Back in mid-2006, nearly a year before I launched ForeclosureRadar.com, I wrote an article for iTulip.com to help Eric’s readers better understand current foreclosure statistics. In it, I introduced the fact that there is a base rate of foreclosure that happens regardless of the housing market. This base rate of foreclosure being due to the Five D’s: Death, Disease, Drugs, Divorce, Denial.
From the time I started buying foreclosures, through writing that article in mid-2006, the housing market was booming. Selling most homes was easy, and anyone with a pulse could get a loan (one lender actually went as far as to advertise a “pulse loan”). In this environment, many found it hard to believe that foreclosures even occurred. I initially struggled to make sense of it myself. Why would there ever be homes with tens or even hundreds of thousands in equity being sold at the foreclosure steps? Building this list bridged that gap for me. While the Five D’s now represent a small percentage of the foreclosures that we see, I still feel it is an important part of the larger story.
I’ve wrestled a bit with whether this list is right or not over the years. Some have argued that drug use is a disease, or that denial is a cop-out/catch-all. I had even added a 6th at one point, Duty, as our service members began losing their homes while serving in Iraq. I’ve since dropped Duty as part of the base rate, as I sincerely hope that it is a temporary problem that will not continue. After all the arguments, this is the list that continues to stick. Let’s take a quick look at each: