2009: A nation in foreclosure

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Yesterday on Twitter Pam Crouch posed, "Raise your hand if you think that the year 2009 was not one of your greatest, or some stronger version of that statment."

Collectively, as a nation, I believe well over 50% would raise their hand - at least partially. It will be remembered as a year where old failures were repeated, more mistakes were made than correct actions, temperatures got cooler (again), a greater divide was created between political parties and peoples, and more foreclosures than at any other time in history were consummated.

Millions of foreclosures

There were over 1 million foreclosures in 2008. By June of 2009 a Wall Street report indicated the nation had already passed that number and added an additional 10%. Elementary math will tell you that was 2.1 million foreclosures in 18 months. There's a small problem that reaches far beyond the individual home owners who entered foreclosure. It touches every one of us.

Quoted in a report on NPR.com Senior Vice President Ken Scheller is in charge of "home retention" — an effort he says is designed to "keep as many people in their homes as possible." According to Scheller the number of people at Bank of America handling foreclosures and defaults doubled in 2009 to 8000. Let me spell that out, eight-thousand people are employed by the bank to help stop and control foreclosures.

Agents here on Active Rain and elsewhere have long complained about the slowness of lenders to act in short sales. How much more should lenders do? President Obama gave his opinion earlier this week when he indicated lenders and servicers who are not meeting his standards would suffer the consequences.

You don't frighten me

"Shaming people into doing the right thing is very slow, and a lot of people will lose their homes in the meantime," said Diane Thompson, a lawyer with the National Consumer Law Center in an LATimes interview.

Remember that new FHFA (Federal Home Finance Administration) that was created under the Bush administration? This is from their August report which was published at the end of November, "Fannie Mae and Freddie Mac completed nearly 32,000 home retention actions in August 2009, a 32 percent increase from July. Separately, trial mortgage loan modifications under the Administration’s Home Affordable Modification Program (HAMP) increased nearly 30 percent from September to October 2009. The data were released by Edward J. DeMarco, Acting Director of the Federal Housing Finance Agency (FHFA), as part of the agency’s monthly Foreclosure Prevention Report. The report summarizes mortgage delinquency and foreclosure prevention data for Fannie Mae and Freddie Mac through Aug. 31, 2009 and HAMP trial modifications through Oct. 31."

If you read those numbers that is 32,000 in one month. Suppose the lenders only wrote down $20,000 for each on. Do a little quick math and you see it easily could have been $640,000,000 - for one month. ONE month.

The reaction of course is, "Well, if they had not made those bad loans ..." True. So now many people are getting what they wanted. By February of 2010 it is estimated that only 1 in 7 mortgage applications will be approved. That alone is enough to put the final nails in the coffins of the few remaining small lenders and mortgage brokers. That, in turn, will lead to less competition which will me fewer places to shop.

Waxing political

Of course the national regime and the bevvy of czars is seeking to continue the lies about Yield Spread, lender fees and appraisal values anyway. Even if you're not a conspiracy theorist you have probably wondered why so many regulations are being placed on smaller lenders and the megabanks are not even required to license their loan officers or tell the borrower how much profit they are making.

Then again - life is not fair. So you have to win anyway by finding a different path or a different set of tools.

Regulations will never, NEVER, fix the problem. The problem will simply morph into a new set of problems while the empty shells of massively high cost regulatory agencies enforce rules which are no longer in effect and soon the government will be the largest single employer in the nation.

Ooops, too late.

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Photo credit: Casey Serin at http://flickr.com/photos/72159404@N00/338035553

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I started writing on Active Rain in 2006 when I was representing the mortgage industry. I am no longer in that industry and many of the older posts contain outdated information. Please do not contact me for LENDING or MORTGAGE questions but rather contact a licensed mortgage professional from your area. I have always been in marketing and branding and that is still what I do. Thanks for reading!

Comments (3)

Tom Robinson
Keller Williams Realty Kingstowne/Alexandria, VA Office - Fairfax, VA
Experienced Real Estate, Professional Serving No. VA and DC

We have gone from one extreme to another with loans. If you could fog a mirror you could get a loan. Unless you have something like 750+ credit now you wont get one or you will certainly not get the best rate. Eventually, the banks will have to loan money to make money so the purse strings will have to be loosened.

Dec 05, 2009 03:58 AM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Ken - Few are willing to confront the "new reality" we face. Regardless of what the politicians tell us, the housing market and economy will NEVER recover; that is, will never return to what we had thought of as normal. Business models will be altered dramatically as we enter this new economy--and no one knows exactly what that's going to be.

Dec 05, 2009 04:01 AM
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

I fear a long road back.  And every day the road gets a little longer.  It almost seems as if the regulators are tryingt o purposefully destroy that which they regulate. 

Dec 05, 2009 03:15 PM