According to the program of Making Home Affordable, the lenders get the taxpayer funds so that they cut down on the mortgage repayments to be made by the borrowers. This can be easily done by reducing the rate of interest against their loans. Some others might extend the period for repayment of the loans. The Treasury Department’s report featured that hardly 11% numbering to 95,000 borrowers in Bank of America are felonious and they are the only ones who qualified for the program of modification of the loans. Comparatively, in J.P. Morgan Chase this figure was 27% or 117,000 borrowers and in Citigroup the percentage is 33% amounting to 68,000 borrowers. Moreover, the figures for Morgan Stanley owned Saxon Mortgage Services is 41% approximately amounting to 32,000 borrowers.

Ken Scheller, the senior vice president in the home retention segment at Bank of America observed that, “We’re sure working hard. We don’t want to be down there.” He further emphasized on the fact that the bank apparently altered 215,000 mortgages. These modifications were done out of the realm of federal program. This also included some of the settlements worked out with the attorneys general in relation to the subprime loans that the Countrywide Financial had issued. Countrywide Financial was taken over by the Bank of America in 2008.

According to the industry officials, among the 62 lenders contributing in the federal program were also ramping up. According to the Wells Fargo records, the volume of calls tripled as soon as this program was announced in the month of February. This forced the company to hire at least 5,800 employees more just to manage the requests from borrowers applying for loan modifications. Citigroup was no exception, as they had to increase the number of from 450 employees to 4000 and above to handle their loss-mitigation segment early last year. According to the observations of Mark A. Calabria, an Cato Institute, financial regulation expert, “This was a much bigger wave than the lending industry was expecting.”

The Bank of America seems to face more problems primarily as, its cases of mortgage and faulty borrowers increased greatly as it gained Countrywide according to the observations of the analysts. The loan portfolio of Countrywide featured risky mortgages coupled with faulty borrowers. The crisis of foreclosures has aggravated even after the Treasury officials tried to control the financial institutions through numerous programs in the month of July. Due to the increasing rates of unemployment, increasing number of borrowers is falling behind with their repayments as observed by the economists. At least 4.4 million among the borrowers are homeless since the crisis commenced from 2007 and the Moody’s Economy.com observes that approximately another 2 million are going to lose their homes in 2009.

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During 2007-08 the banks were almost at the edge of collapsing due to the huge number of loan defaulters, who needed help under the ‘$700-billion Troubled Asset Relief Program’ launched by the government. At the same time, the lenders are pressurized so that they find solutions to help the borrowers in trouble. When this is possible the club will let the borrowers get their loans adjusted or the bankruptcy court might just forgive them through the process of cramdowns.

Sean O’Toole, the chief executive of ForeclosureRadar selling loan default data commented that, “If there’s so much as bad news on the foreclosure front, members of Congress will again start talking about bankruptcy cramdowns. We’re probably pretty close to the level of foreclosures we’re likely to see going forward.” As per the MDA DataQuick reports, at least 50,013 homes faced foreclosure within the 3 months by the end of Sept. 30. Last year this figure had risen to approximately 79,511 homes within the same time.

The default notices are in fact, the initial stage of foreclosure and this hiked to almost 19% featuring a figure of 111,689. However, the aspect of stagnant foreclosures compared to the rising defaults proves the leniency of the banks. With the decline of the default notices to almost 10.3%, the foreclosures are expected to reduce. The estimated inventory of Californian properties comprise of 90,000 foreclosed properties according to ForeclosureRadar.

Their estimation also states that at least 140,000 properties are scheduled for auctioning. It will take quite a long time in backlog clearance as numerous properties are still in the clutches of defaulting. However, the aggression of the banks regarding home foreclosing and the property market’s strength are going to determine a lot of things. Moreover the homes that have been foreclosed were resold very quickly.

In California, the last 3 months witnessed the selling of at least 125,000 homes and among these approximately 40% of the houses were foreclosed houses and in 2008 this number was almost 60%. Currently quite a few companies place the foreclosed homes for auctions at the Los Angeles County Superior Court.

The Congressional Oversight Panel considers that the administration needs to focus on more anti-foreclosure programs. The First American CoreLogic data shows that around 35% homes in Los Angeles going through mortgages are in a confusing state. The Obama administration is also considering the option to sell of the distressed properties to those investors who will allow the old owner to stay in that home and pay rent.

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Bank of America struggle hard to alter the loans to stay ahead of the deadlines given by the government.

The employees have to keep a track of how much hard work they have to put in to meet their target. They have a cardboard thermometer located just outside the command center in third-floor. This thermometer helps the employees to realize the degree of their achievement and how much more they have to strive to get at least 125,000 borrowers to sign up for the loan modification program.

This institute just like the lenders experiences numerous challenges while dealing with the crisis of foreclosure. However, the bank is racing against time as the November deadline is approaching closer. Unfortunately, the Bank of America is lagging behind the other banks in terms of loan modification as reported by the Treasury Department. The efforts of the company were greatly hindered due to a shortage of staff members, moreover, their computers and fax machines had to be adapted to match the scale of the loan modification program. Their efforts were stalled to a greater extent due to their traditional way of modification as they demanded income documents and other paperwork to be completed before the modification process is approved.
It was only in August the bank allowed certain flexibilities and some modifications were done in absence of the required documents. To add to the problems of the borrowers, the Bank of America misinformed them about their failure to qualify for the foreclosure-prevention plan by the administration as their loans did not have the backing of the government based mortgage agencies like Fannie Mae or Freddie Mac. The bank claimed in the letter to the borrowers that, “Bank of America is not actively participating in this program.” The bank ceased to send these letters only after a reporter questioned them about the letter. According to the representative of the bank, this issue is being reviewed and that she has no idea as to how many borrowers got this letter.

Although, the lenders are pressurized by the government to help as many borrowers as they can, somehow the employees of Bank of America fell apprehensive about the fact that if all the cases are genuine and if all the borrowers asking for help actually need it. Jerry Durham, the vice president of home retention in Bank of America feels that, “There’s a difference between hardship and entitlement.”

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The Federal Reserve took initiatives separately for making the terms of lending far more feasible and comprehensible. This is mainly a part of the mortgage melting process that led to the onset of recession all over the world.

Although, as per the economic records the recessionary process seems to reducing by the end of 2009, but at the same time, a fresh set of foreclosures has become a prime concern. Rhode Island Democratic Sen observed that, “It is clear to me that Congress must do more to help struggling American homeowners.”

According to Sheldon Whitehouse, an important proposer of the mortgage cram-down bill, “If we fail to act, I fear that we put ourselves at risk, that a vicious cycle of foreclosures, falling home values and declining tax revenues will keep us in recession for years to come.”

Whitehouse, chairing a Senate Judiciary subcommittee evaluating the calculation, called the Senate to have a serious appreciation at legislation for cram-down, as one among his elements, justifies concerning the incapability to alter two mortgages.

The industry of financial services and numerous Republicans stringently went against this decision and hence this helped to stall the legislation in Senate following the passing of the measure by the house.

Thanks to the cram-downs, the bankruptcy judges would now have the authority to cut down on the amounts of loans so as to help the borrowers to pay back their debts and also to sustain their homes as well. In fact, this proposal turned out to be one of the prime alternatives of the loan alteration plan.

In the meantime, Fed proposed the passing of fresh rules of disclosure that focussed on the most hazardous features of home equity loans and mortgages. The hazards include the likes of changeable rates and prepayment penalizations including the rules to stop the brokers of mortgages from manipulating people from running into costlier loans.

According to Fed Chairman Ben Bernanke, “Consumers need the proper tools to determine whether a particular mortgage loan is appropriate for their circumstances.” Until the next year these regulations would not be operative on a regular basis.

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There are numerous such families like the Doyle’s who are in such a distressed condition and according to Craig Obama’s venture with loan modification has literally been unable to improve the conditions. Contrarily, a Chase representative, Jennifer Zuccarelli, commented that there has been some misunderstanding regarding the Doyle family case and the bank is trying to solve this.

The demand of the Doyles was rendered ineligible by the bank as their loan amount was too high and not applicable for the Obama administration program.

According to the other key lenders, they are already working hard enough to process the requests of loan modification from numerous borrowers. According to some lenders, this entire procedure took time, as Obama’s plan was mostly, not chalked out until March.

As per this plan, in case the amount to be paid each month by the borrowers is cut down by 6% the ratio of mortgage-debt-to-income hence the amount to be paid will be balanced at $1,000 payment for 3 years as long as the borrower continues to pay. This monthly amount should not be less than 31%.

As soon as the trial period for 3 months is over and the loan documents get signed the servicer is allowed to pay approx $1,000 as the incentive and the investor gains $1,500 in the process. The investors get an incentive as this loan modification program is mainly aimed at those loans, which are tough to alter against specific securities backed by mortgages.

In fact, the government is also attempting to put away a specific amount to be used for aid of literally 5 million families. This amount will be used for re-financing to better and long term deals of mortgages. This transformation is done mainly from the typically difficult mortgages, which are adjustable, and their payments could rise to become highly unaffordable with time.

Loan modifications can help borrowers by reducing mortgage principal, the interest rate or the term of the loan. The government also has set aside money to help up to 5 million families refinance into safer long-term mortgages from risky kinds of adjustable mortgages whose payments could soar to unaffordable levels.

As per the reports of the Bank of America, there were approx 232,000 mortgage modifications since the past year. This year by the first quarter, the bank has modified almost 157,000 loan applications. All this was done prior to the beginning of the operation of the home saving program by Obama’s administration.

Last year Bank of America agreed to alter the loans for some homeowners in order to resolve the demands from the attorney general for each of the 11 states. The bank decided to alter the loans for those homeowners who had taken risky loans resulting to a mammoth amount for re-payments. These claims mostly came from the borrowers of the Countrywide Financial, which was taken over by the Bank of America in 2008.

Search Foreclosures by state

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An increase in the number of foreclosures and a fall in housing prices are the two major implications of the failure of the sub-prime loan market.

In Hawaii, about 1599 subprime loans were extended last year and there are chances that all of them could end up into foreclosures. With an increase in the number of empty houses, the supply is far more than what is actually required, thus reducing the demand. If this continues, the market will be left with only a few buyers. However, not all housing experts share this view.

In 2006, 78 percent or 672 houses experienced foreclosures over the preceded year as per the data released by RealtyTrac, a real estate research company.

Generally, people who do not qualify for a fixed interest rate loan scheme opt for sub-prime loans. These loans have low monthly installments in the beginning, but later on rates inflate causing problems in monthly installment payments. Interest only loans or no money down loans make up the bulk of the sub-prime loans market. An increase in the interest rates later on in the loan plus a decline in the real estate market make things very difficult for homeowners. Because low market demand of real estate cause hindrances in refinancing.

Sub-prime loans were popular when property prices were increasing briskly. Estimates state that out of the 8310 loans made available in 2006 in Hawaii, 20.1 percent loans will end up in foreclosures. This figure is double the figure seen during 1998 to 2001. The estimated countrywide delinquent loan rate of 19.4 percent is also less than that of Hawaii’s. This situation is worrying officials at the Center for Responsible Lending.

There are so many lenders who have become bankrupt, and those who have not are leaving the sub-prime loan market for good. The short selling route is frequently used by some of the lenders who thus manage to get at least a bulk of the amount if not the full amount from the borrowers. It has also affected the financial market severely which in turn is affecting the stock markets.

Due to unconstructive sub-prime loans, market investors are also washing their hands off from it. This has made the share of some of the banks like the ‘Bank of Hawaii’ and ‘American savings Bank’ low, but bankers still believe that the real state market in Hawaii is sturdy. Plus Factors like a strong economy, good employment level and fine income development will hopefully change the foreclosure crisis in Hawaii soon.

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Florida – once the hot spot of housing sector is now under the storm of foreclosures. Signs of resale can be noticed on most of the houses of Cape Coral, a beautiful place on the gulf coast of Florida. The once flourishing real estate market of Cape Coral now appears to be at its closing stages.

People have to leave their three bedroom and two bathroom luxurious apartments for a condensed asking price. The asking price of these houses is priced to match the amount owed by the homeowner. Sub-prime loans and the current credit crisis are among the few but major reasons for the current condition of the people of Cape Carol.

Increase in property taxes and also the augmenting rate of insurance, after the hurricane in 2005; have affected the lifestyle of the people here. This is also a reason why people are leaving Florida, to secure themselves from losing all their money. People leaving their houses also added to the piled stock of empty houses apart from foreclosure mortgages.

For the natives of Florida, the great depression has already come. More than 41 percent of single family owners, at a single point of time, have listed their housing at prices lower than $249,000 – the median market value, while just 17 families have priced their houses above the market value.

Builders are gradually removing their housing stock at discounted rates. But investors who are buying them will come to know the actual price of the deal only while maintaining the property. The real estate market in Cape Coral town has dried up. So builders want to shed off their liability of the piled stocks as early as possible.

Big houses are being sold off at the ground level prices. For them even a delay of one day could bring more losses. And for some, it is the transaction they were waiting for their entire life. Its like investors are getting prosperous on the ladder of someone else’s misfortune.

Builders who go by the short sell method are happier than those who don’t. This way, they at least get the bulk of their amount if not the entire amount. It also helps them in shedding off their inventory.

There are also people who buy houses from banks and lenders in Cape Carol and then sell it off at higher prices. For them, it has become a regular business. Builders ultimately find themselves a potential buyer. For the buyer it is like buying a dream home at much lower rates all thanks to the large number of foreclosures in the state.

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Today, the face of the New York Stock Exchange (NYSE) has changed. Though this might be a temporary change, but one can see the close relation of the sub-prime tension and worry to the NYSE, which hit a low of 9087.75 this Friday. Foreclosures and sub-prime data play a vital role in and give instant reactions in the U.S. stock markets.

The current foreclosure crisis has caused a major downfall in the real estate sector. Slow construction movements along with the sluggish pace of regional factories are some of the major implications of foreclosure. And its direct effect is seen in construction of new homes.

A report on regional factories by Philadelphia Federal Reserve Bank, gives an idea about the recent depression on Wall Street. The downfall in construction activities was at its highest in July 2007 in the U.S., and the slow pace in factory works was seen higher in the Mid-Atlantic region in August 2007.

In July, housing activity slowed to its worst by falling 6.09 percent. Permits to build houses, and future construction signs have also gone under the surface. In July, the fall in building permits was 2.79 percent, the lowest since October ’96. In the south, the condition was worse as construction in new housing dropped by 10.9 percent. But in the Midwest, housing starts showed some improvements. West and North-east also showed decline in housing starts. Earlier this July, house starts were down by 21 percent and new permits by 22.5 percent.

In August the business activities were worst than expected. The Index showed 0.0 whereas the expected figure was 9.0. In July, the situation was slightly better as the Index was at 9.2. Dow Jones saw a decline in its average by 2.66 percent before the day ended when this news came out.

The Labor Department data assured a steady job market in spite of the rise in the number of U.S. workers signing up for jobless benefits. Last week the number was 322100. Economist were, before the weekly report (August 11 report), actually expecting declines in the claims for jobless benefits to 312999 from the previous week i.e. 315999.

A variation in weekly data is ordinary. For economists, a weekly increase in the jobless claims is not something to be worried about. But they still believe in scrutinizing this activity closely because the four weeks moving average data can give us a true picture of the economy.

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A real picture of foreclosure mortgage can be seen in Stockton. There are at least five homes for sale from which about two to three houses have been reclaimed by the lender. Specifically, Clark Fork Circle’s northern side is the area where the mortgage tension is at its peak level.

Stockton was once considered as a favorite destination for real estate. But now, as per the estimates of RealtyTrac, it is rated as the place with the highest foreclosure rate compared to any city in the country. Earlier, having a house in Stockton was more easy and affordable than to have one in South Bay. However, the scenario has changed a lot in the last two years. Thousands of people are now facing mortgage issues.

People from other regions located themselves in Stockton searching for reasonable homes. As a result, the area became well populated, and expanded a lot. The location of Stockton was also another contributing factor. It is about 90 to 91 miles east of the silicon city i.e. San Francisco.

Even now, an average house for a family can be bought for $355,000. The main reason for increasing foreclosures in this area is sub-prime lending. Many current deals were supported by sub-prime loans. Lenders provided complete loans with minimal down payments to the homeowner, but the sudden increment in the interest rate later on affected many of these deals.

Many nonprofit organizations are currently working on this issue. They are asking lenders to freeze these foreclosures. They are also extending credit to low salaried families. Senior citizens and immigrants are affected most by the lenders actions.

Not only Stockton, but also other cities of California like Modesto and Merced are among the top cities for foreclosure filings. All of them were predominantly made up of agricultural land earlier. RealtyTrac findings rank California at number three in foreclosure mortgages. The other top places are occupied by Nevada and Colorado. DataQuick, another real estate tracking company, confirmed that the foreclosure crisis was hitting the state the worst in the last two decades. There have been 54,100 cases of delinquent loans in the state between May and August of this year.

Short sales, as the relief, are extended to homeowners by some of the brokers in Stockton. Short sales means the homeowner can pay back a bulk of the amount to the lender, if not the entire amount. But how many homeowners this will save is a big question since there are thousands of people affected by the foreclosure crisis countrywide.

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The increasing rate of foreclosures forced top officials of the city to call for a meeting. The Main agenda of the meeting of Federal Reserve Board’s Consumer Advisory Council in Washington on Thursday was home mortgage foreclosures. A report by the central bank pointed out the sluggish growth rate of loans in the real estate sector in the last four years due to the constant increase in foreclosures. The meeting was attended by chairman Ben Bernanke along with advocates of the bank. Fed Governors Susan Bies, Frederic Mishkin and Randall Kroszner were also present.

There has been a steady increase of the Fed interest rate for two years which in turn, slowed down the housing sector and also suppressed the demands of loans. A homeowner’s situation has been quite distressing of late. Fed’s periodical “Flow of Funds” account shows that there is just a marginal gain -$793.5 billion -in mortgage borrowing from the year of 2002. This is the smallest increase in loan figures since 1989.

The benchmark rate of Fed in June was 5.25 percent. But in 2005, the net new borrowing of loans increased by $ 1 trillion, and then the prevailing rate of the Fed interest rate was 3.2%. Experts believe that the Fed will keep the rate unchanged till September 2007.

In the meeting, the condition of homeowners in Philadelphia, New York and Denver was discussed. In all these areas the homely ambiance is fading away because of the burden of loans or due to foreclosures. The delinquency rate, on the loans taken from every bank, has increased by 2.10 percent. This is highest figure since 2003.

The fact that there are 1.21 million families at stake due to foreclosures made Stella Adams, an executive director 0f the North Carolina Fair Housing Center (present in the meeting) very sad. RealtyTrac data confirms that there were around 1.19 million foreclosures reported countrywide in the previous year. This figure is 41% more than that in 2005.

Advocates present in the meeting believes that the main culprit behind this is sub-prime lending and the poor paper work of loan agreements. Also, the segment of people who fall in this bracket are from the middle class strata with scarce bank accounts. These are the people who generally avail of sub-prime loans. On 2^nd March, regulators of the bank released the proposed guidance on subprime loans.

This meeting has definitely made the chairman Ben Bernanke and the other involved people cautious about increasing foreclosures in the real estate sector. We can but hope for an improvement in foreclosure figures in the future.

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The booming real estate market has encouraged a new player in the market i.e. Credit extending agencies. These agencies provide loans to people at low interest rates. Wooed by this, people buy a new house thinking the rates will not change much. But the scheme that seemed to work very well in the beginning has now proved out to be nothing but a pure farce as the number of foreclosure filings are increasing every day.

Home loans offered in this segment often bypass verification by lenders, brokers, agencies, firms and investors. Being spread out all over the countryside, this makes it very difficult to map out genuine ownership. In the case of Chase Home Finance (CHF), for instance, a homeowner used to send payments of his mortgage to CHF. The homeowner had to divert his monthly mortgage payments towards some other responsibility and so he could not meet his payments. It was CHF who initiated foreclosure proceedings and scheduled the auction date of the borrower’s house.

The homeowner asked for either a break with a new payment scheme or a delay in foreclosure proceedings, though there was little CHF could do as they were not the actual investors. They were just a service provider. It was an unknown investor who was actually calling the shots. The investor denied making any changes.

Similarly, there are many other homeowners trying extremely hard to save themselves from delinquent payments. But what they get at the end is nothing but a simple ‘we’re just the service provider” line. A couple of decades ago the scene was different. Then, neighboring institutions carried out the entire procedure and services of mortgages. The current situation has made the attempts of officials in Massachusetts and housing lawyers very difficult in resolving this problem.

Nowadays, lenders sell off mortgages to an investment banker. These banks in turn sell bonds to investors, assuring them pay offs with ready money from the payments of mortgages received by the borrowers. These bonds are called mortgage-backed securities. In this, property mortgages are traded for profit like buying or selling a house.

The foreclosure problem has not affected real estate prices too much. In fact, as stated earlier, foreclosed homes are being looked upon as an opportunity by investment bankers. People should be more cautious. They should know the complete details of a deal i.e. what they are buying, when they are buying and whom they are buying from. It could end up saving them a lot of grief later.

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Real estate industry is growing drastically and so are the foreclosure fillings. As per the fresh statistics in the first half of the year home foreclosure filings augmented in the Capital Region though the filings statewide have receded.

Foreclosure filings are observed more in that segment of Capital Region where initially it was unseen. It seems foreclosure issue has turn into an endless fraction of the Real estate.

If we talk about numbers then, as stated by the Realtytrac (California based company), there are 691 foreclosure fillings in the area. This is more than 581 filings which were observed in the entire 2006 year. These types of cases are seen more in Saratoga and Renssealaer County. But from January to June this year, there has been slight decrease in the statewide foreclosure filings compared to that in the last year i.e. from 26526 in 2006 to 26147 this year.

“Sub-prime loans” which are extended to people with low earnings has very less interest rates initially, but the rates rise tremendously in the later period. This type of loan has caused the boon in the real estate and at the same time has increases the rate of foreclosure fillings. Well it’s still not clear yet whether the Subprime loans are the main culprit behind the increasing number of foreclosure fillings in the Capital Region.

But Attorneys say that customers now and then suffer from changing rates. Their clients are generally from middle class strata having Real estate valued in the range of $150,000-$300,000 and are not poor .It is their flawed credit account that force them to indulge into subprime loan.

There are various other reasons that cause the homeowners to foreclose their property even if they have taken loan on fixed rate basis like loss of job, death of the earning member of the family and so on.

Apart from Capital Region, foreclosure rate have also increased in Albany and other parts of the country. As a result, legislation that would prevent people from taking subprime loans is introduced in these areas. Also various lending programs are introduced by the state to help those who need financial aid. Under these programs the mortgages are provided at a fixed rate for 30 -40 years. It is provided only to them whose risk factor is much higher.

Foreclosure issues cannot be taken lightly and so apart from government intervention to protect the interest of the homeowners, general people should also act proactively and do their homework thoroughly before investing into Realty. This also includes the basic credit check of their account.

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Recently, Bargain Network reported that there were foreclosures for one in every 877 homes countrywide in June. It calculated 5,283 Michigan foreclosures for June.

As mentioned in Part I, Willie Al Thomas was able to keep his home when he got some much-needed help from Carmen Fernandez, who works in Detroit as a counselor for foreclosure prevention at Southwest Housing Solutions. Southwest Housing Solutions is an organization which is affiliated to Neighbor Works, which is their partner in this foreclosure avoidance program.

A booth had been set up by Fernandez at a housing seminar which was attended by Thomas at the Wayne County Community College. Since Fernandez began her current job a month ago, she has seen over forty people and has been able to help around 25% of them.

Many people come to her through their toll-free number, 888-995-4673, which was put up by the Washington community development group NeighborWorks America. Her organization is a member of the same group.

She councils people looking to get loans to ascertain whether she can be of any help before she actually begins. Even though the nationwide toll-free hotline was started just a month ago, it has received over 1,000 calls daily. Her job is to be the third party connecting lenders and borrowers.

“It helps to have that third person there,” Fernandez said. “I help remove the emotions. I’m working for the client and help the best I can. Many times, they’re upset and don’t understand what the lender is talking about. I’m able to explain to the lender what the client can do, and I can explain to the client how the lender is able to help them.”

Fernandez has assisted borrowers in modifying loans, persuaded lenders to relinquish charges and parleyed better terms for these loans.

Thomas’ latest mortgage, for example, had not set up his property tax escrow account. The company had sent Thomas a notification for $1,786 to pay for the taxes that the lending company, Litton, had already paid earlier. Though he had been given four months to make this payment, his fixed income as a veteran of $1,500 a month made it impossible for him to make this payment.

Fernandez said that the bank then made him another mortgage plan of $1,453 a month. This new plan included these taxes which had to be paid, and stretched payments over an extended period of time, though they both knew that he’d probably be unable to afford even that.

Eventually, she was able to get Thomas a 30-year mortgage with payments under $1,200 a month and an attractive rate of 6.375% including taxes. An angel in disguise, some would say.

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In 1977, Willie Al Thomas picked up a nice South Rosedale Park brick bungalow for $23,000 and took out a mortgage for it. He was doing quite well too, but a few years back, he took a home equity loan of $121,000 as he needed money to get his children through college and pay some bills. He got a good loan as his home in Detroit had appreciated in value quite a bit.

Thomas, 59, refinanced a few times again but this March, his loan started to untangle. He couldn’t keep up with his monthly payments which had ballooned from just $767 in February to around $1,786 in March. As a result, his lender Texas-based Litton Loan Servicing LP — began proceedings against him for foreclosure for his home this June.

Just a couple of days before a Wayne County sheriff’s auction might possibly have separated Thomas forever from his property, Thomas learned about this new movement which assists homeowners in avoiding foreclosure. He was able to save his home when he got help getting his loan restructured from a counselor and he was able to save his home.

Shocked by the dramatic increase in foreclosures in many states, which includes Michigan, an association of mortgage lenders along with community organizations has started a public service program which aims at getting help for borrowers who are at risk. Among these organizations are the Mortgage Lenders Association, Neighbor Works America and the Ad Council.

“The key message is that people should call their servicer as soon as they sense there is a problem,” said Jonathan L. Kempner, President and CEO of Mortgage Bankers Association based in Washington, D.C. “It’s counterintuitive to do this. When you are young and you owe your brother or sister money, the last thing you do is go up to them and talk about it,” he added.

The concept is that mortgage lenders make money when borrowers do not. He added that the bank never wants to have to buy back a home and have to suffer a loss. “We believe this is in the best interest of everyone,” he said. Prior to this, there was very little headway being made in this direction. Efforts are being made to teach homeowners who default and an attempt is being made to give this a national push.

News reports of foreclosures, largely driven mostly by the recent jump in sub-prime lending, have helped prepare community organizations and lenders and helped them reach out to borrowers facing trouble.

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Federally chatered agency, Fannie Mae buys the maximum number of real estate mortgages in the U.S.. It surpasses all the other real estate companies. This company has planned to provide $100 million to homeowners in the New York state to enable them to refinance their loans. Else that will wind up in default or foreclosure – says Governor Eliot Spitzer.

Borrowers whose loan are of adjustable rate types, which compelles them to pay interest at the end of every month will be eligible for the refinancing schemes. In that, they will have to pay 30 and 40 years fixed rate mortgages.This programme will be carried out by the State Of New York Mortgage Agency, or Sonyama. This information was provided by a ststement submitted by Spitzer’s office. This has provided a relief to homeowners, who wereat the verge of loosing their homes to foreclosures, a chance to refinance their mortgages and remain the legal homeowner Priscilla Almadovar, Sonyma’s chief executive officer said in a statement.

States like Ohio, New Jersey and Pennsylvania are taking initiatives to heelp homeowners out of the trouble of foreclosures. The housing market is facing the worse times since 1991. A minimum of 21 states have come up with new consumer protection laws and bond sales in order to protect homeowners from the escalating defaults.

Mortgage foreclosures in the New York rose to 13% last month from a year earlier reports RealtyTrac, a company that sells foreclosure data. In the entire U.S. foreclosures escalated to 87 percent in June as a result of falling home prices and rigid lending terms made it difficult for homeowners to sell their homes and refinance thir loans.

New York state has appointed lenders to refinance mortgages upto $417,000 and 100 percent of the value of the property will be covered under this new scheme. Borrowers will be allowed to use this money for various closing costs, prepayment penalties or to pay second mortgages says Spitzer.

Homeowners who are just less than 60 days behind the payment can also avail of the new scheme if their income is below a certain level. Restrictions will tend to limit the refinancing to people whose income is upto 165 percent of the median in New York city and sorrounding counties or upto 125 percent of the median in the rest of New York state.

Applicants will have to undergo a homeowner education programme and will have to participate in counselling if they fall behind in payments. This will make borrowes understand the risks and resposibilties of owning a home.

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People of low and median income group are more prone to such trade offs. States like Ohio, Michigan and Indiana are affected badly by foreclosure. As per the study of public-records tracker in Kaneville; there are about 584 mortgages of more than $ 350,000 in cook and lake counties. In Highland Park the number is triple.
It’s not just the home owners who are affected by foreclosures, but the neighbors also. Property values of the area go down due to foreclosure. Due to this one who can afford to sell his home sells it and moves away.
Looking at the increasing pace of foreclosures many states facilitate homeowners by setting up funds. States like Maryland, Massachusetts, New Jersey, New York and many others have invested million dollars in this program to support and prevent vulnerable low- and moderate-income group from foreclosures. State give credits to homeowners and then sells those home loans to other companies. Profit earned in the process is then used to make further loans.

Legislation that would allow the Federal Housing Administration to help low- and moderate-income buyers is being considered by the Congress. Nicolas Retinas, director of the Joint Center for Housing Studies at Harvard University says that this will not solve the problem but it can make a difference.
But the scope of this program is somewhat narrow. More than 60 days delinquent people do not qualify and one who does can afford to refinance through private-sector lenders

It is judged that In America more than millions of homeowners will enter foreclosures this year. As per the data provided by the Washington-based trade group, ‘Mortgage Bankers Association’; 2.3% of the nation’s 44 million home loans come into this bracket implications on the housing sector will be definitely awful if the foreclosures rate is not controlled. Ultimately it will be the economy which will suffer the most.

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The numbers are in, and things are not looking too good for the Bay Area! Alarming statistics have just been released for the state of California about the total foreclosure numbers. These figures are ringing alarm bells for anyone who keeps a watch on the property market, as was reported by a popular news channel on Wednesday.

The sum total of house owners who were unable to meet the monthly payments on their mortgages in the sunny state of California has just hit a new peak at an 11-year high as reported by DataQuick. DataQuick is a company which provides real estate and property data.

They reported that there were 258 foreclosures in the Bay Area during the months of April-June in 2006. Now, this figure has taken a quantum leap to 2,206 homes for the same period in 2007. That makes it a massive 755 percent higher on a year to year basis! This second quarter includes all the statistics as taken between April through till June.

They also reported that on a state wide basis in California, the total amount of foreclosures took a huge leap. Figures of 17,408 foreclosures were recorded in this 2^nd quarter of 2007, while the figures for the same period last year were just 1,936! That in itself is a massive jump of 800 percent!

Ted Faravelli , who is a professor at the San Jose City College – real estate studies commented that these reports were beginning to have a large effect on the property market in the area. According to him, trillions of dollars invested in mortgage based securities can be at risk, since they are largely tied to these record foreclosure rates and figures.

“There’s real potential for major market meltdown that would make Enron or Worldcom seem small in comparison,” Faravelli said. “The wild west freewheeling days are no longer with us and there’s some accountability now.”

According to a reporter, the answerability has come in the shape of federal investigations. A mortgage broker apparently said off camera that the FBI has stormed premises of over a dozen brokers known to him. The same broker said that he is himself facing three lawsuits from different banks as a result of borrowers who have been unable to meet their loan payments.

Faravelli also said that too many unqualified homeowners had been allowed to be eligible for loans despite incorrectly stating their income and credit. He expects that foreclosure increases may well continue till 2009.

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A new plan is being considered by the Patrick administration that will enable mortgage lenders to pay the first and last months’ rent for homeowners who have lost their homes to foreclosure along with their moving expenses payments.

Part of a foreclosure prevention initiative, this proposal will be presented by administration officials at a meeting where some of the state’s biggest mortgage lenders will be present. According to a draft found by the Globe, this initiative will ensure that homeowners facing foreclosure will be paid $5,000 by lenders for relocation and administrative costs incurred by nonprofit agencies in finding them a new home.

Kofi Jones, who is the spokesperson for the Executive Office of Housing and Economic Development said that the Patrick administration is in the course of attempting to put in place a comprehensive plan to try and resolve this foreclosure situation. “We are committed to protecting homeowners and communities throughout the Commonwealth.” She added.

In addition, according to the draft, the proposal requires lenders to holdup foreclosure proceedings for a few cases; decrease loan amounts and give up prepayment penalties for other cases; and work together with the state government to relocate these foreclosure and vacant properties to buyers buying first-time homes or nonprofit agencies.

According to the draft, the idea is to “prevent as many foreclosures as possible and to minimize neighborhood destabilization by reclaiming vacant foreclosed properties for owner-occupied homeownership.”

The Massachusetts Mortgage Bankers Association’s executive director, Kevin Cuff, declined comment saying he hadn’t yet seen the proposal.

This will be the second attempt between the Patrick administration officials and mortgage lenders to chalk out a plan to lessen the impact of shooting foreclosures.

Compared to around 6,000 in the same period last year, a whopping 10,000 foreclosures have been filed in the first five months of the year alone. This data was given by The Warren Group, which studies and publishes real estate information.

These foreclosures have been focused around sub-prime loans. These are loans which are made to people with little or poor credit and carry much higher interest rates. A lot of these sub-prime mortgages have rates which are adjustable, and recent interest rate hikes, or resets, have further wringed already struggling homeowners.

Earlier in this month, a $250 million fund was unveiled by the Patrick administration which will help a few sub-prime borrowers to refinance to less expensive and affordable mortgages. State officials are planning to use hardball tactics during negotiations to compel lenders to take in any financial losses on these concerned mortgages that the state will attempt to refinance.

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A study conducted by RealtyTrac, an online research and listing company dealing with foreclosures, shows that the rate of foreclosures in the country as a whole reached a peak in May 2007. June saw the rates falling marginally. According to RealtyTrac’s findings, the rate of foreclosure filings had risen 90% in May this year in comparison to last year and in June it fell to 87%. Foreclosure filings encompass default notices, trustee sales notices and repossession notices. But with actual numbers of foreclosures still very high, it is not yet time for homeowners to heave a sigh of relief.

RealtyTrac itself anticipates that the rates will rise again. It attributes this to the forecast that many adjustable rate mortgages are due to be rest at higher rates. This is bound to increase the number of foreclosures as many will then be unable to make the higher payments and may be forced to foreclose their loans.

There are several factors which are contributing to this rise in the rate of foreclosures. Many loans have been taken on the subprime market where loans are given to potentially risky borrowers and with little attention being paid to their ability to repay the loan. Rising real estate prices in the earlier period encouraged greater building activity and an increase in speculation on the real estate market. Increasing mortgage fraud, rising interest rates and predatory lending are some of the other factors which have led to the present situation.

Some experts hold the equities market responsible. According to them, lenders began to come down strongly on borrowers when they saw defaults increasing due to rising rates of interest. Anticipating a flood of such defaults, they decided to take a firmer stand so that they would not lose out on the loans they had given. This was particularly true in the case of balloon loans and loans with lax underwriting. First time buyers were among the first to be affected and many succumbed to foreclosures as they were unable to keep up with payments.

With more homes being sold the market is being flooded with real estate. This is pushing property prices down significantly. The hardest hit states are those which saw property prices booming earlier. The effect of resetting of adjustable rate mortgages is expected to especially affect those states where unemployment is high and where there has been widespread speculation. Together this accounts for a large part of the whole country!

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Interest rates in the real estate market were very low about three years ago. This prompted many people to use the situation to their advantage by taking out mortgages to buy property at that point in time. Variable rate mortgages which were also being offered were another attraction. These mortgages came with low teaser rates which would start climbing only after three years.

However, the situation has since changed. With foreclosures rising all over the country, interest rates have also been affected. Experts are anticipating that in the next five years a number of variable rate mortgages will be reset. They are forecasting that the interest rate that will now be charged will be higher than what the buyer would expect. It would also be more than the present rate for conventional house loans.

A look at the ABX loan pools show that the number of defaulters is already on the rise. A subset of the ABX index indicates that the interest rates in about 42 % of loans taken in the latter half of 2005 are due to be reset.

The change in the interest rates is bound to affect the rising numbers of foreclosures. Many of the low interest rate loans pertained to the subprime real estate market. Here loans are given to those who do not have good credit histories and where the requirements for qualifying for a loan are few. It can then be assumed that many borrowers from this market will be forced to foreclose if interest rates are revised as they will be unable to pay the higher rates.

An analysis of mortgage loan pools by Morgan Stanley shows that in May, 8% of the loans in pools formed at the end of 2005 were already more than two months overdue.

For loans take in late 2006 too, research shows that there is a rise in the percentage of homeowners who were defaulting payments. Most of the defaulters were more than two months behind on their payments. The percentage is not very high as yet. But what is significant is that it is twice as high as what it was at this time in the last year.

Not all defaulters face foreclosure. There are some who are able to make their payments current and save their real estate. But a significant number do have to foreclose on their homes. As the above research indicates, there is no denying that the number of defaulters is steadily growing. This in turn will ensure that the number of foreclosures the nation is facing will not abate very soon.

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