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Tag: foreclosure


Every day we hear about the housing market, how new homes are not being built and that foreclosures have dropped X percent from their all time highs of a few years ago but are still above historical averages. Which still means that there are a LOT of houses being foreclosed on. Here’s some news though boys and girls: it is not all because of the big bad bankers selling loans that they shouldn’t have or companies laying off entire divisions (although Detroit due to economic concentration in one industry can blame the auto industry for their woes).

One fact that is getting lost in all the short term economic noise:homes have always been foreclosed on for a variety of reasons. And the number one (before the bankers messed it up) was disability.

Home ownership has long been part of the American Dream, but if you become disabled it can become a nightmare, because few Americans have protected themselves financially if they can’t work due to illness or injury. In 2007, before all the mortgage madness, almost HALF of all residential foreclosures were due to income disruption caused by disability. HALF!

I am not a big fan of throwing additional restrictions and requirements on people, but if I were a bank I would require anyone taking out a mortgage to have disability insurance, just to protect my loan. They require life insurance through PMI, why not DI?

LIMRA, the Life Insurance Marketing and Reseach Association, has released data about income and income protection that is pretty scary.  70% of US households depend on dual incomes.  Yet only 25% of households have disability insurance.

This is scary.  Before the housing market fiasco of the past few years (fueled by economic downturns and too great financial committments to houses), the number one reason for house foreclosure was disability.  Something that can be almost completely hedged from a risk management point of view.  Yet it is ignored three quarters of the time.  Not a good thing unless you are a foreclosure specialist.