Home foreclosures are at crisis levels. A startling report released by RealtyTrac, 1 in every 452 homes in the U.S. received a foreclosure notice in October causing home foreclosure activity to rise 25% up from one year ago.
The result of years of lending to risky or "subprime" borrowers has driven the U.S. foreclosure rate into double digits. The so-called housing boom instead has created an enormous amount of home foreclosures in an economic downturn.
In an unstable economy due to job losses, plant closing and more, homeowners are losing their homes at an alarming rate. The federal government drafts packages to save banks and lending institutions while homeowners are losing their homes due to foreclosure an the inability to pay their mortgages, particularly as interest rates reset and as plunging home values nationwide increasingly render properties worth less than the mortgage.
Strong housing markets that once lead the home ownership boom found their way to the top of the home foreclosure list in September. For 22 months in a row the state of Nevada had the highest home foreclosure rate in October. One in every 74 homes received a foreclosure filing, that’s more than six times the national average.
Another lucrative market, Arizona has the second-highest state foreclosure rate. Some 17,507 Arizona homes received foreclosure filings showing an increase of 35 percent from September and 176 percent a year ago.
The sunshine state, Florida, has the nation’s third highest home foreclosure rate with 54,324 homes receiving a foreclosure filing. This number represents an increase of 13 percent from October and nearly 80 percent from last year.
If help is on the way, where is it? Can Fannie Mae or Freddie Mac help consumers from having their homes foreclosed?
Maybe so. Homeowners who are facing foreclosure and spend more than 38 percent of their income on mortgage payments could have their monthly mortgage payments reduced by Fannie Mae and Freddie Mac, the two largest U.S. mortgage finance companies.
CitiGroup is also pro-actively helping up to 500,000 of their mortgage customers by selecting those who may be in trouble during this financial crisis. The bank is contacting home owners who may have fallen behind in their payments with an offer to alter the terms of their mortgage or even to ease repayment levels where necessary. JP Morgan and Bank of America have both placed a moratorium on home foreclosures for the majority of its mortgage customers.
"In today's economic environment, Citi continues to build on its long-standing efforts to develop new ways to help our customers remain in their homes," said CitiMortgage chief executive Sanjiv Das. Shares in Citigroup traded down 68 cents at $10.53 in lunchtime trading.
But help for those in a home foreclosure crisis may boil down to fine print. A House Financial Services Committee hearing yesterday questioned whether home mortgage lenders are doing as much as they can to help people from having their homes foreclosed. It was revealed during yesterday’s debate by lawmakers that many of U.S. mortgage loans are held in securitization pools. There are millions of these loans and they appear to be governed by contracts that dictate whether changes can be made on these home loans. These agreements make it difficult to change a homeowner’s loan and therefore getting in the way of home foreclosure prevention assistance.
Help during this home foreclosure crisis seems mired in red tape, as a Bank of America executive explains. Michael Gross, a Bank of America executive, told the committee that the rules vary depending on the investment group. Some "may prevent us from doing modifications that would benefit borrowers and investors," he said. Under some contracts, he said, "loan modifications are expressly disallowed."
Lenders have had the most success modifying mortgages they own, lawmakers said, but run into trouble when they administer the loans held in pools for others, known as servicing. "Where we're running into a problem is with securitizations, and that's really the great majority of . . . mortgages that are in foreclosure or threatening foreclosures," said Rep. Spencer Bachus (R-Ala.).
There doesn’t appear to be a quick fix to the home foreclosure crisis. Homeowners are not feeling any relief as the government wrestles with a way to repair the messes of an overzealous industry. If you have a mortgage through one of the banks listed in this article and are facing a home foreclosure, contact your loan servicing bank today, maybe they will be willing to help you.
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