Market reports showed that the supply of residential properties in the metro area in 2010 primarily came from Phoenix foreclosures, distressed dwellings and short sales that have been purchased by investors and then resold. Along with the high number of distressed and foreclosed homes, analysts stated that the metro region's housing industry is also under threat from poor conditions in the job market, potential interest rate increases and tight lending practices. In addition, analysts stated that a big number of investors are still doubtful about the capability of the industry to recover.

For the housing market to attain a sustained recovery, analysts asserted that it should start shifting from being a market dominated by investors to a housing industry where majority of buyers are potential residents and homebuyer occupants. They also stated that the percentage of bank foreclosures in Arizona accounting for total housing sales should be lowered. Currently, around 40% of Phoenix's housing sales are attributed to foreclosures, with analysts claiming that the percentage should go down to 5% to signify a healthy market condition.

Last year, housing reports showed that residential properties in markets with comparatively low supplies of foreclosures and bankruptcy homes, like Scottsdale and Tempe, had recorded gradual decreases in median selling prices. Local housing experts have explained that this is a necessary step that the market needed to take before it can reestablish pricing levels that are considered healthy.

Despite such developments, a number of analysts are optimistic about the future of Phoenix. Some have reported that filings and notices for foreclosure homes have decreased in some communities at the start of 2011. They stated that this could mean that the metro area is past the worst of the foreclosure crisis. Furthermore, they cited the rise in the prices of houses in Phoenix between 2009 and 2010 which posted a surge of more than 21%.

Although a number of industry analysts have asserted that the housing market looks better this year than last year, they stated that it is still vulnerable from further downturns. They claim that bank foreclosures and bankruptcy homes are still weighing values of properties down and improvements in the labor market are necessary to push the housing sector forward.

Although a huge percentage of Albuquerque foreclosures and other foreclosed property cases in various areas of the state have remained unopposed, the number of troubled homeowners opting to take advantage of their days in court has also increased. According to local officials, the main problem for most homeowners is that there are not enough lawyers that property owners can afford to hire.

Another problem is that the continuous increase of foreclosures in New Mexico has overwhelmed most free legal associations in the area, which makes them less able to accommodate all those who require help. But most homeowners are not backing out. Officials reported that a big number of them has come to court without a lawyer in tow, representing themselves against lenders and big banks.

Legal experts have stated that the growing interest of homeowners to take every opportunity to defend themselves is being buoyed by a change in the nature of processing foreclosures and even homes in bankruptcy. They stated that unlike before, majority of foreclosures now are due to unemployment rather than bad loans. These people are more interested in protecting their homes, which they have spent half of their lives paying for.

However, most of them are hindered by the intricate legal details governing foreclosures for sale that a lot who come to court without attorney representation still end up losing their homes. This has not deterred most of them, though. In Albuquerque, officials reported that about half of the owners of 100 foreclosure cases go to court on their own.

A number of legal aid associations specializing in foreclosures and homes in bankruptcy tried to help these unrepresented homeowners, but they stated that the sheer number of people requiring help has prevented them from accommodating all of them. In addition, most of them rely on state funding and are the first to lose financial support whenever the state undergoes a budget cut.

Housing data showed that a big number of San Diego foreclosures for sale and other distressed properties in various areas of California have been sold to third party buyers involved in the property flipping venture. In Sonoma County, realtors estimate that about one property out of every 10 auctioned houses was purchased by a third party buyer involved in house flipping.

They also reported that from January 2008 to October 2010, 700 of the properties out of more than 6,400 sold in Sonoma went to third party buyers, with the rest getting seized by mortgage lenders. Market observers have reported that those involved in flipping bank foreclosures in California earn profits that are often more than double the worth of the investment.

One investor reportedly bought a foreclosed dwelling in Santa Rosa for an auction price of over $153,000 and ended up selling it for around $330,000 after a month. The deal resulted in a 115% gain for the investor, something that is quite common among those who buy homes in bankruptcy and foreclosures and flip them, reports revealed. On average, investors reportedly pay $236,000 for auctioned foreclosed properties and then sell them for $330,000 which gives them a 40% return.

Although flipping properties from bank foreclosure homes list has become a lucrative venture for most investors, a lot of homeowners who lost their properties to foreclosures have spoken against such investors, stating that house flippers are unethical. According to these homeowners, they are also often misled by lenders that they will be getting a loan modification, but they later find out that their houses have been sold to these home flippers.

Foreclosed homeowners have asserted that banks are being influenced by home-flipping investors who buy homes in bankruptcy and foreclosures to speed up the processing so that they can get their hands on the properties. Investors have denied the accusations and stated that home flipping will actually help the market recover in the long run.

Total bankruptcy filings in 2009 marked a 50-percent increase from filings in 2008 and an increase of 200 percent over the past couple of years. The San Jose court, which covers the counties of Santa Cruz, Santa Clara, San Benito and Monterey, has been seeing more filings from people who were previously earning six-digit annual incomes and who suddenly found themselves unemployed after companies collapsed and closed.

San Jose lawyer Norma Hammes, former head of the National Association of Consumer Bankruptcy Attorneys, said that she is now working every day of the week for 10 hours each day because of the substantial rise in the bankruptcy cases she is handling. She said many of her clients were earning annual incomes of around $200,000 before they were laid off.

Hammes also said that the Obama program of rescuing distressed properties has not been effective because most homeowners cannot refinance under the loan-home value restrictions of the program.

Mountain View lawyer Cathy Moran said that the number of San Jose foreclosures will increase because lenders have been holding off on their foreclosure actions to suit their purposes, making a big backlog of properties in the last stages of foreclosure.

In the third quarter last year, foreclosure filings, including already repossessed homes such as VA repo homes, in the San Jose metro area continued to increase, posting a jump of nearly 29 percent over a 12-month period.

Moran also said that the closure of enterprises that have been operating for two or three decades has put many professionals earning six-digit figures into bankruptcy. It is especially difficult for families with both spouses losing their jobs simultaneously.

Typically, people with modest income file for Chapter 7 protection, under which most types of debts are forgiven. People with higher incomes and more assets filed for Chapter 13 protection, under which some debts are discharged while other debts need to be repaid through trustees. Chapter 7 typically lasts for three months while Chapter 13 lasts for years, as borrowers pay their unforgiven debts.

While debtors work out their credit card and other debts through bankruptcy hearings, they can also work with nonprofits to work out loan modifications for their mortgages.

As more Oregonian homeowners owe more than the value of their houses, more are getting eligible for a bankruptcy provision that allows them to convert their second mortgages into unsecured debts which can be wiped out in bankruptcy.

According to Oregonian bankruptcy lawyer Eric Olsen, which owns a company that has employed the second-lien strategy for many of its clients, his firm has successfully wiped out over $3.8 million worth of second mortgage loans and house equity loans for 75 of its clients this year and will be expecting another 29 clients to be helped early next year.

Olsen also added that the second-lien strategy is not known by many real estate agents, bankers and some lawyers. In order to qualify for the privilege of having a second mortgage forgiven, borrowers filing for Chapter 13 bankruptcy protection must first prove to the bankruptcy court that the amount of their mortgage loans are far above the value of their houses. This requirement has been easy to prove as nationwide, home values have dropped by about 25 percent from the level of their mortgage loans.

If the bankruptcy judge affirms the underwater conditions of the borrowers and the lenders do not challenge the filings, the judge cancels the second liens as they are converted into unsecured debts.

This second-lien cancellation strategy in case of bank foreclosure homes sale is not without damage however. Any person filing for bankruptcy will have his credit record significantly tarnished. Besides, the strategy also raises questions about morality, especially for borrowers who took out second loans to buy luxurious items such as ski boats and trendy house appliances.

Financial analysts also insist that this strategy adds another blow to the already precarious situation of distressed lenders struggling from nonperforming loans.

However, housing advocates say that the second-lien strategy is an effective way for troubled homeowners to start again and recover from the downturn and from toxic loans, particularly in cases when the federal foreclosure prevention program is not being implemented properly by lenders.

In the first two weeks of December, over 20 borrowers in Oregon have filed documents in bankruptcy courts to wipe out their debts and to save themselves from second liens in case of bank foreclosure homes sale.

Cascadia Project LLC, the developer of the 5,000 acre master-planned community, has filed a Chapter 11 bankruptcy in order to stop HomeStreet Bank from placing the property on bank foreclosures sales scheduled to be held at the County-City Building in Tacoma.

According to HomeStreet, Cascadia has defaulted on its two loans amounting to $72.9 million plus interest and fees. The bank said that one loan was due in February while the other one was due in July.

John Ladenburg, chief operating officer of Cascadia, said that the company is not bankrupt, adding that it has assets that are worth more than its outstanding loan with HomeStreet. The company likens itself to General Motors, expecting to be back on its feet within six months if it can restructure its debt.

Industry experts said that Cascadia has spent over $114 million on the planned community, more than the land value. They said that the company has received interest from two national corporations that will work on office and housing park projects. Additionally, the company expects to earn more revenue from other business ventures to keep its operation going.

Industry experts said that Cascadia is not losing any money and that it aims to continue to do business. However, they agree that it is too early to tell if the developer would be able to come out from the bankruptcy reorganization and continue the work on the development project.

Under the plan, Cascadia is targeted to be the largest master-planned community in Washington. It includes about 6,500 houses, 626-acre commercial space, three golf courses, a hotel and seven schools.

Meanwhile, Cascadia has a current debt of $200,000 to the city of Tacoma. It also agreed to spend $750,000 to redesign the Highway 410 and Sumner-Buckley Highway intersection.

Industry experts said that the worst scenario that could be expected from the case is that the judge would reject Cascadia’s reorganization plan and allow HomeStreet to go on with the bank foreclosures sales.

In the event that the bankruptcy case would be dismissed, the wine-themed destination development of Vineyards Resort would become a foreclosed bank owned property.

Attorney Ford Elsaesser, who represented the Vineyard Property LLC which plans the development of the property into a wine-themed destination, said during a court hearing that backers of the company have not yet develop a reorganization plan that will lead to the development of the project that will satisfy a Milwaukee, Wisconsin-based hedge fund company which is the major creditor of Vineyards Resort.

At the hearing, Elsaesser told Judge Frank Kurtz that an order dismissing the bankruptcy case of Vineyards Resort will take effect on September 4.

However, Elsaesser said that there are some events that would make the dismissal of the bankruptcy case not on anyone’s interest. In case a dismissal will not happen, Kurtz has scheduled the hearing for a possible dismissal on September 9.

Stark Onshore Master Holding, the Vineyards Resort creditor, has sought the dismissal of the bankruptcy case. If the company’s request would be granted, it is free to pursue with its planned foreclosure on Vineyards Resort.

Stark Onshore Master has been trying to collect on the almost $12.9 million loan taken out by Vineyard Property in 2006. According to the company, its interest in the 500-acre Vineyards Resort is in jeopardy, adding that property developers have no ability to finish the project.

Stark Onshore Master has sought judgment against five loan guarantors before the Yakima County Superior Court. The loan guarantors include Ellensburg-based Gary Scott, Yakima builder Craig Schultz, Colorado resort development firm owners Daniel Fitchett and Rich Barnes and Montana resident Lee Burrington.

Developers of Vineyards Resort plan to construct a golf and residential development project featuring over 500 houses, a hotel retail center and a golf course.

In a separate news, Vineyards Resort has settled with Dincom Inc. which it hired in 2008 to help it obtain financing.

According to court records, Vineyards Resort is seeking a refund of $3.2 million from initial buyers of lots in the development project as fee in the event that Dincom obtain about $80 million to finish the first phase of the project.

The absence of any funding forced Vineyards Resort to file for bankruptcy because of its failure to pay loans taken out from Stark Onshore Master.

The bill would authorize bankruptcy judges to modify loans by reducing mortgage payments for owners of foreclosure homes. It is currently in the Senate for consideration.

Last February 18, Obama unveiled the Homeowner Affordability and Stability Plan as part of his $275 billion anti-foreclosure homes program. The $75 billion plan is designed to help more than 9 million distressed owners of foreclosure homes.

However, not all owners of foreclosure homes would be eligible for assistance under the plan. The revised bankruptcy measure is an added option for distressed homeowners who want to save their properties from foreclosure.

The number of foreclosure homes and pre-foreclosure filings in January of this year showed some improvement with nationwide figures of foreclosures dropping by 25.7 percent to 72,694 from 97,841 the previous month.

Pre-foreclosure filings in January dropped by 12 percent to 166,860 from 190,467 the previous month.

The decline in the number of repossessed homes in January 2009 was noticeably evident in Arizona, California, Florida and Texas. California foreclosures dropped to 14,351 from 20,952 the previous month. Florida foreclosures declined to 10,007, 5,367 in Texas and 5,250 in Arizona.

Meanwhile, pre-foreclosure filings in Florida dropped to 43,070 while California slide to 33,008 from 41,710.

However, despite some improvements in foreclosure figures, the decline barely made a dent on the foreclosure crisis as more and more homeowners are starting to feel the impact of the recession.

Lionel Ouelette of the advocacy group CHANGER pointed out that the measure, which would authorize bankruptcy judges to modify loans if mortgage servicers failed to come up with affordable terms for distressed homeowners, would be a great help to some homeowners.

The mortgage industry opposed the revised bankruptcy law and has lobbied against its enactment. The industry argued that the revised law could reward homeowners who borrowed irresponsibly and may lead to higher interest rates and fees.

It also pointed out that there is no way to determine how much is the cost involved in implementing the law to help troubled owners of distressed properties.

Some distressed homeowners are willing to consider the measure as their last hope to save their properties from foreclosures.

According to Chapter 13 – wherein bankruptcy for individuals who have failed to keep up with their debts but do not wish to be harsh to their creditors – new terms on automobiles, boats and vacation residences can be worked out by bankruptcy judges. This is legally called the cram-down process.

However, judges are strictly prohibited to cram down a mortgage debt on a principal house. Debtors can either comply with the original terms of the loan or undergo foreclosure. This rule is absolutely ridiculous. Judges can help you keep your assets by modifying loans on possessions that are relatively expendable, but what about your home?

A measure supported by Michigan Representative John Conyers Jr. that will likely pass the House could fix this inequality. However, it may not be enough to gain 60 votes to become a stand-alone bill. Bankers are still against the mortgage cram-downs. Last month, when Citigroup Inc. declared that it supports the change, other banks have regarded the company as a traitor.

Moreover, the mortgage lobby states that cram-downs would incite an impulsive rush to the Bankruptcy Court. Mortgage rates could go sky-high even for commendable home buyers since lenders would perceive more danger in the mortgage industry.

On the contrary, cram-downs are essentially bound to mortgages underwater, or those with balances surpassing the market value of the property. Such loans are already at the risk of foreclosure, so the lenders deal with massive losses unless someone similar to a bankruptcy judge knows how to create a solution.

For example, in the primary proposal in Congress, a classic strategy would work like this for a debtor who owes $225,000 at an adjustable-rate mortgage at a home currently priced at $200,000: the judge decreases the balance by $200,000. The extra $25,000 transforms into an unsecured debt towards the lender when the case concludes, or a process identified as the strip down.

The remaining loan can be modified by the judge through changing the adjustable rate into a set market rate, adding up 1 percent to 3 percent as a risk payment. Seasonal rate adjustments, balloon expenses, pre-payment costs, etc. can be deleted by the judge and prolong it up to 40 years.

A house would only go into foreclosure if the judge concludes that no form of combination of these modifications could create a mortgage in which a debtor could cope with. This procedure tackles the rights of bondholders as one huge barrier to mortgage workouts. The separation of the body servicing the loan from the faceless investors or loan owners was made possible through the securitization of housing loans.

Servicers are worried that if they change a mortgage to maintain payment flowing instead of foreclosing, then they will be charged by bondholders even though the outcome is possibly better in the future. The service can obtain legal cover if a judge commands the modification.

No one believes that the cram-down is perfect, nor is it the single solution to the foreclosure crisis. But its advantage is that its focal point is the debtors that are really serious in keeping their houses and are the least expected to re-default.A good question to be asked by people nowadays in this economic recession is why the Bankruptcy Court is not permitted to be one of the solutions to the foreclosure crisis?

Even with President Obama’s compromises, not even one Republican agreed with the proposed economic stimulation and recovery plans. The bill is thought to be delayed until spring or until it could be attached to other legislation. It is just sad to see politics as a hindrance to a good economic and foreclosure relief.

The bankruptcy fix could have been a good foundation to start rebuilding the weakened economy. Bad loans triggered the beginning of the crisis, followed by delinquencies then repossessions as the housing industry dwindle with lower home prices. Repossessed homes are now stagnant in the market, bringing home prices down. With financially unequipped homeowners, this will be a cycle- prices fall, delinquencies increase, foreclosures multiply.

Depreciating homes and rising defaults worsens the credit crisis. As long as banks lose, they become more difficult to borrowers.

Lenders are putting their own efforts to help their borrowers to modify their cases and prevent the looming foreclosure. But these efforts seem not good enough.

Bankruptcy fix could be the remedy. When a trouble homeowner would rather fix his loan through payment than to lose their home through foreclosure, a court settlement is possible. This will promote voluntary loan modifications.

It was said that the current administration is willing to shell out $100 billion for foreclosure relief but this is not enough. We need a bankruptcy reform. A bankruptcy fix will even be better for all tax payers because it will cost them nothing.

And if lender participation is desired, discretion is needed. The Obama administration must assure and clear the thought that their foreclosure battle will be lost under the wings of a judge.

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