To address the growing shortage of legal aid services, advocates have appealed for reforms at the state and federal level to allow expanded legal services to homeowners who cannot afford to hire lawyers of their own.

And it seems that the proposal is gaining some support in Maryland. Already, Governor Martin O’Malley has introduced a legislation that makes mediation mandatory. This means that all mortgage lenders will be required to participate in negotiations that would result to affordable loan terms for distressed homeowners and make foreclosure the last resort.

Aside from making it mandatory for all bank foreclosure cases to go through mediation first, O’Malley also wants mortgage lenders to pay for all the costs related to the case. For the first nine months of this year, the number of households in Anne Arundel County that received at least one foreclosure filing reached an all time high compared with same period last year.

Market data showed that in September, there were 276 repossession cases, a slight drop from the previous month’s 298 but far higher from the total figures for September of 2008 and 2007. On a year-to-year basis, the total number of foreclosure filings in the county is about 2,300. And industry experts are predicting that the number of foreclosure cases will hit over 3,000 by the end of this year.

Experts said that majority of homeowners who are in some stage of foreclosure proceedings in the county does not have court representation. They added that the trend is logical because if troubled homeowners could not afford to pay their monthly mortgages, it follows that they could not also afford to hire a lawyer to help them.

The Maryland Legal Aid Bureau staff members said that the nonprofit law firm is seeing a 64 percent rise in the number of foreclosure cases that it handled for several months now. Staff members pointed out that there is a growing need for legal services from homeowners facing the threat of bank foreclosure. However, they said that the law firm could only help homeowners who meet certain requirements.

Hotels continued to struggle as travelers reduce their discretionary spending, resulting to sharp decline in hotel revenues. And to make matters worse, hotel values dropped so drastically that a growing number of properties are at risk of foreclosure as owners failed to meet their mortgage payments.

In San Diego, California, the number of hotels facing foreclosure threat increased almost four times in the first eight months of this year. And industry analysts are predicting that more hotels will face the bank foreclosure listings before the year ends.

The current trend is benefiting bargain-hunting travelers who will encounter many room rate discounts as a way for hotels to entice more customers in order to survive the current market battered by the economic downturn and high unemployment.

Some local hoteliers are concerned that with many hotel owners walking away from their properties, they will be left competing with hotels owned by lenders who will sold the properties way below the market value.

Industry experts are expecting a very stiff competition among people who want to buy cheap hotels and then operate them at cutthroat rates. This will greatly affect hotel owners who are charging at full price. However, they believe that the market is nearing its bottom and will see some strong improvement in terms of demand by third quarter next year.

Recent market data showed a drastic increase in the number of delinquent hotels, from 6 in January to 26 last month. Meanwhile, hotels that went into foreclosures jumped two times from 2 to 4. These foreclosed hotels include the El Camino Motel, Harbor House, Pacific Coast Inn and Suites and Mount Woodson Golf Resort.

Some of the delinquent hotel properties included the Extended Stay America, Mission Plaza Hotel and Suites and Homestead Studio Suites.

Industry experts predicted that more hotels will go into foreclosures which would result in spiraling prices and more bargains for consumers.

So far, statewide data showed that 260 hotel owners were in default while 47 were on bank foreclosure listings.

Mayor Allan W. Fung rejected the foreclosure ordinances that would have reduced the number of foreclosure properties in the city. He said that he appreciated the initiative to help distressed homeowners remain in their houses but he could not support any measure which he claimed contradicts the state law.

He explained that it was deputy city solicitor Evan Kirshenbaum who told him that the foreclosure ordinances contradict the state law, which led him to make the decision to veto the measures.

The foreclosure prevention measures would have required banks and lenders to have third-party mediations with troubled homeowners before they go through with foreclosures. The measures also required banks and lenders to issue written notifications to renters before they start the foreclosure proceedings.

Before approving the measures, council members said that despite the legal challenges, the ordinances may help distressed homeowners remain in their houses and prevent the number of bank foreclosed home from increasing.

According to industry experts, the nine members of the city council plan to seek to override Fung’s veto. The override would require at least six affirmative votes.

Council President John E. Lanni Jr. said that he favors for an override, adding that so many people have been losing their homes to foreclosures.

Last year, there were 3,479 homeowners in Rhode Island who lost their properties to foreclosures. As of end of September, there were already 2,443 documented cases of foreclosures.

The foreclosure ordinances in Cranston were patterned after two measures in Providence which took effect on September 1. The Providence measures were able to help seven distressed homeowners remain in their houses and have not met any legal challenge since.

Kirshenbaum explain that the foreclosure ordinances would have created problems because they contradict Rhode Island laws that cover loan agreements and foreclosure recordings.

Meanwhile, the General Assembly has passed a bill that would require banks and mortgage lenders to send 45-day notices to distressed borrowers before starting proceedings that may result to more bank foreclosed home.

Furthermore, the bill also requires banks and lenders to notify homeowners at risk of foreclosures about the availability of free mortgage counseling.

Donovan described Orlando as the ground zero of the foreclosure crisis. He also defended the Obama Administration’s $75 billion Making Home Affordable program and Neighborhood Stabilization Program (NSP).

He said that the initial goals of the federal loan modification program will be met but he admitted that the program is not a solution for the country’s unemployment problem. The officials toured a foreclosure home that is being renovated through the NSP. The city of Orlando purchased bank and government foreclosures homes using NSP grant from the HUD.

The renovated house that was toured by the three officials was bought for $125,000. The city intends to spend $20,000 on renovation and repairs of the house. The renovated house is expected to be sold for $145,000. Industry experts are hoping that the rise in sale price will help drive up property values of surrounding houses.

Meanwhile, Donovan said that the government program provides much needed respite to distressed homeowners who are facing foreclosure while the NSP helps stabilize and strengthen property prices and values.

He urges the Congress to approve President Barack Obama’s modernization plan for the country’s financial system and for the creation of the Consumer Financial Protection Agency in order to protect families who avail of financial services and purchase financial products daily.

On the other hand, Grayson pointed out that the two HUD programs are important in helping families remain in their homes, staving off foreclosures, helping create affordable home ownership and providing shelter to those who cannot afford to own a home.

The federal program was created to stabilize the housing market in the country. The initiative includes Home Affordable Refinance Program to help nearly 5 million homeowners have an easy access to refinancing, Home Affordable Modification Program to lower monthly loan payments and providing support to low mortgage rates.

So far, the loan modification program has helped modify mortgages of more than half a million families and prevented bank and government foreclosures homes from further spreading across the country.

The federal funds are intended to be used to purchase foreclosure properties in High Point neighborhoods badly hit by the foreclosure crisis. The funds will also be used to rehabilitate these foreclosure homes.

Industry experts are anticipating a demand for funding, adding that the program is a good chance to move the foreclosure properties. According to market data, about 400 houses were foreclosed in High Point in 2008. And most of the foreclosed homes are located in the zip code of 27265 where moderate and high-income neighborhoods can be found.

Under the NSP, eligible buyers must be first-timers or those who have not owned a house for the past three years.

A loan will be provided to qualified families to help them buy foreclosed homes for sale. The deferred loan amounted to $7,500 and will be used for down payment. Furthermore, qualified buyers may be given as much as $20,000 for repair assistance after they have acquired the properties.

Also covered in the program are 27260 and 27262 zip codes which are inner city areas where foreclosure houses and blighted properties are in abundance. To qualify for the program, potential buyers should meet the income requirements, undergo and complete a consumer credit counseling training.

Industry experts are hoping that the program would help expedite the recovery of the housing market in the area. So far, everything points towards recovery. Last August, the number of home foreclosures in North Carolina dropped by 6 percent compared with the previous year.

Market data showed that 4,317 properties were foreclosed in North Carolina in August, or one out of 956 households. This earned the state the 29th position nationwide in terms of rate of foreclosure filings.

But despite the improvements in this year’s numbers compared with the previous year, foreclosures in North Carolina jumped by 26 percent in August from July. Industry experts attributed the increase to the lifting of moratoriums and the continuing rise in unemployment rate. But they are hoping that the program that aims to help families buy foreclosed homes for sale would pull up home prices and values and may lead to the recovery of the housing market.

The bill gives hope to thousands of distressed families who want to remain on their homes and to communities that are badly hit by the foreclosure crisis.

Under the proposed Preserving Homes and Communities Act of 2009, all qualified homeowners will be evaluated and offered mortgage modifications. The law also establishes a program that will provide mortgage payment assistance to distressed homeowners.

Additionally, the law proposes to provide incentives to local and state governments to motivate them to develop mediation programs that will allow troubled homeowners and servicers to negotiate and create alternatives to help curb the growing bank foreclosure list.

Reed explained that the foreclosure crisis has left many American families devastated and homeless, crippled local communities and neighborhoods and further dragged down the already sick economy.

He said that despite federal, state and local efforts to prevent the spread of foreclosures, the problem continues to grow rapidly. Industry experts said that the current foreclosure rate surpassed the numbers for last year by almost a third.

They said that even homeowners who have fixed-rate mortgages are finding difficulty paying their mortgages and are at risk of losing their homes to foreclosures.

They predicted that the number of troubled loans could increase to almost four million in 2009. Additionally, fixed rate loans accounted for a third of the total repossession starts filed in from April to June of this year. This means that one out of eight homeowners has missed at least one payment.

Durbin believed that the economic crisis could not be resolved unless the housing market has been stabilized. He explained that the proposed law would force lenders to workout with troubled homeowners to modify their loans.

The bill also proposes to expand the loan modification of the government to allow more homeowners to avoid bank foreclosure list and to require banks and lenders to offer approved mortgage modifications to all borrowers who qualify.

Co-sponsors of the bill are Senators Sheldon Whitehouse, Dick Durbin and Jeff Merkley.

The Obama Administration’s program is designed to help local neighborhoods badly hit by the foreclosure crisis. It will provide funding to support state and local governments’ efforts to prevent foreclosure houses from becoming eyesores in communities.

The program has a wider area of coverage, encompassing rural areas and cities across various ZIP codes in the state. Some counties identified to be eligible under the program are New Castle, Sussex and Kent and the city of Wilmington.

According to industry experts, buying bank foreclosures would mean a lot on the recovery of neighborhoods and the housing market. They said that foreclosure properties that have been vacant for a long period of time are magnets to vandals, thieves and squatters. They also lower property values in neighborhoods.

So far, Delaware posted foreclosure filings on over 4,200 properties this year. In August, the number of foreclosure filings totaled over 550, a decline of 15 percent compared with July. Experts said that many programs were designed to help distressed homeowners remain in their houses. But the current state initiative provides buyers in the low and moderate income level extra incentives to buy abandoned foreclosure houses.

Experts said that one less foreclosed home on the market means that a family is living there, earning a living and using local services and goods. The county governments of Kent, Sussex and New Castle have their own program to administer the funds that will be allocated by the Delaware housing agency. The same goes with city governments of Wilmington and Dover.

To be eligible, buyers must meet all the income requirements, including $70,000 for a four-member family or not over 120 percent of the median income in the area.

In Sussex County, each potential buyer is given as much as $50,000 in interest-free loans, provided that it is secondary financing. Buyers may also receive $20,000 for assistance in home cleaning and rehabilitation and additional $20,000 for deposit and closing cost payments.

All participating counties and cities have partnered with nonprofit agencies and organizations to provide homebuyer counseling to those who are interested in buying bank foreclosures in Delaware.

In his decision for the case of Luminent Mortgage Capital Inc. versus Merrill Lynch and Co., Surrick said that the bank foreclosed home crisis is most likely the cause of plaintiffs’ loses. The judge said that there is no evidence to support plaintiffs’ allegation that the defendants committed misrepresentations in 2005, thereby causing their economic loss. He added that the market’s downturn in 2007 was the cause of the plaintiffs’ economic loss.

The securities fraud lawsuit was filed against Merrill Lynch and its subsidiaries by two real estate investment trusts that alleged that they were fooled by false statements issued by Merrill Lynch. They claimed that they invested nearly $26 million on mortgage-backed securities which proved to be full of problem accounts.

Merrill Lynch’s defense team is composed of Karen Pieslak Pohlmann and Marc J. Sonnenfeld of Morgan Lewis and Bockius and Paul J. Lockwood and Jay B. Kasner of Skadden Arps Slate Meagher and Flom.

The defense team sought the dismissal of the case by arguing that plaintiffs committed several fatal flaws, including their failure to prove that Merrill Lynch and its brokers have committed securities fraud that led to their losses.

In his decision, Surrick compared the Merrill Lynch case with a previous lawsuit filed against the company before the 2nd U.S. Circuit Court of Appeals which dismissed the case.

He agreed with the defense team’s argument that the losses incurred by the plaintiffs stemmed from the collapse of the mortgage industry and the subsequent failure of mortgage-backed securities.

Plaintiffs’ lawyers said that Merrill Lynch intentionally withhold information about the risks surrounding the mortgage-backed certificates which it sold to Mercury Mortgage Finance Statutory Trust and Luminent Mortgage Capital Inc.

In its argument, plaintiffs’ lawyers said that Merrill Lynch falsely represented the underlying mortgage loans as having prepayment penalties which would have provided Luminent and Mercury Mortgage with steady income.

Surrick said that in securities fraud lawsuits, plaintiffs must show more than motive and opportunity to prove intentional fraud.

She initiated the call in a letter signed by several of her colleagues in Congress and sent to the U.S. Housing and Urban Development (HUD). The letter is written to call attention to the lack of response from mortgage services to help distressed homeowners.

Also, the lawmakers wanted to point out the need to make sure that the Obama Administration’s Making Home Affordable program will be able to help responsible borrowers who are having difficulty making their mortgage payments and are at risk of losing their properties to foreclosures.

Matsui has urged the federal government to use all the available resources to make sure that distressed borrowers are properly helped by lenders. She added that the Administration’s program is important to provide relief and help to responsible homeowners.

Under the federal program, an array of incentives is being offered to mortgage lenders to encourage them to modify troubled loans to make them affordable to pay by distressed homeowners.

But a report released by the U.S. Department of Treasury showed that only about 9 percent of the target 4 million eligible borrowers under the program had their loans altered into more sustainable and affordable terms.

In July, foreclosure activity across the country rose by 7 percent compared with June and 32 percent from the same month in 2008. In the first seven months of this year, filings of default, auctions or bank repossessions reached 2.3 million.

Meanwhile, Matsui’s letter cited a National Foreclosure Mitigation Counseling Program report which stated that homeowners who were able to connect with their lenders waited for as long as 2 months for a response to their loan modification request.

She and her colleagues urged the Obama Administration to encourage mortgage lenders to intensify their loan modification efforts, to improve responsiveness to homeowners’ assistance request and expand the coverage of existing assistance programs for homeowners.

According to Neil Barofsky, special inspector general for the Troubled Asset Relief Program, the $700 billion initial bailout funding could balloon to $23.7 trillion in addition to the $7.4 trillion already allotted to TARP and other Treasury programs.

The country’s commercial real estate market, valued at $3.5 trillion, is now being battered by defaults on loans for office buildings, apartment buildings, retail centers, shopping malls, hospitals, hotels and residential towers.

Based on data from the Center for Real Estate at the Massachusetts Institute of Technology, commercial property prices have dropped by about 39 percent from their peak in the middle of 2007. Studies by Moody’s Investors Service also show substantial price declines.

The 39-percent price decline has already surpassed the 27-percent price drop that occurred during the savings and loan crisis in the late 1980s and early 1990s.

Additionally, Wall Street enterprises would further suffer from derivative securities backed by these commercial loans, at a time they are still carrying the burden of over $1.5 trillion in losses from delinquent residential loans and foreclosures.

In their most recent quarterly reports, Wells Fargo and Morgan Stanley posted large losses from bad commercial property loans. Regions Financial, Marshall & Isley, Zions, SunTrust and Comerica posted losses and are expected to continue struggling with their bad loans in 2010.

Citigroup, KeyCorp. and Bank of America also have reported commercial property losses. Enterprises like General Electric and Marriott International are also hemorrhaging from their commercial property losses.

According to Steven Sandler, CEO of private equity investor Crosswind Capital, about $1.4 trillion of commercial property loans will mature within the next 5 years and about $750 billion loans will mature in less than 3 years. This year alone, according to Sandler, about $165 billion to $204 billion commercial property loans will mature, adding more pressure for commercial loan refinancing to an already overwhelmed lending market.

Last May, the federal government launched the Term Asset-Backed Securities Loan Facility program to offer loans at low rates to investors buying commercial securities that are mortgage-backed. It announced an initial funding of $100 billion for loans with 5-year maturities, with further funding that could reach $1 trillion.