2010 will be a bad year for homeowners as depressed home values make it out of the question to sell and soaring unemployment makes it impossible to stay current on their house payments. This double whammy is forecast by RealtyTrac to cause 3 million U.S. Homes tol be repossessed by banks this year. In 2009 there were 2.82 million foreclosures, the highest since RealtyTrac began recording data in 2005.
According to senior vice president, Rich Sharga, in Irvine, it is projected there will be more than 4.5 million foreclosure filings in 2010, which includes default and auction notices, and bank seizures. This figure is up from 3.96 million in 2009. “This will be the peak year, and the main reasons are lack of employment and house prices that have stabilized way below mortgage amounts,” Kenneth Rosen, chairman of the University of California’s Fisher Center for Real Estate and Urban Economics in Berkeley, said in an interview. Efforts being made by the Government and mortgage lenders are failing to keep families in their homes during this worst foreclosure disaster since the Great Depression.
The underemployment rate in the US, which includes part-time and those who have stopped looking, rose to greater than 17% in December, according to the Labor Department. The regular unemployment rate was 10%. The Obama administration's foreclosure prevention plan targeted 4 million loans for assistance, but fewer than 1% of those loans had been permanently modified. It is estimated that fewer than 50% of the 3.2 million homeowners originally estimated to be eligible for relief under this plan will qualify. “The government doesn’t have their act together on housing,” Rosen said. “They seem to be pussy-footing around. We need a much more robust effort.”
In a report to Congress, senior managing director of Amherst Securities Group, LP reported Obama’s loan-modification program does not speak to the negative equity factor that is driving foreclosures and due to this is “destined to fail”. Homeowners who are in a negative equity position frequently opt for a 'planned foreclosure'. According to a California based research firm, 10.7 million homeowners are in a negative equity position as of November, 2009. Add to this the fact that, according to the National Association of Realtors, home prices fell 13% 2009, bringing the total fall in price to 26% since the high in 2006.
Efforts to stem the foreclosure calamity include $550 per month reduction in monthly payments for just under 1 millon borrowers and the government has put forth first time home buyer credits, along with $200 billion to Fannie Mae and Freddie Mac. The first time buyer credits are scheduled to terminate this spring. A total of 2,824,674 U.S. properties got at least one foreclosure filing in 2009, a 21 percent increase from the previous year and more than two times the number in 2007, RealtyTrac said.
There is a vast supply of real estate already repossessed by the banks that have not been put on the market yet. It is estimated that prime borrower defaults are likely to become more intense, and there are an estimated 7 million homes already in foreclosure or facing seizure. For the 10th consecutive month, foreclosure filings were more than than 300,000 per month. Nevada has the largest number of filings with Arizona coming in second. Clearly something needs to be done to stem this crisis.
Homeowners need to realize that just because they have negative equity at the moment, they can still benefit in the long run by keeping their homes. December filings increased 15 percent from a year earlier to 349,519, the 10th straight month the tally surpassed 300,000. Foreclosures in the fourth quarter jumped 18 percent from the same period in 2008 and fell 7 percent from the third quarter.
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