The number of people falling behind on their mortgages is decreasing, but the number of homes being seized by the banks is increasing:
Bank repossessions hit a record monthly high in May, according to RealtyTrac, the online marketer of foreclosed properties. Lenders took back 93,777 properties, up 1% from the previous month’s record and 44% from the same period a year earlier.
Foreclosure filings, meanwhile, fell by 3% from a month earlier and edged up less than 1% from May 2009. One in every 400 homes received a foreclosure notice last month.
and
Nevada, Arizona and Florida once again top the state foreclosure rates in May, though the pace is moderating.
One in every 79 homes in Nevada received a foreclosure filing last month, down nearly 12% from April and 16% from a year ago. The state’s foreclosure rate is five times the national average.
Fewer foreclosures, but more property being seized by banks.
For people of color, the foreclosure rate is even higher:
Of borrowers who took out mortgages between 2005 and 2008, some 8% of both African-American and Latino borrowers have lost their homes to foreclosure, compared to 4.5% of non-Hispanic whites, according to a study by the Center for Responsible Lending, released Friday.
The racial and ethnic disparities continued even after controlling for income differences. The center’s research shows that African-American and Latino borrowers were about 30% more likely to get higher rate subprime loans than white borrowers with similar risk characteristics.
Of the total pool of homeowners, 17% of Latinos have lost their homes to foreclosure or are at imminent risk of losing their homes, while 11% of African-Americans are in that position. By comparison, 7% of non-Hispanic whites have lost their homes or are about to.
In other words, the risky, higher cost mortgages and loans were heavily marketed to people of color. Truly shameful. The property values of African American and Latino communities will be hard hit by this.
How many of us have seen promos for the Extreme Makeover reality show and thought, “I wish they’d come fix my house?” A cautionary tale; when something looks too good to be true, it almost always is, as a family in California is finding out:
Five years ago, the Wofford family’s home received a new house on ABC’s “Extreme Makeover” show. But now the family’s Encinitas home may be weeks away from foreclosure.
and
“A lot of people think when you get the house you get the mortgage. Well, you don’t,” said Wofford.
He failed several times to modify the loan with IndyMac, and he even hired an attorney, Mike Curran. “Providing documents, and providing documents again and again and again, and they still don’t have a modification at this point,” said Curran.
I hope it works out for them. What a terrible thing, to lose your wife, get a new home for you and your 8 kids, only to have it yanked away from you by the same banks that helped to destroy the economy.
Tags: foreclosures, mortgage crisis
By Lynda Hiller — Working America member, Pennsylvania
My name is Lynda Hiller and I joined Working America when an organizer came to my home in Coplay, Pennsylvania. My family has been struggling because of the economy for two years now and when the canvasser came to my door, I felt like someone finally cared. I wanted to share my story.
Only a couple months ago, I started to think that things were changing in America. We have a president who cares about the little people, about the working class. We finally passed healthcare reform, and we were getting close to holding Wall St. accountable for gambling with our economy.
But then, for the second time this year, the Senate went on vacation without voting to extend unemployment benefits. The economy has not improved, and they left those struggling with unemployment with nowhere to turn. That same week, we got a letter from the bank that our house was being foreclosed on.
We originally took a mortgage out with one bank, but at some point, it was sold to a third party. A few years later, we took out a small second mortgage which was then sold in pieces to another financial institution. So now we are dealing with multiple banks as we struggle to keep our house.
We are not frivolous people. We made payments on time as best as we could until I was diagnosed with cancer and started undergoing chemotherapy treatments. During this time, it took all my strength just to survive. I couldn’t write a check, I couldn’t remember the payment schedule. All I could concentrate on was beating the cancer. While I was undergoing treatments, my husband lost his job. Our bills kept piling up, and soon they became unmanageable.
My husband has been actively looking for work for two years now. He has applied to everything he can find, at some places multiple times, but nothing has turned up. We have been surviving on the unemployment benefits.
We have tried to follow the rules and we have taken every step that you can take. We applied for a Home Affordable Modification Program but were told that we didn’t meet the criteria. What are the criteria? It’s still a big secret. We have written letters of hardship. We have talked to every person imaginable at the banks or local programs, but have not seen any action. I have given up my pride and have begged every organization in our time in need. We want to be able to pay. We want to work something out with the bank, but have only found dead ends.
In this terrible economy, it all comes back to Wall Street hurting Main Street. This family needs a miracle. They have hurt us in every aspect.
We have been in this house for five years, if we lose it I don’t know where we will turn. We have had to start over before, and I know that we can again. But no one should have to do that. We are a working class family. We don’t go on vacations, we try not to spend a lot on groceries, but without our house, we won’t have anything. Our elected officials need to start looking out for Main St. and extend unemployment benefits until our economy truly begins to recover.
Tags: mortgage crisis, unemployment
In today’s NY Times, unemployment claims “fell more than expected.”
Except they really didn’t. It’s all part of the numbers guessing shell game:
The Labor Department said first-time claims dropped by 14,000 to a seasonally adjusted 442,000. That was below analysts’ estimate of 450,000, according to Thomson Reuters.
But most of the drop resulted from a change in the calculations the department makes to seasonally adjust the data, a Labor Department analyst said. Excluding the effect of the adjustments, claims would have fallen by 4,000.
Later in the article:
The number of people continuing to claim unemployment benefits, meanwhile, fell to 4.6 million.
But that does not include millions of people who are receiving extended benefits for up to 73 extra weeks, paid for by the federal government, on top of the 26 customarily provided by the states. Nearly 5.7 million people were on the extended benefit rolls for the week ended March 6, the latest data available. That is about 300,000 lower than the previous week. The extended benefit figures aren’t seasonally adjusted and are volatile from week to week.
All told, more than 11.1 million people are claiming unemployment benefits, the department said.
And as always, this doesn’t include the numbers of those still unemployed who have used up their benefits and those who were never eligible.
However – it sounds as though good news is coming for troubled homeowners.
From the NY Times:
The Obama administration on Friday will announce broad new initiatives to help troubled homeowners, potentially refinancing several million of them into fresh government-backed mortgages with lower payments.
Another element of the new program is meant to temporarily reduce the payments of borrowers who are unemployed and seeking a job. Additionally, the government will encourage lenders to write down the value of loans held by borrowers in modification programs.
The escalation in aid comes as the administration is under rising pressure from Congress to resolve the foreclosure crisis, which is straining the economy and putting millions of Americans at risk of losing their homes. But the new initiatives could well spur protests among those who have kept up their payments and are not in trouble.
This could be real help for those homeowners who are unemployed or underemployed and barely hanging on. Stay tuned.
Tags: mortgage crisis
The Washington Post reports on what is expected to be a new round of home foreclosures:
About 5 million to 7 million properties are potentially eligible for foreclosure but have not yet been repossessed and put up for sale. Some economists project it could take nearly three years before all these homes have been put on the market and purchased by new owners. And the number of pending foreclosures could grow much bigger over the coming year as more distressed borrowers become delinquent and then, if they can’t obtain mortgage relief, wade through the foreclosure process, which often takes more than a year to complete.
As these foreclosed properties add to the supply of homes for sale, they could undercut housing prices, which have increased modestly through December, according to the most recent figures in the S&P/Case-Shiller home prices index. That rise partly reflected a slowdown in the flow of foreclosed homes onto the market.
This affects a whole different group of homeowners/borrowers:
The borrowers in trouble now are, for the most part, people who have better credit and safer loans and have become delinquent because they’ve lost their jobs or are dealing with other economic setbacks, economists said. More than 75 percent of the borrowers who are now seriously delinquent — meaning they have missed at least three monthly payments — have traditional prime loans, according to First American CoreLogic. Most of these borrowers have not made a mortgage payment in six months.
These borrowers are among the most difficult to help. Homeowners with economic troubles such as extended unemployment often cannot make even reduced mortgage payments. And the longer borrowers stay delinquent, the more difficult it is to fashion a mortgage relief plan for them.
From CBS Moneywatch some rare media honesty about the real unemployment rate:
The real question is what happens to foreclosure projections if unemployment stays high. Right now, true unemployment is running close to 17 percent, but another 20 to 30 percent of Americans have experienced a decline in pay. Half the country has less income to spend, and Americans are still losing jobs.
This serves to underscore the need for the One Million Local Jobs bill.
Tags: foreclosures, mortgage crisis
Atrios has been doing great work on the continuing mortgage crisis, and the failure of government efforts to address it. They did some stuff, it hasn’t worked, and the foreclosure crisis is still very much with us. See here, here, and here.
Another side to how government policy affects people’s living situations is in the rent vs. buy equation. At The American Prospect, Monica Potts looks at how federal policies promoting homeownership contributed to the housing bubble and a lack of affordable rental properties.
Efforts to increase homeownership are partly fueled by the idea that it makes communities more stable. But eliminating and underfunding rental programs in favor of homeownership did the exact opposite. “The very best homeownership program is a robust and stable … group of renters,” Crowley says. “A renter who is able to afford where they’re living, able to pay their rent on time, develop a good credit record, and actually have some money to save … that sets people up for success in homeownership.”
In addition to families who might not be quite ready to own a home but can hold homeownership as a realistic goal, there are families at such low income levels that renting may always be their best option. Crowley says her group estimates that the gap between the need for low-income housing and the supply for it now stands at about 3 million units. From 2007 to 2008 alone, the number of units affordable for extremely low-income renters decreased by about 100,000, and the number of renters at that income level increased by about 3.5 percent. Under pressure from groups like Crowley’s, Congress passed and Bush signed a law creating a National Affordable Housing Trust Fund in 2008. Most of the money must be used for rental housing and be reserved for helping families living with incomes at no more than 30 percent of the area’s median income. Apartments that would be affordable for those groups are not the kinds of moneymakers that would draw private investment on their own.
Luckily, Potts sees a chance that things will start to be set right in this area:
Fitzgerald notes that even without total funding, the Obama administration has signaled some clear shifts in priorities. The administration has linked housing initiatives with transportation, education, and green projects, Fitzgerald said. Low-income housing that’s near transit centers and schools reduces sprawl and makes it less expensive for the residents to get around. And of the $5 billion weatherization funds in the stimulus bill, about $2 billion was targeted for multifamily housing financed by the Federal Housing Administration, which Fitzgerald believes shows a willingness on the administration’s part to concentrate on rehabilitating existing stock. “The most green thing you can do is not knock down a building and replace it all,” she says.
Tags: foreclosure, mortgage crisis
That assessment from Jay Brinkmann, chief economist for the Mortgage Bankers Association (MBA), noted by Laura here on Friday, came as MBA released a new survey showing mortgage delinquencies reached a record high in the third quarter of this year.
The New York Times reported:
Nearly one in 10 homeowners with mortgages was at least one payment behind in the third quarter, the Mortgage Bankers Association said in its survey. That translates into about five million households. The delinquency figure, and a corresponding rise in the number of those losing their homes to foreclosure, was expected to be bad. Nevertheless, the figures underlined the level of stress on a large segment of the country, a situation that could snuff out the modest recovery in home prices over the last few months and impede any economic rebound.
Unless foreclosure modification efforts begin succeeding on a permanent basis — which many analysts say they think is unlikely — millions more foreclosed homes will come to market.
More ominous yet was this line further down in The Times story:
mortgage bankers expect foreclosures to peak in 2011
In its announcement of the survey, MBA’s Brinkmann said:
Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP. Over the last year, we have seen the ranks of the unemployed increase by about 5.5 million people, increasing the number of seriously delinquent loans by almost 2 million loans and increasing the rate of new foreclosures from 1.07 percent to 1.42 percent.
The MBA and other bank lobbying groups helped take the teeth out of the Helping Families Save Their Homes Act earlier this year by defeating the so-called “cramdown” provision in the Senate which would have allowed bankruptcy judges to order mortgage restructuring for many struggling homeowners. Bank lobbyists also succeeded in weakening the legislation by making it more difficult to get lenders to agree to mortgage modifications.
So far many who qualify for such modifications just aren’t getting them.
RealtyTrac’s Housing Predictor now has upped their forecast to 10 million foreclosures by
end of 2012:
Housing Predictor forecasts that 10 million homeowners will be foreclosed through 2012 as more mortgage holders are unable to refinance their mortgages because of falling home values or give up at the prospect of holding on to their homes all together.
The increase to 10 million foreclosures represents 2.4 million more homeowners from the 7.6 million forecast in March. These homeowners will have the dream of home ownership taken away. Until lawmakers take more severe action to halt the epidemic it is clear the housing market will not stabilize and the economy will weaken further.
Watching the Center for Responsible Lending’s National Foreclosure Ticker it looks pretty certain that 2009 will set another new record for foreclosures in a year.
According to Bloomberg a housing market recovery has been delayed:
A recovery in U.S. housing will have to wait at least until next year.
The outlook for the home market dimmed this week as residential construction and mortgage applications fell and loan delinquencies reached a record.
“I don’t think the housing crisis is over,” Mark Zandi, chief economist with Moody’s Economy.com, said in a telephone interview. “I think we’re going to see another leg down.”
Reporting on the lag in mortgage fixes, the Center for Responsible Lending says:
Last spring when Congress considered taking stronger measures to stop foreclosures, loan servicers said they could handle the problem themselves—but they’re not delivering.
CRL is urging Congress to act to ensure that current foreclosure-prevention and loan-modification efforts are as effective as possible, and to lift the ban that now prohibits home loan modifications through the courts.
Meanwhile those struggling homeowners who don’t qualify for mortgage fixes now at least have an opportunity to stay in their homes through the expanded Deed for Lease program from Fannie Mae:
Some homeowners facing foreclosure will be able to remain in their property as renters under a new program announced Thursday by Fannie Mae.
The Deed for Lease Program allows qualified homeowners to sign a lease allowing them to remain in their homes in return for agreeing to transfer ownership of the property to the lender. Rent is capped at 31 percent of the homeowner’s gross monthly income.
Leases are signed for 12 months, with the option of renewing on a month-to-month basis afterward. Freddie Mac initiated a similar program in January that allows former homeowners to stay in their homes on a month-to-month basis.
The program is based on the Right-to-Rent proposal(pdf) offered by economist Dean Baker.
Applauding Fannie Mae’s new program as “an important step forward in dealing with the housing crisis”, Baker urged it be offered for a substantially longer period, perhaps five to ten years:
This would give former homeowners real security in their homes. This longer lease period could be made contingent on timely rent payments and proper upkeep and other factors, but families should know that they have the option to remain in their home for a substantial period of time, not just a year.
Tags: foreclosures, Housing, mortgage crisis
More signs of a broken system:
Only three years ago, foreclosure was rarely a factor in how people became homeless. But among the homeless people that social service agencies have helped over the last year, an average of 10 percent lost homes to foreclosure, according to “Foreclosure to Homelessness 2009,” a survey produced by the National Coalition for the Homeless and six other advocacy groups.
In the Midwest, foreclosure played a role for 15 percent of newly homeless people, according to the survey, reflecting soaring rates of unemployment — Ohio’s reached 10.8 percent in August — and aggressive lending to people with damaged credit.
At a shelter for women and children run by the West Side Catholic Center in Cleveland, where Ms. West now lives, foreclosure accounted for zero arrivals in 2007, the center’s executive director, Gerald Skoch, said. Last year, two cases emerged. This year, the number has already reached four.
How sick is it that bankers are still getting their bonuses but the government won’t act to keep people in their homes?
Tags: foreclosure, mortgage crisis
This is just incredible (not in a good way). Baltimore has filed a federal lawsuit against Wells Fargo Bank for pushing black applicants to get subprime mortgages even when they qualified for better terms, “tipp[ing] hundreds of homeowners into foreclosure and cost[ing] the city tens of millions of dollars in taxes and city services.”
Loan officers employed other methods to steer clients into subprime loans, according to the affidavits. Some officers told the underwriting department that their clients, even those with good credit scores, had not wanted to provide income documentation.
“By doing this, the loan flipped from prime to subprime,” Ms. Jacobson said. “But there was no need for that; many of these clients had W2 forms.”
Other times, she said, loan officers cut and pasted credit reports from one applicant onto the application of another customer.
These practices took a great toll on customers. For a homeowner taking out a $165,000 mortgage, a difference of three percentage points in the loan rate — a typical spread between conventional and subprime loans — adds more than $100,000 in interest payments.
This wasn’t just in Baltimore: A New York Times analysis of mortgages in New York City found a greater black-white disparity in subprime rates for Wells Fargo than for other lenders (among borrowers of equivalent income).
A lot of commentators with big platforms—the banks, many politicians and pundits—want us to believe that the mortgage crisis is about irresponsible homeowners. As if Americans had suddenly, inexplicably just gotten really irresponsible, decided they didn’t care if they lost their homes. Stories like this remind us again of the range of practices by the lenders that produced this crisis. They were the ones who changed, not homeowners. And they got away with it because the government wasn’t keeping a close enough watch on them.
We need effective regulation and oversight of the financial industry.
Tags: mortgage crisis
