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Foreclosures: Unwieldy Until A Bottom Is Found

Posted Sunday, January 8, 2012

The forecast for the 2012 real estate market is gloomy and ominous. While there are some economic experts that are optimistic about the 2012 real estate market, the majority of experts are quite pessimistic. Many leading experts believe that the market has not bottomed out yet and that the worst is yet to come. The consensus of the least pessimistic experts calculates that the market will actually decline in value by 1.4 percent in the next five years.

The foreclosure crisis is ravaging homeowners and neighborhoods alike. About one third of all mortgagees owe more money for their loan than the value of their house. This is leading to a widespread abandonment of houses which depresses the value of houses in the surrounding neighborhoods. Housing sales are stagnant despite the fact that mortgage rates are at an all-time low and that housing process are affordable.

Delinquent mortgage payments continue to be a problem. 8.15 percent of all loans not in foreclosure are thirty days or more past due. The pre-sale inventory of foreclosed houses was at an all-time high in October of 4.29 percent. The November numbers were slightly better, but they were still at a staggering 4.16 percent.

For those distressed homeowners who are shouting “sell my house,” there may be little relief in sight. The housing prices declined by 1.57 percent in the fourth quarter of 2011 and are expected to decline even more in 2012. There are already a flood of distressed homes on the market, so new distressed owners will just add to the troubles on the housing market.

The same owners who shout, “sell my house” are not likely to find a whole lot of relief from the government either. The Home Affordable Modification Program, or HAMP, which is the government’s foreclosure prevention program, is about to come to an end. HAMP has been less than effective in getting reduced mortgage payments for distressed homeowners. A Congressional overseer has estimated that at least 600,000 qualified homeowners will not get a modification on their mortgage before HAMP expires in 2012. While more than 880,000 homeowners have been helped by HAMP getting a modification on their mortgage, this is far short of the goal helping three to four million homeowners.

While there is little denial of HAMP’s ineffectiveness, a marketplace without HAMP would be a far worse alternative. The expiration of HAMP could easily bring on another wave of foreclosures, which would further hurt areas hit hard with foreclosures.