Foreclosure Scam with Declining Housing Prices

States like Michigan have had a 147% increase in foreclosures in the last month alone (InfoTrac, 2007). The unemployment rate is also considered extremely high in the area with 8.2% of the population unemployed. If were to add the people not even registered to work within the Detroit area the numbers might actually be around 15%. To make matters worse, a new 7 year foreclosure scam is actually working its way through local banks.

In some areas around the Detroit Michigan area house values have declined as much as 20%. In a few places the price for non-traditional real estate like commercial buildings, condos and vacant land can be found at a 50% discount. This is putting a lot of pressure on people who bought their houses for many tens of thousands of dollars more than what it is currently worth.

Prior to the downswing in the economy and the collapse in the housing market, Michigan touted excellent wages when compared to many other states. The automotive, engineering and skilled labor of the area were being paid a lot of money due to technical ability and union interference. With the abundance in wages the housing prices in upscale neighborhoods continued to rise to unprecedented highs.

As housing prices continued to drop in value every quarter many workers have become frustrated with their loss of value. They are frustrated because they still owe more on their houses then they are actually worth. When they bought the house for $180,000 while still owing $130,000 but the neighbor's house is now offered on the market for $95,000 it causes a lot of speculation.

Some people are taking out a second mortgage on their home and utilizing that money as a down payment and start-up money for their new home. Once they purchase their new home they allow their old home to go into foreclosure putting additional stress on banks. The old home goes up for foreclosure, the owner walks away with $40,000 or $50,000 in cash and they get a home for under market value.