I would like to share this article I read in the New York Times:

http://www.nytimes.com/2009/11/12/opinion/12thu2.html?_r=1

More Foreclosures to Come


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LinkedinDiggFacebookMixxMySpaceYahoo! BuzzPermalink Published: November 11, 2009
After a few months of some better than expected housing news, home prices are likely to fall again, driven lower by a renewed surge in foreclosures. By conservative estimates, another 2.4 million homes will be lost in 2010, while prices will fall another 10 percent or so. This should be a wake-up call for the Obama administration. Foreclosures are expected to surge, in part, because lenders have been delaying the process during the long rollout of the administration’s antiforeclosure plan. But according to Moody’s Economy.com, most troubled borrowers ultimately will not qualify for help, and a backlog of bad loans will soon enter foreclosure.

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Times Topics: Obama Housing PlanThe Obama plan, which provides subsidies to lenders who modify troubled loans, has been flawed from the start. It has no teeth to compel lenders to participate. And it was primarily designed to help borrowers who defaulted because their loans had exploding interest rates or other features that made them suddenly unaffordable.

There were a lot more of those borrowers when the housing bust began, and for them, the plan’s main remedy — reducing monthly payments — could work well. But with unemployment running above 10 percent, many people are now defaulting because they have lost their jobs. They will have trouble qualifying for help, because they can’t make even reduced payments.

Millions of borrowers who now owe more on their mortgages than their homes are worth are also unlikely to qualify because borrowers without equity are at high risk of re-default, even on modified loans.

To help people with negative equity, the subsidies in the Obama plan should be redeployed so that they are used to modify loans by reducing the principal balance. That would restore equity in addition to lowering payments, and in the process, reduce the risk of re-default.

To help unemployed people who cannot qualify for loan modifications, Congress and the administration should expand programs to provide rental assistance, including help for foreclosed homeowners to rent their homes at a market rate. That would at least help prevent the blight that comes with abandoned housing.

On Tuesday, the administration announced that through October, 650,994 loans had been modified under the Obama plan. But the administration did not specify how many of those were trial modifications — reduced-payment offers that will become permanent after up to five months of steady payments by the borrowers — and how many had already become permanent.

The administration expects to provide that information within the next two weeks. Until then, it will be impossible to know how many people have actually avoided foreclosure. What is evident, now, is that at the current pace of modifications, and with the housing market coming under renewed pressure, the plan has little chance of making a meaningful dent in the crisis.

The housing bust sparked the recession. More foreclosures and renewed price declines will worsen the damage. American homeowners, and the economy, need an antiforeclosure plan that works.

Check out this article I read today on CNN:

Foreclosures: 'Worst three months of all time'

Despite signs of broader economic recovery, number of foreclosure filings hit a record high in the third quarter - a sign the plague is still spreading.

By Les Christie, CNNMoney.com staff writer
Last Updated: October 15, 2009: 7:34 AM ET

Foreclosure crisis

The number of homes receiving foreclosure filings is skyrocketing across the country. Here's the rate in your state.More What I bought with my $8,000 tax credit

These 7 new homeowners stepped up their house-hunting to take advantage of the first-time buyer tax credit -- before it expires on Dec. 1.

Rates provided by Bankrate.com.
NEW YORK (CNNMoney.com) -- Despite concerted government-led and lender-supported efforts to prevent foreclosures, the number of filings hit a record high in the third quarter, according to a report issued Thursday.

"They were the worst three months of all time," said Rick Sharga, spokesman for RealtyTrac, an online marketer of foreclosed homes.

During that time, 937,840 homes received a foreclosure letter -- whether a default notice, auction notice or bank repossession, the RealtyTrac report said. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008.

Nevada continued to be the worst-hit state with one filing for every 23 households. But even tranquil Vermont, where the foreclosure crisis has barely brushed the housing market, saw foreclosure filings jump nearly 170% compared with the third quarter of 2008. Still, that resulted in just one filing for every 5,023 households in the state -- the best record in the country.

The RealtyTrac report also unveiled the results for September, and it found that there was slight relief from foreclosure filings. Last month, notices totaled 343,638, down 4% compared with August. Unfortunately, that total accounts for 87,821 homes that were repossessed by lenders.

That deluge contributed significantly to the quarter's record 237,052 repossessions, a 21% jump from the previous three months. So far this year lenders have taken back 623,852 homes.

"REO activity increased from the previous quarter in all but two states and the District of Columbia, indicating that lenders may be starting to work through some of the pent-up foreclosure inventory caused by legislative delays, loan-modification efforts and high volumes of distressed properties," James Saccacio, RealtyTrac's CEO, said in a statement.

Most disturbing is that all foreclosures -- not just repossessions -- are rampant despite efforts to corral them. Not only has the Obama administration's Making Home Affordable foreclosure prevention program taken a bite out of REOs but lenders themselves have scaled back repossessions over the past few months to give the program time to work.

And in some low-price markets, lenders simply aren't following through on foreclosures, according to Jim Rokakis, treasurer for Cuyahoga County, Ohio, which includes Cleveland.

"They'll even set the date for the sheriff's sale, but they don't file the final papers," he said. "They hold it in abeyance and let the residents stay in the house."

In ever more frequent cases, delinquent borrowers want out of the mortgage worse than the lenders. There are no firm statistics for it, but many industry watchers claim the percentage of REOs caused by borrowers voluntarily walking away from their homes is skyrocketing.

A study of the trend by the Chicago Booth School of Business and the Kellogg School of Management determined that when home price declines drop home values 10% below the mortgage balances, people start to give up their homes. When "negative equity" approaches 50%, 17% of households default, even when they can still afford their mortgage payments.

No end in sight
The foreclosure crisis may not diminish anytime soon. "The fastest growing area is in the 180 days late-plus category, the most seriously delinquent borrowers," Sharga said. "It's going to be a lingering problem."

Plus, the RealtyTrac statistics may understate the depth of the foreclosure mess because lender and government actions have delayed many filings. As a result, some delinquencies have not been counted on the foreclosure tallies. That means the crisis may not end quickly.

And because there are so many delinquent borrowers, Sharga predicts the banks will be slow to take back their properties and put the repossessed homes back on the market.

"It's hard to envision [the banks] putting millions on properties up for sale and cratering prices," he said. "Recovery will be slow and gradual. I don't see home prices getting much better until 2013."

Interesting story I read on Reuters today:

http://www.reuters.com/article/domesticNews/idUSTRE59705J20091008?sp=true

Foreclosures mark pace of enduring U.S. housing crisis

Thu Oct 8, 2009 11:18am EDT
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1 of 3Full SizeBy Tom Brown

MIAMI (Reuters) - Every 13 seconds in America, there is another foreclosure filing.

That's the rhythm of a crisis that threatens to choke off hopes for a recovery in the U.S. housing market as it destroys hundreds of billions of dollars in property values a year.

There are more than 6,600 home foreclosure filings per day, according to the Center for Responsible Lending, a nonpartisan watchdog group based in Durham, North Carolina. With nearly two million already this year, the flood of foreclosures shows no sign of abating any time soon.

If anything, the country's worst housing downturn since record-keeping began in the late 19th century may only get worse since foreclosures, which started with subprime borrowers, have now moved on to the much bigger prime loan market on the back of mounting unemployment.

In congressional testimony last month Michael Barr, the Treasury Department's assistant secretary for financial institutions, said more than 6 million families could face foreclosure over the next three years.

"The recent crisis in the housing sector has devastated families and communities across the country and is at the center of our financial crisis and economic downturn," Barr said.

A September report by a foreclosure task force appointed by Florida's Supreme Court pointed to a shift in the root cause of foreclosures: "People are no longer defaulting simply because of a change in the payment structure of their loan. They are defaulting because of lost jobs or reduced hours or pay."

Florida had the nation's highest rate of homes -- 23 percent -- that were either in foreclosure or delinquent on mortgage payments in the second quarter, and the report said "the latest news for Florida is horrifying."

A recent pickup in sales and home prices in some regions has been heralded as a sign that the crisis in residential real estate may be close to bottoming out, after the steepest price decline since at least 1890.

But nearly half of recent sales have been attributed to foreclosures or "short sales" at bargain-basement prices.

Even as the U.S. economy seems to be recovering from its worst recession since the Great Depression, mortgage delinquencies continue to rise. And that adds risk to any relatively upbeat assessment, since foreclosures depress the value of nearby properties while eroding the net worth of homeowners and the tax base for communities nationwide.

The Center for Responsible Lending says foreclosures are on track to wipe out $502 billion in property values this year.

That spillover effect from foreclosures is one reason why Celia Chen of Moody's Economy.com says nationwide home prices won't regain the peak levels they reached in 2006 until 2020.

In states hardest-hit by the housing bust, like Florida and California, the rebound will take until 2030, Chen predicted.

"The default rates, the delinquency rates, are still rising," Chen told Reuters. "Rising joblessness combined with a large degree of negative equity are going to cause foreclosures to increase," she added.

Anyone doubting that the recovery in U.S. real estate prices will be long and hard should take a look at Japan, Chen said. Prices there are still off about 50 percent from the peak they hit 15 years ago.
Jay Brinkmann, chief economist with the Mortgage Bankers Association, said foreclosures are expected to peak in the second half of 2010. But that forecast is based on a projection that unemployment will begin falling after topping out "barely in double digits by the middle of next year."

Last week the Labor Department reported the unemployment rate rose to a 26-year high of 9.8 percent in September, in the latest evidence that a turnaround in the jobs market is the missing link in the economic recovery.

Since the start of the recession, the number of unemployed people has soared 7.6 million to 15.1 million. In Florida, unemployment is hovering at a nearly 40-year high of 10.7 percent, led by a steep decline in construction jobs.

MODIFICATIONS AND "MONSTERS"

Mortgage modifications, the centerpiece of a plan unveiled by the Obama administration in March to help as many as 9 million struggling borrowers hold onto their homes, have gotten off to a sluggish start.

The Office of the Comptroller of the Currency, which regulates U.S. banks, said in a September 30 report that banks and loan services stepped up efforts to help distressed homeowners in the second quarter, more than tripling the loan modifications that reduced principal.

"This trend represents a significant shift from earlier quarters, when the vast majority of loan modifications either did not change monthly payments or increased them," it said.

Only a relatively small number of homeowners have seen financial relief from so-called "loan workouts" so far, however, and government officials acknowledge that far more is needed to reverse the national tide of foreclosures.

Help would be more than welcome in areas like Miami Gardens where there is a pervasive sense of anger about banks and the blight caused by foreclosures in a city that once boasted one of the highest home-ownership rates in the country.

A predominantly African-American community of 111,000 people, just north of Miami, it now has a 13 percent foreclosure rate -- the second highest in Florida -- and a glut of shuttered or boarded-up homes.

"The banks were bailed out first. We all assumed that they were going to turn around and help other people but that didn't happen," said Ruby Milligan, 61, a teacher who took early retirement after suffering a mild stroke several years ago.

She received a foreclosure notice from Deutsche Bank in August last year, but still lives in her Miami Gardens home, fearing a knock on the door with an eviction order any time.

Her retiree income is considered insufficient to qualify her for any modification of the adjustable-rate home-equity loan that she took out when the property was worth far more than it is today, she said.

"I feel that the banks should write these mortgages down," Milligan said. "They wrote these bad mortgages, they created these monsters."

One way of easing the crisis would be so-called "cramdowns," a measure giving bankruptcy judges authorization to write down the principal on homeowners' mortgages.

A similar measure helped curtail family farm foreclosures in the 1980s, but Representative Brad Miller, a North Carolina Democrat, said the banking lobby killed it when it came up for approval by Congress earlier this year.
"We fought that fight before and lost it," Miller said. "The industry will continue to oppose it."

(Reporting by Tom Brown; Editing by Pascal Fletcher and Claudia Parsons)

Story from the Denver Business Journal - http://denver.bizjournals.com/denver/stories/2009/09/28/daily55.html

Nearly 1 million homes nationwide are in the process of foreclosure, according to a report Wednesday from the U.S. Department of the Treasury covering banks and loan servicers that make up 64 percent of all outstanding mortgages.

As of June 30, there were 992,554 homes in the process of foreclosure, up 15.3 percent from March 31 and up 79.4 percent from the same period a year ago, the Office of the Comptroller of the Currency reported.

While the rock-bottom sales of foreclosed properties are dragging real estate prices down, what’s on the market now is the just tip of the iceberg. The report said that 106,007 foreclosures were completed as of June 30. For every bank-owned property, there were nine more homes in the process of foreclosure.

There were 23,102 short sales in the second quarter, up 34.8 percent from the first quarter.

The report found that 5.3 percent of all mortgages were more than 60 days past due as of June 30, up from 4.8 percent as of March 31. The worst categories for delinquency were subprime loans, at 17.8 percent, and payment option adjustable-rate mortgages, at 15.2 percent.

The report noted that banks modified 142,362 loans in the second quarter, down 25.2 percent from the first. However, the effectiveness of those modifications is questionable. More than half of the loans modified in the first nine months of 2008 were found to be delinquent as of June 30.

In addition, banks agreed to 297,212 new mortgage payment plans during the second quarter, up 73.9 percent from the first quarter. The increase came mostly from the federal "Making Home Affordable" trial plan.