Archive for the 'Foreclosure Crisis' Category

It would not come as a surprise to industry experts if the number of bank foreclosure properties in Philadelphia, Pennsylvania would increase in the coming months. This is because banks are heavily burdened with bad loans for home construction.

According to market data, problem loans have been mounting in numbers, led by home construction loans. Seriously delinquent loans increased by 3 percent in 15 biggest publicly traded banks in Philadelphia in September. The figures are a significant increase from the 0.89 percentage point the previous year.

The September increase in problem loans added about $1.1 billion debts that banks need to collect through foreclosure, restructuring or other measures. And unless the economy improves which would allow borrowers to recover and pay their debts, banks have no choice but to find ways to collect on these debts.

Meanwhile, taking into consideration the problem of banks with the growing bad loans, the Federal Reserve provided some relief by maintaining a record low federal funds rate of not more than 0.25 percent. This helps banks keep their borrowing costs at a low level and allow them to generate more profits on their new loans, thus reducing the possibility of incurring more bank foreclosure properties.

However, some banks continue to experience problems even if they hold the strongest mortgage loan portfolios. Industry experts said that many banks will think twice before they will boost their reserves because the market is still too vulnerable and unstable.

But some banks are lucky enough not to be sucked into the current mortgage crisis, as in the case of Third Federal Savings Bank. The bank continued to offer the lowest nonperforming asset rate among area banks. Officials said that the bank decided to stick with its conservative lending measures during the peak of the housing market. This helped them avoid the trouble with bad loans that many banks are experiencing right now.

By contrast, the Abington Bancorp Inc. has the highest nonperforming asset rate of 5.03 percent. In 2004, it raised about $71 million from a stock offering. Today, its construction loan portfolio is in a really bad shape, with delinquency rate of 35.2 percent.

The average delinquency rate on home construction loans in New Jersey and Pennsylvania banks rose by 15.5 percent as of end of September. This prompted many industry experts to anticipate more bank foreclosure properties in the region in the coming months.

A report on the federal government’s Home Affordable Loan Modification Program (HAMP) showed that the initiative is not enough to contain the growth of bank foreclosure list. On its report, the Federal Reserve Board warns that more foreclosures are in the offing, adding that the flood of distressed properties would likely occur in the next two years.

According to the study, many homeowners have lost their jobs or reduced their income, resulting to difficulty in meeting their mortgage payments, even if they have been reduced into affordable terms in order to help homeowners save their properties from bank foreclosure list. The study noted that the HAMP is not ideal for homeowners who have suffered a significant decline in their incomes as a result of unemployment or other mitigating circumstances.

The modification program involves reducing the payment ratio to income of borrowers based on present income level. In the event that the income would return to the old level, the reduction could not be reversed, making the required loan modification costly.

Additionally, the modification program will work if the value of the troubled property is less than the total mortgage owed by the homeowner. Many homeowners who feel that home prices and values would not improve soon, prefer to walk away and leave the troubled properties for lenders to foreclose.

But what is worst is the growing number of borrowers who re-default, meaning that they defaulted again on their mortgage after entering the federal program and incurring costs associated with the modification process.

Also, the study discusses the cost of foreclosures. It stated that the costs associated with the increase in foreclosures are quite significant. Historically, almost 50 percent of foreclosure filings went on to become actual foreclosures. And given the current economic downturn, the probability is great that foreclosures would even be higher.

The study pointed out that communities and neighborhood residents are also severely affected by the foreclosure crisis. Abandoned and vacant houses are magnets to vandals and criminals. Aside from that, they tend to pull down prices of nearby houses, thus making it hard for some homeowners to sell their properties at reasonable prices.

Finally, the study said that an overflowing bank foreclosure list is clogging the housing market, thus reinforcing the weakness of the sector and hindering economic recovery.

The number of bank homes for sale continued to clog the housing market pipeline, pulling down home prices and values. In the third quarter of this year, foreclosure filings increased by 5 percent from the second quarter and 23 percent from the third quarter in 2008. The figures indicated that 937,840 houses were in some sort of foreclosure proceedings.

And looking at the numbers, it could not be denied that loan modification is not working as intended despite being touted as one of the most effective housing market recovery program of the Obama Administration.

Industry experts said that based on the progress made by the loan modification program in helping control the flow of bank homes for sale that is clogging the housing market pipeline, the program is not enough to help homeowners save their properties, especially those who are buried in debt and have little or no income to afford the monthly mortgage payments.

Experts said that the Obama Administration’s loan modification is designed to help distressed homeowners extricate themselves from the trouble caused by loose lending standards.

During the peak of the housing market, many homeowners took out loans against the increasing values of their houses and used the money to pay for other expenses. Others borrowed using loans that are adjustable and have no down payment to purchase properties that they could not afford otherwise.

Later, many homeowners found themselves missing monthly payments, especially when their loans adjusted to higher interest rates. Industry experts said that many homeowners opted to sell their properties. However, they found themselves willing to sale but unable to because home prices and values dropped below the market level.

And adding to the growing number of homeowners who are at risk of foreclosures due to loose lending standards are homeowners who have lost their jobs or their income have been cut.

A recent market study showed that 30 percent of delinquent borrowers will found some means to make their accounts current without help from lenders. Finally, despite loan modifications, as many as 45 percent of troubled homeowners will still end up unable to pay their mortgages again, usually within six months, and find their properties on bank homes for sale.

In 20 metropolitan areas across the country, it is cost effective to buy bank foreclosures instead of renting. This is the conclusion of a recent study of housing markets in various metropolitan areas. Industry experts said that in the long run, it is cheaper to buy homes than rent them.

Many homeowners in Pioneer Valley, Massachusetts are on the brink of foreclosures, causing another flood of foreclosed homes in the area. The number of foreclosure filings in the area rose in August. And many lenders are holding off taking over distressed properties for fear that they will be stuck with them.

Fort Lauderdale bank foreclosures are still growing despite the decline of foreclosure filings in other places largely because of the high number of delinquent Fort Lauderdale unable to obtain favorable modification agreements with their lenders.

The number of Pittsburgh bank foreclosures and unemployment continue to rise for the first half of this year. The city of Pittsburgh ranked 134th among metropolitan areas in the country in terms of foreclosure rate.

Bank foreclosure sales are threatening to dampen all the progress that has been made towards the recovery of the housing market. A recently released report showed that the scheduled resetting of adjustable-rate mortgages (ARM) in 2011 is threatening the housing market to face another round of foreclosure.

Bank foreclosure for sale has both positive and negative effects on neighborhoods in Marion County, Indiana. According to a study of over 8,400 home sales in the county from January last year to June 2009, 47 percent of properties sold during the period are considered repossessed homes. They include properties foreclosed on by banks and lenders, auctioned at sheriff’s sale or by federal agencies such as Veterans Affairs and Federal Housing Administration.

The Southern Nevada economy is still reeling from the devastating effects of the housing market collapse. The state still leads the nation in terms of foreclosure rates and industry analysts are not sure if the worst of the housing collapse is finally over.