A proposal for a six month suspension on foreclosures has been made by some lawmakers as the numbers of people unable to pay their mortgages are increasing. Three bills have been introduced with the purpose of providing relief to the mortgage climate and the proposal for moratorium is among them. According to the second bill the tenants would be able to live in the foreclosed houses for another year.

The final bill would enable the homeowners to challenge their foreclosures at court. This law is the same in another 29 states like Connecticut, Maine, Florida, etc. Specific categories of subprime loans would attract a moratorium of six months on foreclosures. This category covers loans which have been approved without finding out whether the borrowers can actually repay them. During the standstill period, the homeowner would be negotiating terms with the lenders to come to an affordable monthly payment and he would continue to pay his loan.

According to a spokeswoman from the administrative department, foreclosures of around 600 properties across the state became delayed since the passing of the law. Since the volume of foreclosures is steadily increasing and the real estate market is facing a low, the numbers of empty homes are also increasing. In Lawrence more than 800 homes are facing foreclosure and it’s the nation’s third highest number. William Lantigua, a representative from Lawrence said that all the three measures taken by the bills were essential for bringing about stability to the Lawrence real estate market. The huge numbers of vacant homes were attracting vandals and thieves. Anthony Verga, a representative from Gloucester district said that it is unfair to throw the tenants out as the entire neighborhood is destabilized. He supports moratorium as it would give people a chance to negotiate and come to an agreement.

In 2007, Essex County had faced a hike of 65 percent in the rate of foreclosure while in Cape Ann, the hike was 47 percent. The foreclosure crisis was triggered off by the increase in the interest rates of subprime loans. These loans had adjustable rates and when the rates increased, people were unable to afford it. Since the real estate market was facing a low, the homeowners could not get rid of the problem by selling off their properties as the loans amounted to more than the property’s value. Tucker, a Democrat who is the chair of the Legislature’s Housing Committee, said that she would rather face the risk of foreclosure than lose lenders, scared away by moratorium. Lenders were essential as the credit was needed so that people were able to buy homes.

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Foreclosure notices being sent out at a rapid pace, in many places, has exceeded the number of homes sold in the particular month. The rate of foreclosures in Nevada is the worst hit with the highest across the nation. With the housing markets being hit continuously with falling prices and distress sales, worried government officials and voluntary service organizations are trying to bring about legislative proposals and other plans to delay foreclosures so that the homeowners can have some time to arrange for the payments. However, with no consensus yet with the legislative proposals, the foreclosures are still mounting.

With over 153,745 initial notices being sent out for foreclosure proceedings in January alone (as reported by RealtyTrac), even sales of 43,000 newly built single-family homes means nothing. This figure of initial notices amounts to more than half of the total home sales made. Moving West, the situation only worsens with the home sales being barely higher than the number of issued notices. It looks like the worst hit areas are behind in the home sales as compared to the notices issued.

Foreclosures in California topped the list with the highest number of foreclosure filings, however was ranked fourth on the number of houses affected by the foreclosure proceedings as many homeowners tried to make payments or sell their homes to clear off the loans. Nevada topped this set, with Michigan foreclosure homes being a close follower.

Foreclosed homes represent displaced homeowners on one hand but increase the number of homes available for sale on the other. This in effect creates competition to other sellers like those trying to sell newly built homes. Moreover, since the foreclosed homes fetch lower prices when the sale happens, they bring down the prices even for the newly built homes. As reported by the Census Bureau, the number of newly built homes lying vacant as of December last year was 197,000 and came down only to 195,000 homes in January.

It seems that the areas which grew rapidly with the housing boom are the areas worst affected by the mortgage crisis. States like South Dakota, Vermont, Maine, North Dakota and West Virginia were among those largely unaffected by the housing boom and today these states boast of having sound economies when the rest of the nation is under the foreclosure storm. Foreclosure rates reported in these states is well below 0.1 percent!

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An increasing number of home sales are attributed to foreclosures, more so in areas that are affected the most in this real estate crisis. According to data from the Associated Press, comparison of 2007 foreclosure data shows that there is more pressure for dipping house prices not only in areas of Colorado, Michigan, Nevada and Tennessee but also in Arizona, Florida, Georgia and Ohio. In fact, 50 percent of home sales are from foreclosures in some parts of California. In addition, rate of sales in Nevada at 17.5 percent is four times that of 2006.

According to real estate experts, this growing rate of foreclosures is worsening conditions in weaker markets and having many cascading effects. Even those owners who are not under deadline pressures are foreclosing their properties. In effect, banks are under increased pressure to off load their burgeoning inventory of foreclosed properties at low prices prolonging the housing crisis. According to RealtyTrac, average price has dropped by $1000 for a foreclosure sale nationwide. This means that properties are losing value and local tax collections are further reducing. These effects are enhanced more in neighborhoods of minorities, as lending standards are the weakest for the residents here.

Many investors and real estate brokers feel that the situation is much larger than it is made out to be. Bush’s administration and top lending banks of the country have devised some sort of a relief measure where heavily indebted defaulters are given a 30-day break, for in the meantime, lenders would devise a new plan to make more affordable mortgages.

A comparison of the third quarter results (2006 Vs 2007) made by Associate Press on the annual rate of home sales nation wide data showed an increase up to 4.7 per cent vs. 3.3 percent in 2006.

The data shows that areas where lending standards were the weakest are the hardest hit. Places like Kansas, Maine and New Mexico have very low shares of foreclosure contributing to home sales at just 2 percent of total sales. Lax lending standards in prime areas have added fuel to this crisis.

National Association of Realtors is conducting an informal survey to get more detailed information to gauge the depth of this issue.

Though many experts feel that data findings do not cover foreclosure sales through auctions, the fact remains that Foreclosures are on an increase and authorities will need to put in a lot of checks and measures to bring stability in the Real Estate Housing Market.

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The volume of home sales has grown due to the rise in the volume of foreclosures. Almost 50 percent of home sales in parts of the state of California are from houses that have been foreclosed. According to the data given out by an Associated Press comparison of the sales of 2007, this phenomenon is seen mostly in Colorado, Michigan, Nevada and Tennessee and it has been seen in a slightly lesser rate in Georgia, Arizona, Ohio and Florida.

The rising volume of sales of foreclosed homes is mainly due to the terrible condition of the real estate market which is becoming more and more worse. Those homeowners who do not have a deadline to sell their properties are taking their properties off from the market and as a result the foreclosed properties are being sold off at fire sale rates. This is making the local tax revenues and property values suffer and this is happening mostly in neighborhoods where there is a huge number of minority residents who have very weak lending standards.

To bring the situation under control, the Bush Administration, together with lenders like, Bank of America Corp, Citigroup Inc, etc devised a plan to give borrowers an extension of 30 days during which the process of foreclosure would be paused and lenders would have time to work out a new repayment plan, where the mortgage would be more reasonable. An analysis of the foreclosure rate was undertaken and the observation was that the foreclosure rate was highest in areas where the standards of lending were very loose or where the economy was very weak. Places like Maine, Kansas and New Mexico showed foreclosure sales which were under 2 percent of the total number of sales.

Previously, the real estate market in places like Nevada and California were booming and since during those boom years the borrowers were allowed houses which they could not afford, now the number of defaults was increasing. Walter Molony, spokesman of the National Association of Realtors said that to tackle the problem, the Association would informally survey the issue and release the findings sometime later during the month. Experts declare that the data which is available does not give a complete picture. This is mainly because all foreclosure sales are not recorded by the Realtors group as they are auctioned off and are thus not found in the regional database files.

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