The banks need to start working with homeowners now. If they don’t we are going to see a ripple effect in the economy that made the last meltdown look tame. I can see no reason why the banks are forcing homeowners to go 60 to 90 days late on their mortgage just to get a loan modification which doesn’t really solve the problem. The banks should be willing to short sell properties back to property owners at market rate instead of forcing the homeowner to do a short sale to a third party and have to move out. I can see reasons why the banks haven’t done this, but at this point with home prices continuing to drop and foreclosures on the rise I believe it will be in everyone’s best interest if the banks start working out deals on principle reductions. They were bailed out by our government with public money and have done nothing but some token maneuvers to placate those who really need help.
The mortgage crisis is dragging on the economic recovery as more homeowners fall behind on their payments.
More than 10 percent of homeowners had missed at least one mortgage payment in the January-March period, the Mortgage Bankers Association said Wednesday. That's a record high and up from 9.5 percent in the fourth quarter of last year and 9.1 percent a year earlier.
Around 4.3 million homeowners, or about 8 percent of all Americans with a mortgage, are at risk of losing their homes. They have either missed at least three months of payments or are in foreclosure, the trade group's top economist said Wednesday.
Should loan modification programs fail to help, their homes will go up for sale either as a foreclosure or short sale — when the bank agrees to sell the property for less than the original mortgage amount.
Many analysts have been forecasting home prices will dip again as more of these homes go up for sale at deeply discounted prices.
Moody's Analytics predicts home prices will fall about 5 percent and hit the bottom next spring. This is not a good thing for the economy.
Federal tax credits which help boost home sales in the early spring expired last month. As a result, mortgage applications to purchase homes fell to the lowest level in 13 years this week, the Mortgage Bankers Association said in a separate report Wednesday.
Stocks slid Wednesday as investors remain concerned with the European debt crisis. The rising number of mortgages also drew some attention. The Dow Jones industrial average fell more than 100 points in midday trading.
The Obama administration's $75 billion foreclosure prevention program has barely dented the problem. More than 299,000 homeowners had received permanent loan modifications as of last month. That's about 25 percent of the 1.2 million who started the program since its March 2009 launch.
About 277,000 homeowners, or 23 percent of those enrolled, have dropped out during a trial phase that lasts at least three months.
Economic woes, such as unemployment or reduced income, are the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit. But homeowners with good credit who took out conventional, fixed-rate loans are now the fastest growing group of foreclosures.
Those borrowers made up nearly 37 percent of new foreclosures in the first quarter of the year, up from 29 percent a year earlier. The risky subprime adjustable-rate loans that kicked off the foreclosure crisis are making up a smaller share of new foreclosures. They made up 14 percent of new foreclosures in the January-March period, down from 27 percent a year earlier.
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