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.

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.

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.

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.

The study was designed to rank 20 metropolitan areas nationwide where it is cheaper to buy bank foreclosures than it is to rent them. In the cities of Detroit, Michigan and Pittsburgh, Pennsylvania, renters can actually reduce their monthly costs by buying homes instead of renting.

Other cities on the list where buying is slightly expensive than renting included Memphis, Tennessee; Rochester, New York; Cleveland, Ohio; Tampa, Florida; Dallas, Texas; Columbia, South Carolina; Providence, Rhode Island; and Las Vegas, Nevada.

Researchers who conducted the study calculated the ownership costs by assuming a fixed-rate 30-year mortgage for 100 percent of the buying price and no down payment. This method is designed to develop a fair and average matchup between renting and owning.

Researchers said that if they factored in a 20 percent down payment, the result would show that owning a home is a cheaper alternative for 10 metropolitan areas.

Industry experts said that results of the study only reinforced what they have been telling potential buyers for a long time now—that the market is ripe for the picking.

They said that the collapse of the housing market has brought the equation of owning versus renting to a level similar to that before the housing bubble pushed home prices way above the costs of renting. But they noted that the rentals are also dropping now, albeit at a slower pace.

Additionally, experts said that the foreclosure crisis pulled down home prices and values from Riverside, California to Tampa. However, for several months now, housing markets are seeing some increase activity in home buying driven by federal incentive programs such as the tax credit of $8,000 provided to first-time home buyers and the historic low interest rates.

Industry experts said that to buy bank foreclosures now is the smartest investment decision any individual or family could ever make.

The number of foreclosure petitions in Hampden County rose by 191.67 percent to 175 in August from 60 filings in the same month last year. Meanwhile, the number of repossession deeds dropped by 25.32 percent to 59 in August compared with 79 for the same month the previous year.

In Hampshire County, foreclosure petitions rose by 257.14 percent to 25 from seven. However, the number of actual foreclosures remained at 10.

In Franklin County, foreclosures were filed on 23 homeowners, an increase of 360 percent from five of August 2008. Similarly, the number of actual foreclosures jumped by 50 percent to nine from six.

Industry experts said that all over the region, people have lost or starting to lose their jobs, resulting to missing their mortgage payments and opening the gate to another flood of foreclosed homes. Meanwhile, one family is facing the risk of losing their 1,900-square-foot, four-bedroom house to foreclosure after they defaulted on their mortgage payment with Option One Mortgage Crop.

To delay getting into foreclosure, the family filed for Chapter 13 bankruptcy under which they are required to create a payment plan to be approved by the court. The family also decided to file a lawsuit against lender, Option One. Under the lawsuit, the family alleged that the lender misled them. They also seek recovery of late penalties and for the Option One to pay their legal fees.

A case like this demonstrated the worsening foreclosure problem in the region. Industry experts said that there should be a judicial foreclosure in the state. They explained that a judicial foreclosure would entail each foreclosure case to be brought before state judges.

Nationally, the number of homeowners who went into foreclosures jumped by over 5 percent. In July-September period, almost 938,000 properties went into foreclosure, compared with 890,000 in the second quarter. The flood of foreclosed homes filings are expected to reach 3.5 million in 2009, a drastic increase from 2.3 million the previous year.

Based on data released by the Treasury Department, only 16 percent of distressed homeowners nationwide who applied and qualified for loan modifications in September obtained favorable loan modifications. As of the last week of September, 3.1 million homeowners are seriously delinquent on their home loans.

According to Terri Schmitz, a home loan broker working with the Fort Lauderdale unit of AmeriFirst Funding, more than 3 out of every 4 homeowners who took out home loans in recent months need to restructure their loans because of job loss, reduced work hours and other financial difficulties.

But lenders in South Florida have been rejecting a lot of loan modification applications, according to distressed homeowners in the area. Wells Fargo, which acquired mortgage lender Wachovia in 2008, said it hired 12,000 new employees to help troubled homeowners. But according to reports, none of these newly hired employees were assigned to South Florida, which is among the most foreclosure-battered areas in the U.S.

Based on a nationwide foreclosure report for the first two quarters of this year, the metro area covered by Fort Lauderdale, Miami and Pompano Beach, had more than 85,300 foreclosure filings, representing nearly 4 percent of all residential units in the area. Many of these delinquent properties eventually entered listings of Fort Lauderdale bank foreclosures.

With a foreclosure ratio of one out of every 28 households, the metro area that includes Fort Lauderdale ranked 14th compared to the foreclosure rates of 202 other major metro areas.

Compared to the first two quarters of 2008, Fort Lauderdale’s foreclosure rate in the first two quarters of this year soared by nearly 41 percent.

According to Inside Mortgage Finance publisher Guy Cecala, one of the major reasons lenders reject loan modification applications is that they do not believe the process works. They cite the data released by the Office of the Comptroller of the Currency which indicate that many borrowers with modified loans redefault within months of loan modifications.

Additionally, Ertha Brathwaite, head of the Aventura unit of the Chase Homeownership Center, said that many homeowners expect to get loan modifications even if the values of their homes have gone down sharply. She explained that banks are also looking at ways to cut their losses.

From January to July this year, the number of foreclosure filings totaled 5,830, with one in every 190 homeowners or 0.53 percent going into foreclosure process. The foreclosure rate for the first six months rose by 14.49 percent compared with the same period the previous year.

Similarly, the unemployment rate in the Pittsburgh region continues to rise. Last month, the seven-county region posted a 7.8 percent unemployment rate. According to the Pennsylvania Department of Labor and Industry, the region’s unemployment rate in August was the 11th monthly consecutive increase.

But despite the rise in unemployment, industry experts said that the region is still better off compared with the state average. They noted that the unemployment rate increased in a slow pace for the past five months. Furthermore, the region’s unemployment rate is still below the state average of 8.6 percent and 9.7 percent national average.

They have the same sentiment when it comes to the number of Pittsburgh bank foreclosures. They noted that the foreclosure trend for the most part of the year went up but it drop by 5 percent in August to 323. The number of foreclosure filings totaled 5,766 and sales add up to 567.

Industry experts said that as with other areas in the country where foreclosure is rising, unemployment is the factor that exacerbates the problem. In the Pittsburgh region, the unemployment rate in August was higher by 2.5 percent compared with the same month last year when it posted 5.3 percent.

They noted that the biggest job losses occurred in the service provider segment, with 1,000 in health and education services and 1,400 in government services.

Meanwhile, home sales in the region dropped by 1.6 percent in August, compared with the same month a year ago. For houses selling over $250,000, the sales dropped by 11 percent. Additionally, the average home price in the region was down by 2.4 percent to $157,988 while the median price of a property increased to $125,000 or 1.4 percent.

Industry experts said that the drop in home sales may be due to potential buyers’ economic and employment uncertainties.

These risky home loans will reset to higher payments, endangering thousands of borrowers into falling behind on their mortgage payments. The report noted that the resetting of about 70 percent ARMs, with a combined worth of $189 billion, would be a devastating setback to the housing market still reeling and scrambling to recover from the collapse that resulted to the financial crisis.

Data released by First American CoreLogic showed that option ARMS accounted for about 1.3 percent of the total mortgages. Option ARMS are used by a small segment of consumers compared with subprime mortgages.

Industry experts are hoping that because the option ARMs market is not that big, the fallout from the resetting may be manageable. However, because the housing market has not yet recovered from the subprime collapse, an additional burden, no matter what the size is, would lead to more bank foreclosure sales.

Options ARMs are loans that allowed borrowers to choose the amount of mortgage they want to pay every month. Majority of borrowers who took out this type of loan between 2004 and 2007 opted to pay less than what the interest due was. Some borrowers paid as low as 1 percent. But the loan is subject for resetting which means borrowers are required to start paying the full interest rate and the principal, resulting to significant high payments.

According to the report, an estimated $134 billion worth of option ARMS are scheduled to reset within two years. The report predicted that monthly payments after the resetting will increase by an average of 63 percent or $1,053 per month.

What alarmed industry analysts is that many option ARMS are in trouble even before adjusting. This indicated that some borrowers did not stand a chance of paying their monthly mortgages. As of April, over 35 percent of ARMs were delinquent for at least 60 days even if they have not reset.

Industry experts predicted that bank foreclosure sales will rise in states where home prices dropped the lowest, including Arizona, California, Nevada and Florida.

The study noted that several listed sellers of foreclosure houses are lawyers who work on behalf or for mortgage companies. Industry experts said that foreclosed houses are important because they pull down home prices and values, adding that a typical foreclosed home is selling with as much as 20 percent discount.

On a negative aspect, bank foreclosure for sale pull down prices and values of neighboring properties. Experts pointed out that foreclosed houses pushed down the national median house price by 24 percent from its peak in July 2006.

The hardest hit neighborhood in Marion County is the Lawrence Township where for the past 18 months, 75 percent of houses sold in the area were distressed properties. Industry experts said that many foreclosed properties are sold at almost for nothing. The home values have dropped to the point where getting a fair price is almost impossible.

In Marion County, the number of foreclosed homes accounted for almost 30 percent of the total home sales in the area for a fiscal year ending in June. However, the figures do not include foreclosures sold at auctions.

In other counties, the study showed that almost one-third of the total home sales involved foreclosure homes. The counties of Hamilton and Boone have the highest home values and income levels. It follows that they have the lowest number of distressed sales.

Similarly, in the counties of Johnson and Hancock, repossessed homes accounted for 38 percent and 36 percent sales, respectively.

Industry experts said that sales figures released by the study do not represent the real condition of the housing market because some sales are difficult to monitor. They said that what is happening in the market is just a tip of the iceberg and bank foreclosure for sale will continue to increase in numbers.