Archive for the 'Foreclosure Crisis' Category

Foreclosures for sale are contributing significantly to the economic challenges faced by 10 U.S. states, according to a report from the Pew Center.

Based on the report, California is not the only state struggling from state budget problems. Nine other states, namely Arizona, Florida, Michigan, Illinois, Nevada, Oregon, New Jersey, Wisconsin and Rhode Island are also headed towards economic disaster if interventions are not adequate.

The report cited double-digit budget deficits, record-high unemployment rates, budget constraints and large numbers of foreclosures as the major reasons for their difficulties.

Susan Urahn of the Pew Center said that California has been in the spotlight for so long, but other states have been struggling financially over the past months. She called on the governors and legislators of the ten states to act quickly to head off economic disaster because the population and economic production of these ten states account for over 33 percent of the whole country’s output.

Based on Pew Center data, states have lower tax revenues during and after recessions, but the current recession has overburdened state governments because of the sharp rise in number of people needing state services such as health care, social services and housing.

The report cited California as having the worst economic situation largely because of its poor financial management practices. California also had the highest number of foreclosures in the third quarter, with more than 250,000 of its residential units notified of foreclosure actions, almost 51,000 units of which are already foreclosures for sale.

Early this year, California has started implementing measures to stop its financial hemorrhage, such as cutting allotments to social services and educational programs, increasing taxes temporarily and granting stimulus money.

According to Governor Arnold Schwarzenegger, residents of the state should expect more cuts in services because he expects the budget plan to be released in January to show a deficit of up to $14.4 billion.

The report also said that the states continue to suffer because they have been implementing temporary fixes to fiscal problems. For instance, Michigan, clobbered by the bankruptcy of two Detroit automakers, is still providing tax incentives despite sharp drops in revenues.

Arizona, which has surpassed California in foreclosure rate, has been considering mortgaging its state buildings and then renting them while the state recovers. In the third quarter, more than 50,000 residential units in Arizona were in foreclosure, with more than 36,000 units for trustee sale and more than 14,000 already foreclosures for sale.

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 [...]

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.