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Only 30 percent of borrowers who defaulted on their mortgage in 2001 had returned to the housing market within 10 years. (AP Photo)

Ten years later: Foreclosed borrowers still pay price

BY Tom Kelly  on November 1, 2012 @ 8:50 am (Updated: 2:07 pm - 11/1/12 )

Only 30 percent of borrowers who defaulted on their mortgage in 2001 had returned to the housing market within 10 years, according to a new study conducted by researchers at the Federal Reserve Bank of San Francisco. The study evaluated how long it takes borrowers to re-enter the housing market following a default on a previous mortgage.

Only 10 percent of homeowners with a "serious delinquency" were able to qualify for a mortgage within 10 years after a default, according to the study. The access to credit is the main hurdle restricting most borrowers from re-entering the housing market. The average borrower who goes through a foreclosure ends up with a credit score below 600 as a result, the study finds.

"The rate at which borrowers get new mortgages after defaulting on a mortgage is low," researchers note. "What explains the pace of return to the mortgage market? Overall economic conditions appear to play an important role in allowing borrowers who have defaulted to return to the market. When we control for factors such as local unemployment rates and past house price appreciation, we find that these variables influence the rate at which defaulters come back to the mortgage market."

The best predictor ever of when a defaulting borrower will return to the market is the change in the borrower's credit score, researchers note. After five years from the default, borrowers who return to the mortgage market have seen a more than 100-point jump in their credit score.

Tom Kelly, Real Estate Today
Tom Kelly has been a professional journalist for 36 years. He served The Seattle Times for 20 years, many as Real Estate Editor.
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Comments (3)


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  • longwayhome wrote...
    Elect a republican...
    November 1, 2012 7:06 pm
    And we can go through this disaster again. The republicans have no retention of the past, they are only interested in the $ they can generate NOW. If you voters want to go through the depression that happened when the republicans totally ruined our economy, vote for the idiots. The wars, the unemployment figures, all come back to the disaster of the 8 (eight) years of the republican failure to run this country as a business, rather than the playground of the rich republicans invested heavily in halliburton (the war machine) and pandering to the uneducated southern people to garner votes. Not one of the people I have talked to in the Greenlake area are remotely interested in the republicans. Dunderheads, all of them. The only votes romney might get in this area are...... Well, I just don't know. Where does its the moron live? Oh, I forgot, he lives in a cardboard box under the freeway and posts from the library. He's still hoping mitt is going to send him a check for being such a "good" supporter. Ha Ha, the joke is on you!
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  • SickofSeattleite wrote...
    @lonway home
    November 2, 2012 6:04 am
    it was actually democrats who forced the banks to let anyone purchase a home regardless of a down payment or income...do your research. It is also the democrats reckless spending and entitlement programs that caused our massive deficit. You can look it up...according to the Congressional budget office...Obama alone spent the most by 4 times president Bush. Ever heard of researching before spouting?
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  • SickofSeattleite wrote...
    Vote Republican!
    November 2, 2012 6:06 am
    They will prevent the economy from collapsing again by reducing Govt spending and control. This will then allow Americans to get back to work and regrow America. Democrats=mass govt, spending and control while being complete hypocrites.
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