Surge In Mortgage Foreclosures In The Us
Foreclosures have jumped in the third quarter of 2010 even as persons receiving permanent modification have fallen, according to banking regulators
. The increase in bank repossessions belied the hopes of a recovery in the housing market by the end of the last year.The number of foreclosed homes increased by 31% in comparison to the second quarter and 3.7% compared to third quarter 2009, according to the Office of The Comptroller of Currency (OCC) and Office of Thrift Supervision. The newly foreclosed homes will pile up with a growing backlog of 1.2 million properties which are in some stage of repossession; an increase of 4.5% over quarter 2 and 10% surge from third quarter 2009.
In quarter 3 of 2010, number of completed foreclosures jumped to 187,000; a 14.7% increase from quarter 2 and 57.5% surge from same period of 2009. Even as all these foreclosure properties enter the market, it is expected that these will reduce property prices by 5%-10% in this year, according to economists.
Regulators also observed that activities to retain homes like principal and interest reductions reduced by 17% from 2009, marking a sharp fall in loan modification program run by the government, the Home Affordable Modification Program (HAMP).
Modifications by HAMP numbered 504,648 till November, much short of the governments target of 3 million. Another trend is that despite receiving loan modification, a large number of homeowners are re-defaulting. A Congressional Oversight panel pointed out that 40% of homeowners who get loan modification through HAMP are likely to re-default in the coming few years.
The decline in modification by HAMP was in part due to as smaller group of loans that are eligible for change. But this was only part of the story. The problem was with shortage of modification programs of loans, experts said.
For instance, HAMP has to compete with private modification programs given by banks which provide interest and principal reductions of smaller amount, making them desirable for lenders and less appealing to homeowners.
A second problem was holders of second liens. Most first lien holders will reduce the loan principal only if balance on the second lien is also decreased. But homeowners continue to honor second mortgages which happen to be smaller and more affordable even as they are defaulting on first liens.
by: Dywon Erick Dylon