As such, many distressed homeowners complained of the difficulty of reaching lenders to alter their loans into affordable rates. The Maine Legislature stepped in and offered mediation for parties involved. The mediation program will officially start on January 2010. But a trial run is set at Sanford’s York County District Court where foreclosure rate is at the highest.

York County Community Action Program home financing counselors helped explain to distressed homeowners about how to use the mediation program to save their houses from becoming bank foreclosure homes. Counselors said that homeowners have the right to demand a mediation if they think that, given reasonable amount of time, they can make their mortgage payments.

So far, the mediation program in Maine has five judges who volunteered to act as mediators. Many homeowners liked the program, especially of having a third party join in negotiations with lenders. They said that they were having difficulty negotiating with banks and mortgage lenders on their own that having someone to mediate for them is a relief.

Some homeowners said that they were trying to make arrangements with their lenders to pay partial amounts. But their lenders rejected their offer, saying that if homeowners want to make their accounts current, they have to pay the whole overdue amount, plus interest and fees.

Under the mediation program, troubled homeowners and their lawyers have a half-day time, face-to-face discussion with their lenders. This is a welcome change to many homeowners who have given up hope of ever meeting with their lenders.

One of the groups involve in the program is the Maine Volunteer Lawyers Project. Its members have been providing free legal services to homeowners at risk of foreclosure. They said that many distressed homeowners have heard about government programs that could help them save their properties from foreclosures. The problem is, they could not find someone that would help them go through the process.

Maine law requires all lenders filing foreclosures in the state to join the mediation program or face sanctions, including case dismissal and barring.

Industry experts said that it is in the best interest of lenders to work out solutions with homeowners because having too many bank foreclosure homes on their inventory could be more costly for them.

In the investment world, short selling is turning to be a gold mine for many investors. Recession or no recession, investors are finding ways to repair run-down foreclosed houses and sell them for huge profits.

In the current economic downturn, the practice of buying, fixing and selling is given a name: short sales. The method involves investors finding distressed homeowners who are on the brink of government bank foreclosures. They will make cash offers to banks to purchase the distressed properties for low prices.

Usually, banks would agree to sell the houses to reduce their losses resulting from foreclosure costs, maintenance, taxes and legal fees. This means that banks also agree to accept the amount from the sale of the distressed properties as settlement payment for the mortgage owed by their homeowners.

On the part of homeowners, they are more than willing to sell their properties to minimize the damage to their credit record and avoid the complex process of foreclosures.

Industry experts said that short selling has always been an alternative for banks. But the current economic downturn fueled the growth of short sales. Experts said that in short sale deals, the winners are the people who have the means to take advantage of low property prices. As of May, both foreclosure and short sales accounted for 33 percent of the total existing housing market.

In the following two months, the figures dropped to 31 percent. Essentially, banks would review every short sale transaction to determine if the loss they are going to take will make more sense. Many banks have to answer to their directors and stockholders and need to reduce losses on foreclosure properties on their portfolio.

But lately, many homeowners who want to go the route of short sale to save their properties from foreclosures were complaining that banks are taking longer to respond to their requests. The Obama Administration knows about the shortfall and decided to offer financial incentives to lenders to encourage them to expedite their short sale process to help more homeowners avoid government bank foreclosures.

The desperation to save their homes from foreclosures and not knowing who to turn to for help have driven many homeowners to unknowingly put their trust on the hands of fraudulent foreclosure prevention companies.

Homeowners who have been waiting for months to hear anything from their lenders over their loan modification applications are questioning the effectiveness of the $75 billion federal Home Affordable Modification Program (HAMP) which is designed to give mortgage relief to financially-strapped homeowners who lost their jobs, facing an increase in mortgage payments and have seen their income reduced.

According to housing advocates, the HAMP is an improvement from the previous administration’s programs that failed to reduce the number of bank foreclosure house sale. Under the program, banks are provided with incentives to motivate them to lower their interest rates, extend mortgage terms or delay principal loan payments.

Additionally, the program stated that borrowers who remain current on their modified loans will receive incentives to reduce their mortgage balances.

Industry analysts said that despite the efforts of the federal government to make the HAMP work to help troubled homeowners, foreclosure remains unabated, ruining hundreds and thousands of lives, pulling down home values and prices and devastating neighborhoods.

Analysts said that the federal subsidies were not enough to encourage many lenders to do their share in helping alleviate the foreclosure problem by helping distressed homeowners save their houses from foreclosures.

In Sonoma County, about 100 notices of defaults were issued by lenders every week for homeowners who defaulted on their loan payments for the first six months of this year. Federal officials said that while homeowners are having their troubled loans reworked, banks should boost their loan modification activity. Market data showed that 19 percent of about 3 million eligible homeowners across the United States were able to modify their loans with the help of their lenders.

Banks claimed that they have been intensifying their efforts to help troubled borrowers avoid bank foreclosure house sale, including hiring more employees and working with more borrowers who are at risk of defaulting.

Since the start of this year, only about 20 distressed homeowners who were at risk of losing their homes to foreclosures have chosen mediation option ordered by judges. The figures are a small fraction of the nearly 3,000 repossessions filed in Montgomery County this year.

According to fair housing advocates, other counties including Franklin have been more aggressive in promoting mediation as a way to avoid foreclosure and help homeowners remain in their homes.

Miami Valley Fair Housing attorney Randall J. Smith said that it is imperative that the county explore how Franklin County implements the mediation program and how it becomes a success, adding that both counties have comparable foreclosure rates.

Meanwhile, judges and lawyers are blaming ignorance of consumers about their legal options, lack of funds for legal help, overburdened court system and homeowners’ resignation to their condition for the low participation numbers in the county’s mediation program.

Montgomery County Administrative Judge Michael T. Hall said that if he thought that there was a remotest chance for some resolution, he would order it. Counties in Ohio are being pressured by state housing advocates and the Supreme Court to push the mediation program or a managed settlement with lenders if there is a chance that homeowners could be saved from foreclosures.

As of June, Franklin County posted 870 mediation applications from troubled borrowers. Out of these figures, 290 were referred by judges and 80 percent are on the mediation process. Industry experts said that homeowners who do not participate in the mediation program are those who have moved out from their houses and are not aware of their rights.

Meanwhile, the attorney general’s office in Ohio was not surprised that only 10 percent of those eligible homeowners at risk of foreclosures were able to receive help in modifying their loans.

Assistant attorney general Bob Hart said that the office has been urging mortgage servicers since 2007 to increase the number of their staffs who will handle the anticipated surge in foreclosure cases.

But industry experts said that even if mortgage servicers are willing to modify a loan, the process is so difficult and complex that delays are inevitable.

The Soldiers and Sailors Act was enacted to help military personnel on active duty avoid repossession until their tour of duty is done. But the law failed to protect one military family in Las Vegas, Nevada who is facing the threat of foreclosure.

The Las Vegas wife does not want to let her husband, who is currently deployed in Iraq, to know that their house is in danger of being taken by a bank. She explained that two months before her husband left for Iraq in May, utility bills and other fees started to weigh heavily on their finances.

She said that she and her husband acquired their current Las Vegas home three years ago thinking that they could afford to pay for its monthly mortgage. It turned out that the monthly mortgage is way beyond their capacity to pay.

The house went into foreclosure shortly after her husband left for Iraq. But until now she does not talk to her husband about the foreclosure threat and how serious it is. She said that she does not want to place more burden on her husband, adding that being far away does not help resolve the problem.

She turned to loan modification to help her save her home from foreclosure. Her lender, Countrywide Mortgage, said that it is not the company’s practice to foreclose on properties of military personnel on active duty.

However, this seems not to be the case with the Las Vegas wife who claimed that Countrywide Mortgage wants to refinance her home loan with a 14 percent interest rate which is higher than the loan’s original terms. The wife sought the help of a consumer advocacy group to re-negotiate her home loan with Countrywide Mortgage.

For the first half of this year, Las Vegas’ foreclosure activity was six times higher than the national average rate. According to market data, one in every 13 homeowners in Las Vegas received a foreclosure filing during the period compared with one in every 84 national ratio.

Economists said that the increase may not be significant but what counts is the upward trend. They said that a higher property value means homeowners are more likely to avoid house repossession if they think that they could get equity on their homes.

They are hoping that the upward trend would mean an end to the housing crisis. The Standard and Poor’s/Case-Shiller Home Price Index showed that home prices are starting to increase in many large cities across the county.

Additionally, recent market data showed that home price declines have started to slow down, incurring a slight gain on month-to-month basis or quarter-to-quarter. However, year-over-year numbers were still not encouraging.

Other developments that fueled the recovery expectations of economists include the 1.4 percent increase in the national price index in the second quarter compared with the first quarter. The second quarter rise was the first in almost three years.

Furthermore, the house price index released by the Federal Housing Finance Agency showed a gain of 0.5 percentage point in June after a revised 0.6 percent rise in May.

According to industry analysts, higher home prices would greatly help in hastening the recovery of the housing market. They said that potential buyers who are just waiting on the sideline would decide to jump on the market if they know prices have already hit bottom and increase will follow.

Already, overbidding and multiple offers on foreclosure properties were reported in San Diego County, indicating that buyers’ interests are growing. Market data showed that July single-family resales grew by 3 percent in San Diego and 12 percent in California compared with the same month last year.

Analysts are welcoming these upward trending in prices as good news. They were concerned that the glut of foreclosure houses on the market would continue to pull down home prices. But some are skeptical about the figures reflected in the price index, saying that they do showed a decline in sales of foreclosure houses that were dominant just a few months ago.

About six months ago, majority of industry experts were expecting housing prices to fall further by 10 percent nationally. And they were also expecting that the price drop would trigger another wave of foreclosures and dampen economic recovery efforts.

Documents filed in the U.S. District Court in Greenbelt stated that the couple accused Wells Fargo of driving them into foreclosure by offering them a second mortgage amounting to $30,000 in 2000. The couple claimed that the bank raised their monthly mortgage payments by as much as $700 which they could not afford to pay.

Court documents showed that the couple is asking for equitable and legal relief. Lawyers are hoping that the settlement would include a chance for the couple to renegotiate with their lender.

The Bowie lawsuit is just one of the hundreds filed by distressed homeowners in the region who want to protect their properties from becoming bank foreclosure houses. According to market data, Prince George’s County posted 3,427 foreclosure filings from April to June. The county’s filings accounted for 36 percent of Maryland’s foreclosure activity.

According to court papers, the Bowie couple argued that Wells Fargo had approved their second home loan despite knowing that it would be beyond their capacity to pay and thus, may lead to foreclosure.

Under the state law, any contract can be nullified or changed if it would be proven that one party in the deal acted or negotiated in bad faith. Legal experts said that if banks created a situation wherein they have pushed homeowners’ finances into foreclosure, the case falls under the unclean hands doctrine.

Many lawyers have taken on the cases of distressed homeowners at risk of foreclosures pro bono at the urging of state officials. Legal experts said that the unclean hands argument have been used by pro-bono lawyers since 2006 when foreclosures started to spread in the region. They said that in most cases, the lawsuits forced banks to renegotiate with distressed homeowners.

Furthermore, lawsuits are used to get both homeowners and lenders to negotiate. Statistics released by the U.S. Treasury Department showed that only 15 out of 100 homeowners who qualified for loan modification were offered help to save their properties from foreclosures, leaving 85 troubled homeowners facing the risk of losing their homes to foreclosures.

According to industry experts, a face-to-face discussion of their financial situations helped many homeowners renegotiate their debts to avoid foreclosures. When homeowners received notices threatening foreclosure, their lenders offered them three options.

The first is a quick sale of their distressed properties, meaning that with the agreement and consent of their lenders, they will sell their houses at less than their total mortgage due.

The second option is for them to extend their mortgage loans under not so favorable mortgage adjustable terms. Or, their third option is to talk to strangers and tell them about their current financial predicament.

Industry experts said that distressed homeowners who want to save their properties from foreclosures can easily get referrals for foreclosure counselors. Counseling services have become very common in communities in Missouri, especially in areas hardest hit by the foreclosure crisis.

They said that counseling is effective in preventing foreclosures against homeowners who experienced a loss of income or illness.
People who worked on counseling programs said that demand for their services has increased by almost one-third in the first half of this year as the number of foreclosed properties continues to rise because of massive layoffs and adjustable-rate mortgages.

In the city of St. Joseph, 915 foreclosure filings were posted from July of last year to June of this year. The figures represented 2.5 foreclosures daily. Last month, 4 percent of homeowners in St. Joseph were behind on their mortgage payments by at least 3 months. And lenders foreclosed on about 1 percent of these troubled loans. The city’s foreclosure rate increased by 0.4 percentage point, compared with 2008.

According to counselors, they have agreements with some lenders to work out loans of eligible homeowners. They said that most often, they have prevented properties from being placed in foreclosure auctions. They added that in the event that homeowners do not want to hold on to their properties anymore, ownerships may be transferred to lenders without affecting the credit scores of homeowners.

Counselors said that many homeowners just do not realize that their lenders are willing to work out solutions for them to remain in their homes.

According to data released by research firm, Real Capital Analytics, year-to-year figures showed almost $60.5 billion assets in the commercial real estate market that went into default. Overall, the total delinquent assets, bank REO properties and bankruptcy reached $108 billion. This includes about 1,420 commercial asset estimated to be worth $31.1 billion.

In contrast, data showed that a total of $4.1 billion in distressed assets were resolved so far this year. According to Real Estate Econometrics chief executive officer and president Sam Chandan, in the first four months of this year, 20 biggest banks across the country reported that their loan modification activity outnumbered their commitments by two to one.

Industry experts said that lenders and banks are trying to avoid realizing their commercial real estate loan losses. They pointed out that loans taken out during the market boom have loan-to-value ratio of 100 percent. Those loans were also underwritten with the assumption that properties will experience rising rents and occupancies.

However, since 2007, values of commercial properties dropped considerably, followed by rents and occupancies. Adding to the problem is the locked down of commercial mortgage-backed securities.

Third Wave Partners LLC managing partner Christopher Grey said that banks are hoping that stemming the tide of bank REO properties for one or two years would give the market a breather and allow them to recover a bigger portion of their investments than what they will stand to gain if they decide to sell in the current market.

Grey added that he is not hopeful that retail properties will increase its value under the current market. He explained that this is because there are a great number of distressed properties on the market and little investor interest. Additionally, retail is tied with consumers who are expecting an income decline.

Industry experts agree that if banks would foreclose on assets and add to the growing number of bank REO properties, they will be forced to manage properties in a very unstable economic climate.

The total trial mortgage modifications initiated by JPMorgan Chase include 87,000 loans altered under the Making Home Affordable program and additional 50,900 mortgages through the bank’s own modification program.

Under the program, a distressed homeowner can modify his loan to reduce payments for interest, principal, hazard insurance and property taxes to about 31 percent of his gross income. The modification usually involves extending the loan terms or reducing interest rates to help homeowners protect their homes from becoming bank foreclosure property.

According to Chase, its loan modification plan is the same as the one used for troubled homeowners who failed to qualify for the federal program. JPMorgan Chase retail financial services director Charlie Scharf said that the bank has made significant progress since the federal program was launched last April 6.

He said that the bank was able to help distressed homeowners with its trial loan modifications by increasing its capacity through hiring more people, expanding its office space and technology investment.

He added that JPMorgna Chase understands the desperation of many homeowners to save their homes from becoming bank foreclosure property and they need to hear from the bank as quickly as possible. He said that the bank is committed to do all the necessary things to help distressed borrowers who qualify for the programs.

According to JPMorgan Chase, it has successfully met the demand for serving troubled homeowners by hiring nearly 950 loan counselors in its various operations across the country. The bank now has a total of 3,500 loan counselors and plans to hire more in the coming weeks.

Furthermore, the bank has hired about 2,000 employees for its mortgage operations and opened about 27 Chase Homeownership Centers across the country. It claimed that over 20,000 troubled homeowners visited the centers.

On the other hand, a report released by federal regulators, the Office of Comptroller of the Currency and the Office of Thrift Supervision stated that loan modifications across the country have increased.

The report noted that when distressed homeowners got reduced payments, the number of bank foreclosure property rates dropped.