Foreclosure Recap – Week #57
Even though some areas in California have seen some signs of fewer foreclosures in the first quarter than in the last quarter of 2009 with a 40 % drop in notices of defaults (NODs), over 216,000 properties are affected in California which accounts for 23% of the foreclosure activity in the U.S. California homeowners average five months of delinquent payments when the lenders filed the NODs, and home equity loans in default average over $3,800 on a median $64,000 credit line. An estimated 6 million people continue to live in their homes up to 18 months after making their last payment due to the massive glut of foreclosures that has overwhelmed the legal and financial systems of many states.
U.S. home foreclosures in 2010 are on a course to exceed the $2.8 million initiated in 2009 through the Treasury’s Home Affordable Modification Program (HAMP), with more than 932,000 filings during the first three months, as an estimated 40% of borrowers helped by the programs continue to default on the modified mortgages. The median savings to 1.1 million homeowners helped by the HAMP loan modifications is $500 per month, saving a total of $3 billion in lower monthly mortgage payments, but the weak economy and lack of higher paying jobs continues to dampen the efforts of the government to keep homeowners in their homes.
The foreclosure situation is becoming so desperate that counties in Indiana are paying lenders $150 per four foreclosures to reach out to distressed homeowners to modify their home mortgages, if the settlement conference reaches an agreement that delays a foreclosure filing at least six months. Less than 2 percent of eligible borrowers had exercised their right to a settlement conference by the end of 2009, even though state law requires mediation before a foreclosure. Many homeowners facing foreclosure didn’t were unaware they had a right to a settlement conference because the required notification letter was stapled into the rear of about 20 other documents the homeowner receives, which tends to overwhelm the homeowner. The program is expected to spread statewide soon.
In some areas of the U.S. home buyers are getting unheard of deals. In Orlando, Fla. some homes near Walt Disney World that once sold for $300,000 are now selling for around $90,000, and nationally sales are up 18 percent from their low in early 2009, but are still down 26 percent from their autumn 2005 peak. But critics say that the administration’s foreclosure prevention efforts have had little effect, and the government is subsidizing those who would have purchased without the incentives: an $8,000 credit for first-time buyers and $6,500 for current homeowners who buy and move into another property. However, many analysts predict a flood of low-priced foreclosures will hit the market and push down prices in the second half of 2010.
With 13.8 percent unemployment and 80 percent of homeowners “under water” on their mortgage about half of which have at least 25% or more negative equity, Las Vegas Nevada leads the foreclosure rate in the U.S. While earlier foreclosures were entry-level homes caught in the subprime mortgage meltdown, the trend is now higher-priced homes and not necessarily from a subprime borrower. Apparently the economic damage has been done, and fewer jobs are being lost (a business must have some people to do the work!). But real wages and secure jobs are still leaving the workforce in America shaking and trying to regain its balance, while also trying to remain in their homes. Many believe that the government’s assistance will postpone rather than cure the foreclosure problem at a cost to the taxpayers who will never see that tax revenue used as originally intended, robbing Peter to pay Paul.
The sea of loan modifications is difficult to navigate. The government has certain guidelines to meet but borrowers who owe far more than their homes are worth are finding it difficult to modify their loans. Often, no matter what is tried to modify the terms of the loan, the borrower still cannot make the payments. Some distressed California homeowners have stopped making payments that they believe are unreasonably high since their mortgage payments are higher than the entire home value of the house next door. And banks are reluctant to quickly place homes up for sale or auction because that adds further to the glut of foreclosed homes and further reduces the value of homes on the market. So the banks are trying to restructure loans to keep people in their homes and making payments. Even so, in Glendale alone, 15% more homes received foreclosure notices, the largest increase in the state.
