Banks Are Now Cooperating To Prevent Foreclosures
After being recalcitrant for quite some time, the banks are at last cooperating with the borrowers to prevent foreclosures. It seems they have woken up to the harsh fact that it more costly to proceed with foreclosure than to come to an understanding. Lenders stepped in to prevent 239,000 foreclosures in December 20008 – this being the fourth running month that the figure has gone above 200,000.
Hope Now is an alliance of lenders, investors and advocacy groups for communities. It reported that December marked the fourth consecutive month that over 200,000 mortgages had been modified. Throughout 2008 there had been 2.3 million interventions.
The most important thing is that foreclosure numbers are decreasing. In December there had been 55,608 bank repossessions showing a fall from 69,000 recorded in the previous month. In October there had been 77,000 bank takeovers. In 2008 altogether 917,964 houses had been swallowed by foreclosure.
Faith Schwartz of Hope Now said, “The December results demonstrate that Hope Now members are moving aggressively to do what’s needed to avoid preventable foreclosures.” She thinks that in December there were fewer foreclosures because of seasonal causes. Lenders tend to go slow on repossessions during the festive season. Many important lenders including the two giants – Fannie Mae and Freddie Mac, have also implemented foreclosure moratoriums. Another reason was the introduction of low mortgage rates that has helped many to refinance – at least those who are not underwater.
However despite these encouraging figures the crisis is continuing. Housing pundits apprehend worse days ahead. Jim Carr of National Community Reinvestment Coalition said, “There’s an overwhelming preponderance of late that confirms that these voluntary loan modifications simply don’t work.” The body is a counseling group that gives advice about fighting foreclosures.
The US Comptroller of the Currency has recently reported that 53% of the borrowers who had recently modified their loans during the first months of 2008 have already defaulted. It is said, “The re-default rate is growing, home prices are tumbling. Repossessions may be down but the projections for future foreclosures are going through the roof.”
According to Carr the report from Credit Suisse anticipates that a staggering number of 8 million will face foreclosure during the coming next five years. The problem is that foreclosures are no longer tied to nature of mortgages but to rising unemployment. This is going to wash away all efforts being put in to stem the flood.
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