Tucson Foreclosures for Sale – The Sub-Prime Fiasco

Taking a look at Tucson foreclosures for sale, we see that some of the hardest hit areas are the poorer areas of Tucson. This makes sense as these areas would be the places that home buyers took advantage of what they though was a good deal to buy their own home, when sub-prime borrowing was still available. Of course it is the sub-prime fiasco that has been responsible for the high foreclosure rates in Tucson. It is a sad state of affairs when poor people are the ones who have to pay the highest interest rates.

Sub-prime buyers who had to make use of “Pay Day” lenders in order to raise the money to buy their own home are the present victims in the foreclosure crisis in Tucson. In some instances this has been called a financial “Shipwreck”. This is because as soon as higher interest rates apply, these home owners are no longer able to afford the mortgage repayments on their homes.

In the first place these borrowers did not have enough borrowing power to obtain a conventional loan, so they turned to unconventional lenders who made use of bad lending practices. These practices were in fact destined to lead these home owners down the road to foreclosure and the lenders were aware of this. It is in the news every day, we hear of sub-prime lenders who have perpetuated the foreclosure crisis in the US, and in fact many of these lenders have indulged in fraudulent practices.

What is even worse for sub-prime borrowers is that even though they are facing foreclosure, it get worse, because somewhere down the line they will also be responsible for a large tax bill. The IRS considers that any amount which is not recovered by the lender on the sale of these homes is income and this is taxable. An example of this is:

The amount borrowed = $200,000
The amount recovered after sale of Tucson foreclosure = $150,000
Amount considered to be income by the IRS = $50,000
Taxes, penalties and interest will b e due on $50 000

But is there a good side to sub-prime lending? Apparently so! So far figures have indicated that less than 15% of sub-prime borrowers have made late mortgage payments. This means that even if as much as 20% of sub-prime borrowers undergo foreclosure, the 80% that are still making their mortgage repayments will still be happily mowing their lawns. Meaning that 80% of sub-prime borrowers are creating their own wealth in the form of equity in a home.

The suggestion is that the sub-prime market should be cleaned up and people whose homes are in threat of foreclosure should be salvaged from aggressive lenders. The good thing about sub-prime lending is that it caters for poor minorities in Tucson and other US cities.

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