Over the last eight years, adjustable-rate mortgages (ARMs) have gained popularity, enabling buyers to afford more expensive homes with their budgets.

Now, with the introductory period of many adjustable-rate mortgages (ARMs) ending over the next few years, monthly mortgage payments are projected to rise significantly, from $1,000 to $2,300.

Here is an excerpt from an article by NBC from June 9, 2023:

“A new study shows home foreclosures in California are up more than 20% from this time last year.
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The California numbers follow a nationwide trend and are the second highest of any state in the country, but they are nowhere near the number of foreclosures seen during the 2008 crash.
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Part of the reason many are defaulting on the mortgage loan is the adjustable rate mortgages that have shot up suddenly after the recent rise in interest rates.”

The article's point was that home buyers seeking adjustable-rate
mortgages in this high-rate environment could be at an increased risk of foreclosure...

"The Mortgage Bankers Association found that applications for 5/1 adjustable-rate mortgages (ARMs) climbed 32.5 percent in the week ending October 6 as loan rates fell to the mid-6 percent range.

Meanwhile, the total number of ARM applications surged 15 percent last week, and in what has been the highest percentage since November 2022, borrowers who were looking for an adjustable-rate mortgage (ARM) made up 9.2 percent of the entire group."

In the memo, Mortgage Bankers Association Deputy Chief Economist Joel Kan explained a bit about how he saw this affecting foreclosures."

The yield curve has become less inverted in recent weeks, and ARM pricing has certainly improved.

This could lead to a spike in foreclosures in the future as ARMs are generally far riskier than traditional 30-year fixed-rate mortgages. The reason is that while traditional mortgages will stay the same no matter the year, an ARM changes after the introductory period to reflect current rates.

Sometimes, borrowers plan for rates to drop after the introductory period, while other times, they don't expect to own the home for long. Still, occasionally, homeowners are punished for choosing these riskier options when mortgage rates rise, and they are forced to pay a higher amount.

Anyone who took out an ARM before the COVID-19 pandemic, for example, and did not take the opportunity to refinance while rates were at the lowest point in history, is right to have regrets."

An avalanche was sure to be building underneath. But what stopped the downfall?

COVID-19 has touched every part of the world, primarily because it had stopped the flow of income, spending, and money.

Mortgage payments were no different.

In fact, 3.4 million homeowners paused their payments in May 2020
(according to the United States Government Accountability Office).

When the CARES Act was announced, millions more received relief from possible foreclosures.

Banks brutally and aggressively started to pounce on this new found money.

After the payment freeze period from the COVID-19 foreclosure moratorium, which by law paused millions of active foreclosures for 18 months, the forbearance amount immediately became due on millions of mortgages.

According to real estate data provider ATTOM, lenders repossessed nearly 96,000 properties during the first three months of 2023, up 22% from the same period in 2022.

The lenders have little reason to work with borrowers when they can immediately recover the entire loan amount plus interest and fees at a foreclosure action.

The greed of these banks and mortgage companies escalated so rapidly that the government had to intervene once again.

This is a deeply troubling and often overlooked trend unfolding beneath the surface of America.

Most people worldwide feel disillusioned with the current financial systems, perceiving them as rigged against the average person. It has become increasingly difficult to get ahead, as each dollar stretches less than it did just a few years ago.

So, what do we do?Do we sit idly by and watch this unfold?

Do we turn a blind eye and ignore the plight of those impacted?

These are the critical questions we must ask ourselves as we navigate this challenging reality.

We can’t reverse the foreclosures already taking place.

However, what we do is step in and help those affected emerge as winners from an otherwise tragic situation.

It is a simple concept to understand.

When the government executes a foreclosure auction and the sale creates an amount larger than the amount owed to the lender, this amount is called an “overage.”

Here is an example:

Someone owes the bank $120,000.
The home is sold at a foreclosure auction for $300,000.

That $300,000 remains in the government’s bank account. It doesn’t matter if the homeowner has paid off 29 years of a 30-year mortgage—the bank will still initiate foreclosure after just three missed payments.

The additional $180,000 is referred to as the overage. The individual who was foreclosed on retains legal rights to claim these funds, typically within a window of three months to two years, depending on state regulations.

After that period expires, the overage amount is automatically forfeited to the local government entity.

Here are three examples of the state laws mandating the distribution:
2023 California Code
Revenue and Taxation Code - RTC
DIVISION 1 - PROPERTY TAXATION
PART 8 - DISTRIBUTION
CHAPTER 1.3 - Distribution of Proceeds From Sale of Tax-Deeded Property
Section 4675.

4675. (a) Any party of interest in the property may file with the county a claim for the excess proceeds, in proportion to that person’s interest held with others of equal priority in the property at the time of sale, at any time prior to the expiration of one year following the recordation of the tax collector’s deed to the purchaser. The claim shall be postmarked on or before the one-year expiration date to be considered timely.

2022 Texas Statutes
Tax Code
Title 1 - Property Tax Code
Subtitle E - Collections and Delinquency
Chapter 34 - Tax Sales and Redemption
Subchapter A. Tax Sales
Section 34.04. Claims for Excess Proceeds

Sec. 34.04. CLAIMS FOR EXCESS PROCEEDS. (a) A person, including a taxing unit and the Title IV-D agency, may file a petition in the court that ordered the seizure or sale setting forth a claim to the excess proceeds. The petition must be filed before the second anniversary of the date of the sale of the property. The petition is not required to be filed as an original suit separate from the underlying suit for seizure of the property or foreclosure of a tax lien on the property but may be filed under the cause number of the underlying suit.

2023 Florida Statutes
Title XIV - Taxation and Finance
Chapter 197 - Tax Collections, Sales, and Liens
197.582 - Disbursement of Proceeds of Sale.

197.582 Disbursement of proceeds of sale.—

(1) If the property is purchased by any person other than the certificateholder, the clerk shall forthwith pay to the certificateholder all of the sums he or she has paid, including the amount required for the redemption of the certificate or certificates together with any and all subsequent unpaid taxes plus the costs and expenses of the application for deed, with interest on the total of such sums for the period running from the month after the date of application for the deed through the month of sale at the rate of 1.5 percent per month. The clerk shall distribute the amount required to redeem the certificate or certificates and the amount required for the redemption of other tax certificates on the same land with omitted taxes and with all costs, plus interest thereon at the rate of 1.5 percent per month for the period running from the month after the date of application for the deed through the month of sale, in the same manner as he or she distributes money received for the redemption of tax certificates owned by the county.

After-foreclosure real estate is an extremely obscure aspect of law, real estate, and the court system.

To have these funds released, an attorney is typically required to navigate the legal process and sue the government entities involved.

That’s crazy, right?
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It gets even crazier because some states, such as Texas, impose strict limits on how much an attorney can charge for these cases. In Texas, attorneys are capped at charging no more than$1,000.
What attorney is going to work for that??
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Exactly. None.
The government has made it nearly impossible for individuals who have faced the tragedy of foreclosure to access the funds they are rightfully owed, burdening them with endless regulations and the necessity of legal representation.
How can someone who has just endured the financial hardship of a foreclosure possibly afford an attorney?
They can’t, right?