Another Surge of Foreclosures Feared at the End of 2010
Figures indicate that another surge of foreclosures is likely to hit America by the end of 2010. Nearly 4 million residential mortgage holders are lagging behind by at least 90 days in their monthly payments or are already in foreclosure. According to Moody’s Economy the loan modification programme of the Federal Government is hardly making a dent in the problem. Unemployment has further mired the problem. Meanwhile the government is planning to wind up many of its relief measures.
About one year ago the Home Affordable Modification Program had been launched by the Obama government. The banks that availed of it had not been fast in turning the temporary modifications into permanent ones. Bert Ely a banking consultant said, “The overarching sense is that the mortgage modification process has not worked that well.”
Government officials admitted that the programme that involved $75 billion has had suffered teething problems. Cash incentives have been offered to the lenders and borrowers to make the modification a success. The government has started thinking of changing the clauses to make it more effective. The January figures show some improvement after the Treasury Department took new measures to increase modifications permanently.
Bank of America, the largest mortgage servicer in the country said recently that the number of mortgages it had made permanent had increased to 12,700 in January. In last December the number had been 3,200. An extra 13,700 permanent modifications were in line ready to acquire the permanent status.
The number is just a pebble on the sea shore taking into account that BofA has in its portfolio 1 million mortgages that are delinquent by a minimum of 60 days. Nearly 4 million house owners are delinquent by 90 days or more. In some cases foreclosure proceedings have already started as per the findings of Moody’s Economy. So far trial modification had delayed matters and postponed foreclosures. But that would no longer be possible and by the close of this year it is feared an additional 2.4 million borrowers would forfeit their houses – it being five times more than the number noted when the decade started.
It is not as yet clear when the foreclosed properties would enter the real estate market but there is no doubt that property prices would be further pushed down to the lowest point in the fourth quarter of 2010. The situation would be grim for 25% of the home owners who have gone underwater.
