Los Angeles's housing market has been rocked by foreclosure after foreclosure. New initiatives to help underwater homeowners through bank loan modifications have been put in place. However, in Los Angeles, many big banks such as Wells Fargo and Bank of America are failing to carry their weight.
Southern California is the perfect portrait of what went wrong in the real estate market: a housing boom led to a housing bubble with overpriced real estate and overdevelopment leading to sheer and utter collapse. House buying and selling almost became like the stock market – ‘trading’. The downfall, however, has meant an astronomical number of foreclosures.
The burden of foreclosures in the SoCal and San Fernando Valley regions is abating, but there are still a large number of defaults each month. According to market reports, the area had 507 foreclosures in January alone. This is down 34 percent from December.
With so many houses facing foreclosures, many homeowners are left treading water. Their homes are literally worth a fraction of what they were two years ago, but their mortgages reflect the old price. Banks like Bank of America, Wells Fargo, and JP Morgan Chase agreed to help homeowners as a condition of the government Troubled Asset Relief Program (TARP) which bailed them out. Reality is, though, most of these banks are not honoring their promises.
Homeowners Helped by New Mortgage Laws
Under the new Home Affordability Modification Program or HAMP, homeowners who are delinquent on payments are granted a trial period where they must make three payments under a modified loan. If they succeed, they can be offered a permanent loan modification. Banks are supposed to make sure this happens.
As a result of non-action by the banks, Los Angeles officials are threatening to withdraw all city deposits from banks that fail to help homeowners. This, of course would be a huge blow to the banks that were too big to fail, such as the ubiquitous Bank of America. L.A. council member Richard Alarcon is spearheading the measure.
Alarcon has drawn support from the Service Employees International Union and many local banks and businesses. He has also suggested that banks be graded using a report card system of sorts. Banks that failed to pass would be shut out from city funds.
Big Banks Still Failing
The difficulty of mortgage modification lies not only in the amount of paperwork and red tape, but also the sheer number of Americans delinquent on payments. Big banks often do not have the capacity or will to deal with the numbers. The problem is not new. In Boston, Bank of America and Wells Fargo are being sued for the very same lackadaisical inaction.
The vote to cut off city funding from Los Angeles’ major banks will take place on March 5, 2010. In the meantime, the Los Angeles housing market is showing signs of recovery. Home prices are up nearly 13 percent in the San Fernando Valley region. Foreclosures are tapering off as well.
Written by Lani Shadduck
HULIQ.com
Source:industrybnet.com
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