Foreclosure Process Shows Mortgage Lending Isn't The Only Problem

(MoneyWatch)  Are mortgage lenders to blame for record high foreclosures?

Some might say yes, but a new survey conducted by SGS on behalf of the Pennsylvania Association of Realtors found that the economy, not faulting lending practices, is the main cause of foreclosure in the state.

Fifty-seven percent of the Pennsylvania homeowners surveyed said a wage-earner in the home lost their job within in 12 months prior to their slip into foreclosure. Additionally, 47 percent said they were hit with unexpected medical bills.

SGS Executive Vice President Joel Searby said that "most domestic factors [that led to foreclosure] we found were job loss, unexpected bills and change in personal relationships. It was never just job loss. It was always job loss plus something else."

He refers to the phenomenon as the "plus one factor."

But maybe the idea of the "plus one factor" will put homeowners' minds at ease. Foreclosure doesn't sneak up on you because of the loan you choose or because you lost your job. The "plus one factor" posits that job loss and at least one other factor, one most likely related to the economy, are what send you into the foreclosure process.

According to the survey, bad mortgage lending isn't to blame for foreclosures in Pennsylvania. Of those surveyed, 41 percent had prime fixed loans, and only 8 percent had adjustable rate mortgages (ARM).

Searby says the main takeaway from the survey is that people must understand "it's not just about the individual type of loan you enter into but the overall strength of the economy."

The foreclosure survey also said:

• Most of the survey respondents were between the ages of 40 and 59.
• At the time of foreclosure, 71 percent had lived in their home for more than five years.
• 70 percent of those surveyed had not heard of Home Affordable Foreclosure Alternatives Program (HAFA)
• 60 percent had not heard of MakingHomesAffordable.gov

Similar surveys were also conducted in Nevada and Florida and yielded - surprise, surprise! - similar results. Apparently the "plus one factor" is at work nationwide.

Read More:

• What Does Main Street Know That Wall Street Doesn't?
• New Home Sales Fall 16.7 Percent From 2009
• Real Estate Crisis Continues - Non-Residential Construction To Fall 20% by End of 2010
• Jobs, Small Businesses, Payrolls, and the Economy
• Loan Modification Hell: Join The Club
• Loan Modification Success Story - Filing a Complaint With the OCC Can Help
• Loan Modification Hell: New Solutions To Avoid Losing Your Home

Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and The Equifax Personal Finance Blog, and is Chief Content Strategist at RealtyJoin.com, a community for real estate investors.