Economists: Unemployment to Boost Number of Foreclosed Homes

The growing number of jobless people in the country will add to the worsening foreclosure problem, according to economists and bankers.

They said that the rising unemployment rate will overtake subprime loans as the main factor that will drive up the number of foreclosed homes in the country. They pointed out that as more people lose their jobs or reduced their wages, many would default on their mortgage payments and increase the risk of going into foreclosures.

According to economists, foreclosures due to unemployment will be more difficult and complicated to handle and resolve. They predicted that about 1.8 million troubled borrowers would lose their properties to foreclosures before the year ends. The estimate is higher than the 1.4 million foreclosures last year.

Economists also pointed out that the federal government finds it more difficult to help people who lost their jobs than those who are struggling to make their mortgages current. They said that so far, the federal government has pledged billions to its foreclosure prevention programs.

Meanwhile, bankers observed that for the first quarter of this year, the bulk of foreclosure activity shifted from subprime loan borrowers to prime loan borrowers. They said that the shift of foreclosure activity to prime loans indicated that a growing number of jobless people have already fallen into foreclosure.

House Financial Services Committee Chairman Barney Frank proposed allocating $2 billion in federal funds for emergency loans to borrowers who are at risk of foreclosures because they lost their job. He argued that these people need help because they would not be in the current dire financial situation if they have not lost their jobs.

Housing counseling group NeighborWorks said that 65 percent of homeowners who seek counseling cited unemployment or wage reduction as main reason for defaulting on their loans. The figures were higher compared to the 40 percent of homeowners who cited unemployment for their delinquency last year.

Industry analysts said that helping delinquent homeowners due to unemployment is more challenging because they accrue large fees and when they find jobs, often they are low paying which make it difficult for them to make their accounts current.

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Foreclosed Home Search to Buy and Fix

Three agencies in Snohomish County, Washington will spend over $2 million federal funds to provide affordable housing to homeless individuals and low-income families in the area.

The agencies, Washington Home of Your Own, Home for Good and Housing Authority of Snohomish County will conduct a foreclosed home search as part of an effort to purchase foreclosed houses.

The initiative is made possible by the federal Neighborhood Stabilization Program (NSP). The Snohomish County Human Services will be tasked to distribute the $2.2 million federal funds to the three agencies.

Under the initiative, each agency will used their share of the federal funds to build new properties on the site of foreclosed properties or buy foreclose homes, fix and rent them to homeless and low-income families and individuals.

Aaron Reardon, a Snohomish County executive, explains that the federal funds will allow the county to provide affordable housing to over 30 individuals and families. He said that the county needs more affordable houses, adding that the initiative is a good start towards the goal of increasing housing units.

The NSP federal funds to be distributed by the county were made possible under the Housing and Economic Recovery Act of 2008. The program is managed by the U.S. Department of Housing and Urban Development.

According to industry experts, the county received the third biggest share of the NSP funds. So far, eight applications for the over $6.3 million projects were received by the county’s Office of Housing, Homelessness and Community Development.

Each application received by the county is evaluated by a community advisory group. The criteria used for evaluating the project applications include the project soundness, organizational capacity, community readiness, financial feasibility, community benefit and need.

Additionally, bonus points will be given for projects that will benefit homeowners at risk of becoming homeless or homeless homeowners, programs that will benefit areas with high repossession rates, homeowners who are earning below or 50 percent of the area’s median income and construction initiatives that used Colorado’s sustainability standard.

Some of the projects chosen by the advisory committee and their corresponding budget are the Post Foreclosure Rapid Re-Housing and Homeownership for $632,905, $572,878 for In-Home Community Living Program and $992,348 for the Marysville Multi-Family New Construction program.

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Foreclosed Property Prevention Program in Connecticut

If housing counselors have their way, the number of foreclosed homes in the country would not be as high as it is today. Industry experts and housing counselors have always been consistent in telling distressed homeowners to seek foreclosure intervention counseling from counselors approved by the U.S. Housing and Urban Development (HUD).

In Connecticut, some distressed homeowners found themselves facing foreclosures because they filed for Chapter 13 bankruptcy protection, later refilling for Chapter 7 which means a complete liquidation of debts.

Industry experts said that filing for a Chapter 7 is an easy way out of foreclosures for troubled homeowners. They said filing for bankruptcy should be the last recourse for troubled homeowners.

They pointed out that the Connecticut Judicial Branch has a Web site which allows distressed homeowners to view the status of their foreclosure. Additionally, homeowners can also seek advice from New Britain’s HUD agency.

Industry experts said that many distressed homeowners are not aware of mortgage assistance programs initiated by the Obama Administration to help them avoid foreclosure, including the Home Affordable Modification Program (HAMP).

In New Britain, distressed city homeowners can avail of the Emergency Mortgage Assistance Program which provides monthly foreclosure relief workshops for free. The workshop informs homeowners about changes in the mortgage industry and how these changes can benefit them.

Furthermore, counselors under the program also help homeowners communicate with their lenders to work out favorable solutions to their foreclosure problem.

New Britain’s Neighborhood Housing Services (NHS) foreclosure intervention counselors advise homeowners to contact their lenders as early as possible. They told homeowners not to ignore letters from their lenders, to open and read them and respond to them appropriately.

They said that if homeowners have difficulty communicating with their lenders, they should try to approach the NHS immediately or other reliable agencies.

NHS counselors said that homeowners who could not afford to pay their mortgage should opt for foreclosure sale. They said that some homeowners are better off selling their properties, especially if the worth of these houses is beyond their means to pay to begin with.

However, homeowners who chose to sell their distressed properties still need assistance in locating the right resources. NHS counselors cited New Britain’s Human Resources Agency (HRA) which provides funding for security deposits and makes available a list of landlords who are looking for tenants.

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Foreclosed Filings Up in Indiana, North Carolina

Many states saw their foreclosed filings jumped in numbers last month. Two of the states that experience foreclosure filing gains are Indiana and North Carolina.

Industry analysts said that the high unemployment rate in Indiana is the main factor that pushed foreclosure filings to jump by 8.4 percent in July. Market data showed that foreclosure filings were posted on 5,186 properties last month, representing an 8.4 percent gain from the same month a year ago.

The gains incurred by Indiana last month earned the state the 17th spot on the national ranking of highest foreclosure filings. Industry analysts said that the state is now in a much better position compared to previous years when it was one of the country’s top 10 states with the highest foreclosure rate.

However, the July figures showed that Indiana’s foreclosure problem remains unabated despite federal and state efforts to alleviate the intensity of the crisis. Analysts said that the major factor that has been pushing up foreclosure rates is unemployment. The state’s June unemployment rate peaked at 10.7 percent, an increase of 0.1 from the previous month’s 10.6 percent. Last year, about 100,000 job losses were reported in the manufacturing sector.

Analysts said that factors driving foreclosures have changed since last year. The bulk of homeowners who lost their properties to foreclosure were holders of adjustable-rate and subprime loans. This year, majority of homeowners who are at-risk of foreclosures are unemployed.

Analysts noted that many homeowners who are seeking assistance are struggling to meet their monthly mortgage payments because they have been laid off, little income or made to work with reduced wages.

And what worsens the situation for these struggling homeowners who have just lost their jobs is that they are not even eligible to receive the federal government’s mortgage modification program. The Making Home Affordable Program requires that loan payments should not be more than 31 percent of the gross monthly income of the distressed homeowner.

Meanwhile, notices of defaults, auctions and bank repossessions were filed on 3,428 properties in North Carolina last month. The figures represented 7.97 percent gain from June and earned the state the number 36 position nationwide in terms of high foreclosure filings.

North Carolina’s foreclosure filing ratio of one in every 1,203 housing units represented a decline of 20.33 percent from July the previous year.

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Bidding Frenzies for Foreclosures in Fort Myers, LA, Phoenix

Bidding frenzies have sprung up again in many housing markets across the county as banks list their real estate owned foreclosures and as homeowners list their properties at prices below the average to attract interest and create competition among home buyers and investors.

The sharpest increases in bidding frenzies have been occurring in markets battered by foreclosures, short sales and sharp home price declines, but which are still considered attractive markets or great places to live despite the prevalence of foreclosures.

Among these are Fort Myers, Phoenix and Los Angeles. These cities comprise metro areas that occupy top rankings in charts of metro area foreclosure rates in the first 6 months of 2009, based on a nationwide survey of foreclosures.

In Fort Myers, according to real estate businessman Denny Grimes, a total of 4,200 homes were released to the market in February at prices below $100,000, creating bidding frenzies. According to Grimes, oftentimes banks offer their real estate owned foreclosure homes at irrationally low prices to attract buyers.

He also said that currently about 2,000 homes are available for sale in Fort Myers. The median price in the area has fallen to about one-third of the median price during the housing boom.

Grimes expect Fort Myers realtors to sell more properties this year than in the past years because of the attractive prices. He said that oftentimes investors with cash offers have been getting all the bank-owned homes even if their bids are lower than those offered by first time homebuyers and retirees.

He said that most bidding frenzies occur in price levels below $150,000. Homes priced around $300,000, which are often the prices for move-up homes, are the ones not moving. High-end homes continue to be stagnant because many sellers are holding out for price increases.

In Phoenix, homes priced under $150,000 have been getting multiple bids and cash offers even on the first day. But the cash offers have been winning even if they are lower bids because sellers prefer not to be bothered by mortgage financing and strict appraisals.

In Los Angeles, where home prices have gone down by 35 percent from their peak levels in 2006, renewed interest from buyers have sparked bidding frenzies. In the area covered by Los Angeles, Santa Ana and Long Beach, home prices have fallen to $303,500 in the first quarter of 2009, a decrease of nearly 49 percent from the record high of $593,600 in 2007.

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Commercial Real Estate Foreclosures Down Colonial BancGroup

The deal for North Carolina-based BB&T Corp. to acquire the branches and deposits of struggling Alabama-based bank Colonial BancGroup has been approved by the Federal Deposit Insurance Corp., which has been appointed as receiver of Colonial.

After news of the planned acquisition spread, stocks of BB&T Corp. rallied on Wall Street as investors expected BB&T to acquire Colonial’s deposits at a discounted price.

Colonial BancGroup runs 355 branches in Nevada, Florida, Alabama, Georgia and Texas and holds over $25 billion in total assets. It has been the largest U.S. bank to fail so far this year. It was founded in 1981 by its CEO and president Robert Lowder.

BB&T runs 1,505 branches in 11 states and in Washington, D.C. and holds $152.4 billion in total assets. It is considered among the country’s stronger regional banking firms. It was one of the 19 banks that underwent the Federal Reserve stress test and it was one of the few which were not required to increase their equity capital.

BB&T received a total of $3.1 billion from the federal Troubled Asset Relief Program, but it was able to pay back the full amount in June.

According to bank officials, Colonial has been battered by the foreclosure crisis, with soaring foreclosures on commercial mortgage loans it provided in Florida and in Nevada.

Last week, Colonial officials said the bank is being investigated by the Department of Justice for the alleged accounting violations of its mortgage warehouse lending operation in Orlando, Florida. Other news items also reported that Colonial was being investigated by the Securities and Exchange Commission for its loan loss reserve accounting practices and its effort to ask for federal bailout money.
Colonial also announced that it has informed the SEC it will not be able to submit its financial report for the second quarter because of ongoing investigations on its accounting practices.

Meanwhile, the Alabama Banking Department has confirmed it has held a meeting with top Colonial officers. Last month, the department ordered Colonial to submit a detailed plan on how it is going to build up its deficient capital reserves.

In addition, Colonial’s troubles increased when a Miami federal court moved to freeze $1 billion worth of Colonial BancGroup’s assets to respond to a lawsuit filed by Bank of America to protect its loan funds held by Colonial. BofA alleged that Colonial refused to return the loan money it held for BofA after a mortgage loan transaction was canceled.

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Foreclosed Home Prevention Program Helped 60,000 Homeowners

A recently released government data showed that the Obama Administration’s home refinancing program has helped more than 60,000 troubled homeowners avoid foreclosed home since it was launched in April.

The refinancing program is geared towards borrowers who have little or no home equity. It is part of the Making Home Affordable housing program and aims to help about 5 million troubled homeowners within three years.

The program is intended for homeowners who will find it difficult to qualify for a traditional refinancing initiative because their home equity is less than 20 percent. Home equities are dropping precipitously as a result of plummeting home prices across the country.

According to a market report, nearly one-third of homeowners are at risk of foreclosure because their properties are valued less than the total outstanding mortgage they owed. Since April, 60,484 homeowners were able to refinance and save their properties from foreclosures. About 30,192 or 50 percent of the refinancing deals were completed last month.

In a statement, Federal Housing Finance Agency director James B Lockhart III said that there were significant results from the federal programs, but admitted that more work are still required.

The refinancing program is intended for borrowers with loans guaranteed by government-sponsored mortgage companies, Federal National Mortgage Association and Federal Home Loan Mortgage Corp.

The initial program covers only homeowners whose outstanding loans were not more than 105 percent of the fair market value of their properties. In July, the federal government decided to expand the refinancing program to homeowners whose loans were not over 125 percent their current property values.

Meanwhile, the refinancing program is different from the other federal initiative, the loan modification which is aimed at troubled homeowners who are at risk of foreclosure and want to reduce their mortgage payments to affordable rates.

The refinancing program is for homeowners who are still current on their loans but are struggling to make payments and would greatly benefit from cheaper mortgages.

According to industry and government officials, the refinancing initiative was facing challenges such as difficulty in determining eligible borrowers and the lengthy process of appraising the right value of a property. Furthermore, many borrowers were concerned over the gradual rise in historically low interest rates.

According to data, the 5.29 interest rate of the 30-year fixed-rate loan represented a 5.22 percent rise from previous weeks but still lower compared with last year’s average rate of 6.52.

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New Jersey Foreclosure Filings Soared in the First Half

The pace of foreclosures in New Jersey increased in the first half of 2009, compared to foreclosures in the first half of last year, according to data issued by the New Jersey Judiciary. The number of foreclosure filings increased by over 30 percent in the first 6 months.

In the data released in July, the number of foreclosure filings indicated a decline, but later it was discovered that the courts have not yet processed documents submitted by banks as they were overwhelmed by the increase in paperwork.

Kevin Wolfe, chief of the state judiciary’s civil practice division, explained that the Superior Court clerks have been overwhelmed by the volumes of foreclosure filings coming in.

The continued filing of foreclosure actions by the banks indicate that government initiatives aimed at preventing foreclosures have not been effective. With the rising unemployment rate, housing advocates worry that more homeowners will be forced out of foreclosed properties.

Seton Hall University law professor Linda Fisher remarked that the problems underlying foreclosures have not been fixed.

Nonetheless, the backlog seemed to help the owners of houses in foreclosure in some ways, giving them some extra months before they are evicted.

Jim Silkensen, chief executive officer of the New Jersey Bankers Association, explained that both owners and lenders suffer, with banks bearing the bad debts, the decline in home prices and the increased risk that the houses are damaged by irresponsible homeowners, vandals and thieves.

Court clerks have started working overtime and on Saturdays, but they are still working on papers filed last June.

In the first half, the number of foreclosure filings across New Jersey increased to 31,603 filings, a significant increase by 31.6 percent from filings in the first 6 months of 2008.

The highest increase in default or foreclosure notices occurred in Atlantic County, where filings increased by 70.5 percent. The smallest increase occurred in Hunterdon County, where filings rose by only 9.9 percent.

The federal and state governments have been undertaking programs to modify and refinance home loans to help distressed homeowners save their homes from foreclosure, but the programs were not working for many borrowers.

In New Jersey, 1,936 homeowners participated in the state mediation program since its launching date to July, but only 435 cases have been settled, with 165 solved through mediation and 65 remedied before mediation.

According to Al Faella, head of the Union County Foreclosure Task Force, homeowners who took out adjustable rate mortgages should seek help now before their rates adjust to higher rates.

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Programs to Contain California Bank Foreclosed Houses

As the unemployment rate continue to rise across California, some nonprofit agencies bonded together to try to provide relief to troubled residents.

One of these nonprofit agencies is the American Canyon Family Resource Center. Officials at the center said that it partnered with other agencies in an effort to provide relief to unemployed residents.

The American Canyon Family Resource Center launched two programs designed to help residents deal with unemployment and to overcome its effects. Sherry Tennyson, executive director at the center, explained that one program is designed to provide help to women in starting their own businesses. The other program aims to help struggling residents achieve financial stability.

In June, the unemployment rate in American Canyon increased by 14.3 percent from May’s 13.6 percent. Unemployment rate in Napa County reached 8.8, with the highest rate of 14.7 percent posted in March.

Tennyson said that the figures showed that 800 people are unemployed in the American Canyon, about 20 percent of the total population. She pointed out that majority of jobless people in the city were those who used to hold entry-level positions that provided low pays.

According to industry experts, entry-level jobs are starting to dry up with the shut downs of many local retail centers in the area, including Linens N’ Things and Mervyns. They pointed out that the increasing unemployment is the major factor driving up the number of bank foreclosed houses.

Meanwhile, being one of the city’s main nonprofit organizations, the Family Resource Center deals with a growing number of clients who came in looking for assistance, from utility bill payments to food. Tennyson noted that people who are in need of help keep coming in despite the dwindling funds received by the organization.

The Family Research Center has partnered with several organizations for job-related workshops. Tennyson explained that Family Research Center and United Way created a project that provides workshops, placement, job development and resume writing.

Additionally, the center also set up the Women’s Initiative for Self Employment which offers workshop to help women start their own businesses.

Under the SparkPoint program of the United Way, the Family Resource Center offers free services such as credit repair, foreclosure assistance, job placement and financial coaching.

Industry experts predicted that unemployment will be the major factor that will fuel the second wave of foreclosures not just in California but in the entire country.

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Project: Buy on Foreclosed Homes List, Fix, Sell to Veterans

A project has been launched with a purpose to buy on foreclosed homes list, rehabilitate and then sell them at affordable prices to disabled veterans. This project is spearheaded by Northern Nevada residents, R.G. Smith and Jim Helsel. Both of them share a common passion of helping American veterans.

The two men said that they have found their destiny by purchasing foreclosure properties, renovating them and selling them at affordable prices to disabled veterans. Smith said that disabled veterans deserve to have their own homes, adding that the project is an opportunity for them to do something better and positive.

The 47-year-old Smith developed the Project Compassion last February. He recruited 49-year-old Helsel to the cause. Both of them plan to use their experience and connections in the housing market to make the nonprofit organization successful.

They applied for the nonprofit status of the organization which is expected to be approved soon. Once the project is underway, Helsel and Smith aims to have a nationwide operation, purchasing and renovating one foreclosed home every week across the country.

With their project, both men aim to turn the negative effects of foreclosure into something positive. Under the program, disabled veterans can apply for homeownership online. Basic qualification requirements include, having been injured following the September 11 terrorist attacks, assets of equal to but not less than $24,000 and do not have their own homes. Smith said that about 10,000 disabled veterans across the nation meet the requirements.

Employees involved in the project would search for foreclosure houses that fit the requirements and needs of eligible disabled veterans. They will then convince banks to sell the foreclosed properties to the project for $1. By allowing this tax-deductible donation, banks would be able to rebuild its image and change public perception after the bailout issue.

Helsel said that banks are not equipped to handle many foreclosed houses because they have a glut of these properties on their inventory.

Helsel and Smith will use volunteer labor and donated materials to rehabilitate the foreclosed home. Eligible veterans are required to give a monthly payment of $500 which goes to cover the cost of utility, electricity, water and other services.

The title to the property will be awarded to the veteran after five years of consecutive payments.

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