Rising Foreclosed Home Auctions Derail Housing Recovery
The gap between the number of foreclosure home auctions and troubled loans that have been modified are getting bigger even before the Treasury Department called on lending institutions to boost their efforts to stave off foreclosures.
According to industry experts, the number of completed loan modifications for this year showed a slight increase compared with last year. However, the numbers were overwhelmed by the rapid increase in serious loan delinquencies and foreclosure starts.
Experts pointed out that the increasing foreclosed home auctions has dwarfed whatever gains the federal government and lenders have made towards stabilizing and strengthening the housing market.
They said that that the pace of the loan modification program is too slow to keep up with the rising loan delinquencies and foreclosures.
In the first quarter of this year, about half a million troubled loans were modified. However, the number of serious delinquencies and foreclosed home auctions during the period rose to almost 3.5 million.
Experts pointed out that without any effective intervention from the federal government and lenders, the number of foreclosed properties will peak at 13 million within five years. For this year, 69 million borrowers who are at risk of foreclosure are expected to experience reduced assets as market values of properties dropped by $502 billion.
Center for Responsible Learning (CRL) President Mike Calhoun said that continuing the trend would mean disaster, adding that balancing the foreclosure problem and prevention is one of the public policy issues that affect all Americans.
According to industry experts, since 2007, lenders refused to support policy proposals designed to stop the spread of the foreclosure crisis, including allowing the bankruptcy court to modify troubled home loans. Lending institutions were given the opportunity to deal with the foreclosure problem under the Home Affordable Modification Program (HAMP).
Data showed that so far, about 130,000 troubled loans were modified under HAMP. However, the figures were overwhelmed by the projected 3.5 million properties that will be placed on foreclosed home auctions this year.
Industry experts called on Congress to lift the ban preventing distressed homeowners from applying for loan modifications for their primary homes. They also urged the Congress to make sure that the Obama Administration’s programs to stem the tide of foreclosed home auctions will work effectively and would not burden homeowners with tax consequences.
