Georgia remains one of the top states in the nation for foreclosures, but new data from Atlanta-based Equifax suggest distressed homeowners in the state are fighting longer to keep their houses.
The data also suggest that so-called strategic defaults -- when borrowers simply walk away -- are likely less common nationally and in Georgia than previously thought.
The study compared whether borrowers defaulted first on their home loans or things such as credit cards. It also measured the length of time between a default on a credit card and a first foreclosure notice.
The longer the time, known as default distance, the more likely the borrower was diverting resources to stay in their home.
“That’s a bit of good news,” said Afshin Goodarzi, managing director of Equifax Capital Markets. The issue of strategic default, he said, “is not as bad as everybody is talking about.”
As of September 2010, borrowers in Georgia who entered foreclosure first defaulted on a credit card on average about 11.5 months earlier. That’s up from just less than 10.5 months in early 2008, though down from just over 12 months in late 2005, according to Equifax.
Texas and South Dakota had the largest default distance of greater than 15 months.
Georgia was sixth in the nation in foreclosure filings in 2010, according to RealtyTrac.
The Equifax data did not measure the length of time between a mortgage default and when a home is actually repossessed.
Shorter time periods between defaults also could suggest more subprime loans that went bad or high loan to home value ratios that might signal whether borrowers are underwater.
High loan to home values, coupled with reductions in home prices, increase the risk of default.
Other factors, such as if a state has a form of judicial intervention before a foreclosure, could affect the default distance.
Borrowers who defaulted on a home loan in Florida -- a judicial foreclosure state -- defaulted on a credit card on average around four months earlier.
John Bartholomew, an attorney with Atlanta Legal Aid Society, said foreclosures in metro Atlanta have moved beyond riskier subprime borrowers to more financially established homeowners who have suffered significant economic setbacks.
Mary Ellen Nicol, housing counselor with CredAbility, said struggling homeowners often use credit cards to pay for necessities after a job loss or reduction in income, to free up remaining cash flow for the mortgage. But that source of credit is temporary.
“People cashed out their 401(k), savings and other retirement, and there’s nothing left to draw from unless the situation changes,” she said.
