burden faced by borrowers at foreclosure.
I. Age and Tenure
Age of the Loan
While it is difficult to ascertain the factors contributing to any single foreclosure, the
length of time for which a borrower was able to meet the loan terms prior to default may
offer some clues. The age of a loan at default may be indicative of the quality of the
underwriting, the borrower’s preparedness for homeownership, or the level of change in
borrower or neighborhood condition. Loans that move into default quickly may be the
result of unforeseen circumstances; however, they are more likely to raise questions
about the diligence of the originating lenders and borrowers. Older foreclosed loans,
though, are less likely the result of lender or borrower imprudence, since the loan terms
had been met for an extended period of time prior to default; these loans are more likely
due to changing borrower or neighborhood conditions that are difficult to foresee. For
example, a foreclosure may be caused by diminished income resulting from job loss, a
sudden economic emergency, or declining real estate values— a particularly damaging
occurrence that we explore in this chapter.
We determine the age of a foreclosed loan at default by measuring the length of
time from the date of origination to the date the lis pendens was filed. We then separate
foreclosures in 2000 into two age categories: less than four years old and more than eight
years old (Table 15).
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