Foreclosures top 1.5 million with no end in sight
Filed under: Economy
U.S. foreclosure filings continue to rise, proving that job losses and falling property prices are overpowering any attempt by the government to modify loans and keep people in their homes. For the fourth straight month, foreclosures topped 300,000 as more than 336,000 homes reported foreclosure filings in June, up 33 percent over last June. More than 1.5 million homeowners faced the possibility of foreclosure in the first six months of 2009. That total includes properties that received a default or auction notice or were seized by the banks, according to RealtyTrac. Banks repossessed 386,800 properties during this time period.
"I don't see any turn of the tide," Donald Haurin, an economics professor at Ohio State, told Bloomberg. "The effect of more foreclosures will be continued downward pressure on house prices, and lead to difficulty making mortgage payments."
Rick Sharga of RealtyTrac is most worried about payment-option adjustable rate mortgages that are just starting to reset. People who borrowed using this type of mortgage could decide to pay even less than the interest owed, with the unpaid interest added to the principal of the loan. As home prices dropped, these homes fell quickly underwater with borrowers owing more than the house is worth. About three quarters of these loans reset in 2010 and in 2011, with the peak coming in August 2011 when 54,000 loans rest, according to data from First American CoreLogic.
More than 8.3 million U.S. mortgage holders owed more than their homes were worth and an additional 2.2 million borrowers will be underwater if prices decline another 5 percent, according to First American. "Stemming the tide of foreclosures is a critical component to stabilizing the housing market, so it is imperative that the lending industry and the government work in tandem to find new approaches to address this issue." James Saccacio, RealtyTrac CEO, said in a statement released with the data. Yet the Obama mortgage rescue programs are failing.
Allen Jones, a default-management policy executive for Bank of America, will testify before Congress today that the Obama administration stokes "confusion and delay" among mortgage lenders when it announces anti-foreclosure plans before drafting the rules. He believes the administration could improve the effectiveness of the programs if they would give loan servicers advance notice of new rules and time to review program changes before making announcements.
Jones is right. Obama announced the mortgage modification program weeks before the rules were in place. In fact, borrowers are still waiting for details about a plan announced in April that would let homeowners rework home-equity debt. By the time the rules are set people are angry, which makes mortgage modification even more difficult.
A research report released by the Federal Reserve of Boston also gives some clues as to why banks are not rushing to modify loans. The Fed found:
- Some homeowners "self-cure" and start paying again. The Fed found that 30 percent of all borrowers who miss two payments start repaying on their own. If lenders modified these loans they would have agreed to losses they didn't have to take.
- Fifty percent of modified loans re-default. Then the bank must bear the expenses of two defaults. A foreclosure filing after the first default is cheaper.
- If they delay foreclosure by agreeing to a modification and the borrower defaults a year later they may get the home worth 10 percent, 20 percent or even 50 percent less. The continuing fall of housing prices creates an urgency to foreclose.
Yet that last reason seems to be a self-fulfilling prophecy since as more distressed properties are placed on the market, the lower home prices will go. Clearly, the Obama home modification programs are not working and it's time for the banks and the administration to come up with a plan that will work. House prices will not stop dropping until the foreclosures stop and the backlog of homes on the market are sold.
Lita Epstein has written 25 books including The 250 Questions You Should Ask About Buying Foreclosures.
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Reader Comments (Page 1 of 7)
7-16-2009 @ 10:24AM
LARRY said...
OBAMA DOES IT AGAIN -- FORECLOSURES THE HIGHEST EVER-ALONG WITH DEFICITS-UNEMPLOYMENT,ETC==========================
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7-16-2009 @ 3:51PM
Amanda said...
"Obama does it again"???? He's only been in office six months...You HAVE to look at the mess he inherited...
7-16-2009 @ 8:54PM
Jean said...
You are so right...obama just doesn't get it. People try and blame this on Bush, but obama has QUADRUPLED the deficit. How is that the fault of Bush? obama is out for one thing only....power and to pay back all his crooked friends. obama is making such a mess out of EVERYTHING, even my liberal mother-in-law is disgusted with him...and that's saying something.
7-16-2009 @ 11:59AM
James said...
The banks take back the home, and resell it as a short sale, or at action.
If they can sell at such discounts, as in my issue. My home was 1,500,000.00, and now the banks are accepting 660,000.00 for the same model match.
Why don't they lower the principle, and the interest, and sell it back to the person who placed the large down payment as I did 500K DP.Only if the person could quilify to cover the modifyed payment. They resell to investors who are the main reason we are in this bad situation. Instead of helping the back bone of this country.
Obama needs to take a hard look at who he is repesenting instead of pulling rabbites out of his hat.
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7-18-2009 @ 1:21PM
LARRY said...
IF THE U.S. WANTS TO GET EVEN WITH CHINA ALL WE HAVE TO DO IS SEND-OBAMA THE HARVARD IDIOT-OVER TO CHINA TO RUN THEIR ECONOMY-AND ITS GOOD BYE CHINA ECONOMY==================
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7-16-2009 @ 10:31AM
Charles Carter said...
Good news, only 522,000 more unemployed this month. Now, only around 15,522,000 unemployed. No wonder there are more foreclosures. How many of them lost their health insurance? Employers are going to be forced to pay for employees health insurance. What about health insurance for all those unemployed? What about those that are laid off so businesses can afford to buy insurance for employees?
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7-16-2009 @ 11:22AM
tom said...
....and those 15 million doesn't even begin to include those underemployed or those whose wages or salaries are being held hostage at new lows by sneering profit minded too big too fail corps. Then you have the near retirement sellers who had planned to sell ten years ago- are now up against a flooded inventory marketplace- competing against short sellers and crap foreclosure sales lurers.
Boy oh boy. One even wonders if the mess the lenders and banks have made has made ANY impression on them- at all. A terrible scourge-- they are. Hideous, all of it.
7-16-2009 @ 11:43AM
luckysunday22 said...
Both of you seem to be blaming banks and lenders for this mortgage foreclosure problem and seem to be avoiding the biggest problem in this equation: government. Our government has been meddling with the housing market for years with Fannie Mae and Freddie Mac. Barney Frank, Chirs Dodd, and most importantly, Barrack Obama have had a direct hand in the housing crisis. All three advocated that banks were discriminating against minorities and forced banks via threat of litigation and sanctions to lend to people that were unquallified. Then government controlled Fannie and Freddie bought all of these bad mortgages and put government gaurentee behind them. Then they were bundled up and sold to unknown buyers. I always see people like you blame the banks and the private industry, but yet always avoid the obvious. If government wasn't involved, this never would have happened. No one would have made bad loans to people that couldnt afford them, no bank would have made the loans, no prudent investor would have purchased these bad securities and this economy would not have suffered an over extention of credit. Dont forget, a lot of morons in this country refied and added second mortgages on their house because money was cheap (again, low interest rates = gov fault) and purchased bad assets like cars, over done home improvements and over inflated college tuition. And most of this bad government can be traced back to democrat policies and the attitude that this country is racist and punishing the minorities in this country. Its a fallacy. And more damage has been done to all Americans because of these policies than any war ever could.
Furthermore, we asked the same people that caused the problem to fix the problem which has lead to them attempting a non violent political coupe. I propose that the government doesnt want to fix these problems. They want unemployed americans exactly so that universal healthcare will have more appeal. When people are desperate, they will give up their liberties such as the freedom to choose and direct the way doctors treat you. This is the ultimate governmental control over life and limb. There is no right to healthcare in the Constitution, nor is there a right to home ownership. Things in this country have to be earned. When it is given to people, they will never treat it as if they earned it and owned it. And the people that produce are growing smaller compared to the dependants on the system. When the have nots start stealing from the haves, the haves will not see opportunity or drive to be successful. I fear the end of this country is coming soon. There is no other simple solution to this power grab than for people of different ideologies to start to live seperate and appart.
7-16-2009 @ 10:31AM
SHUTUPDEMLIARS said...
YOUR HOME WILL BE NEXT VOTE FOR MORE CHANGE AND HOPE YOU HAVE CHANGE LEFT DEMS
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7-16-2009 @ 4:37PM
desertlady said...
You got it !!!!!!!!!!!!!!!!!!!
7-16-2009 @ 10:33AM
ajgorm said...
Hahahaha Obama nor Bush could get the banks to loan on home loans at a price we could afford they cant lower rates they wont even give us tax free incentives to buy them what idiots now it is to late. Once we hit the last of the over priced homes this will look small in comparison. Figure the high end homes will be worth half no recovery this year we need to wait till prices come down to what we can afford with these rates and costs for taxes an ins on 10 bucks an hour. Equity is the middle class purchasing power with that gone we cant borrow even for a student loan we cant afford it they cut our life line. They think FINANCIALS are the only thing to worry about with that kind of thinking we are TOAST.
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7-16-2009 @ 10:35AM
Ann Layson said...
If the Senate would have passed the "Bankruptcy Cramdown", this would not be happening. Banks would be forced to modify loans if they were afraid the judge could cramdown the price of a home to its actual value. It would stop many foreclosures and stabilize the market. The banks would lose less money then they would if they foreclosed. You would not have a foreclosure in your neighborhood bringing down the value of your home. It is that simple, but the Banks own the government. What these people are calling modifications are not modifications. The banks are taking any back payments and making them into another loan, but keeping the monthly payment the same. If they fell behind before with this payment, they will fall behind again. Banks are still raising the interest rates. We need to contact our Senators and tell them to pass this bill!!!!
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7-16-2009 @ 10:41AM
Captain said...
The modification system is a joke. It takes so long to work through the modification review process that by the time 90 days rolls around your in default. Once your in default they can proceed with foreclosure. The people trying to get their loans modified are at the mercy of their lender, and they do not care....your a number. The only way to stay out of default is to continue to pay your full mortgage payment which in all honesty if you could do you would not be asking for a modified loan. It defeats the purpose, takes any hope of salvage from you. You have probably been laid off or your pay check cut in half due to poor management or anything else not to do with you and you pay the price. Obama put the assistance out there, the details were not worked through and the lenders have no clue but to continue to work the old system.
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7-16-2009 @ 9:34PM
jack said...
sure, we should reward you for buying a house you couldn't afford..... if we want to level the playing field so that no one has an advantage over another, my interest rate should be dropped 2 points on the mortgage I can afford..... or we should keep the old system and let the dufuses who signed for something they couldn't afford... to lose it.
7-16-2009 @ 10:44AM
Dean said...
Ahhhh, I miss the good ole days when unemployment was less then 4% and the Dow was record 14,000 and the media and the dems running for office were screaming, "This is the worst economy in 50 years".
When was this you ask? In 2006 just BEFORE Pelosi and Reid took over congress.
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7-16-2009 @ 11:39AM
mif991 said...
Well stated Dean.
Although I would add that President Bush should have intervened in the racket that the Countrywide style lenders were involved in.....but I know some minority leaders and congresmen were against intervention. Question: is anyone in jail yet for any of the illegal business practices of Countrywide?
7-16-2009 @ 10:44AM
ajgorm said...
China has a right to be worried since the banks wont inflate us back up with low interest loans we need making the fed pay the balance trickle down economics found a leak that emptied the well dont count on it two years from now trust me. We will deflate till we stabalize now we have a dominoe falling to fast to stop. All the banks are doing is adding more dominoes to be knocked over in the end.. BUT as the fed keeps paying our loan for us so to speak because tax revenues wont once we lose more jobs and deflate some more no way can the fed keep these high standard over rated loans paid for without borrowing more and more. Thus we deflate till their is nothing left to balance they cant remove every drop of equity without losing their debt value they will have zero equity they must share it they cant keep it in the banks. They will own every home in America that is not paid for. How will that work sooner or later they will need to sell them back to us at a price we can afford. But that will be after they have a bank run.
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7-16-2009 @ 2:16PM
Duke said...
This is no surprise to us common folk. The experts on the economy in the ivory towers are out of touch with us on the street. It is getting more difficult to make ends. There are no jobs. What jobs there are, are part time, minimum wage jobs, hardly enough to get groceries, let alone pay the monthly mortgage payment. Note to all those experts in the ivory towers, It is getting worse, and will keep getting worse. There will be a glut of houses on the market and home prices will continue to fall. It is a buyer market, but the supply of houses will continue to grow as more jobs are lost. GM is still closing factories and businesses around them will loose revenue as well. The dominos will continue to fall for a few years then it will be a protracted long recession that will not abate until investments are made and the national debt paid down. That will take decades.
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7-16-2009 @ 11:11AM
ajgorm said...
How do we stop the domino effect on foreclosures ? How do we keep the prices from sinking further ? Now the high end homes are next to be hit. The banks have money from the fed they don’t need to sell these foreclosures the fed gives them more money to manage them they don’t need home buyers. The levy effect how long can the levy store foreclosures before the levy breaks . Foolish they will end up owning all the homes. The banks will hold these homes till the mold fills them up. Most home values will deflate to zero or what we can afford to pay and that will be way less than what it is now. From the state to utility companies the fed has proped up values that are artificial JOBS are the real fed and we don’t have new JOBS just more artificial fed money. The banks will need to sell its equity to support the interest payments they pay out sooner or later the fed cant pay more than they can tax us. Eventually the tipping point will be hit. Finally releasing these toxic loans from their books will need to be sold to WHOM jobless Americans ?? ?. The question is how long can the fed play this game by itself will they ever unfreeze credit at prices we can afford is the picture getting clearer yet or do we still blame the fools.
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7-16-2009 @ 5:20PM
del van said...
they should set up a gov mod system to bie up bad debt and take it out of the banking system. Package the loans into a family owned loan where it is a hundred year loan at good rates to cut payment less than rent. It will save the houses from going into forclosure...the loans can be assumed by other family members later...and keep the property in the family and people won't sell these houses because it will be stupid to do so.
For example a couple with a 200,000 dollar loan could cut their payment from 2200 dollars to 600 dollars it is cheaper than rent it removes all the bad debt and gets the train back on the track for prosperity. Not to mention now the govt makes money on these loans which could off set the national debt.