More Repo Homes in the Offing
Soaring mortgage defaults due to increasing unemployment, drastic decline in home prices and expiration of moratoriums are identified as precursors of the impending second wave of repo homes that is expected to sweep the country still reeling and recovering from the impact of the first wave of foreclosures brought by the collapse of subprime lending.
Industry experts are concerned that the expected second wave of repo homes would inflict more sufferings to distressed homeowners, neighborhoods and the national economy.
Early this year, the number of mortgage defaults soared to a new high amid increasing unemployment.
Many banking institutions have delayed foreclosure actions on distressed properties partly because they participated in the home-stability program of the Obama Administration. The program required them to modify troubled loans to make them affordable for troubled borrowers.
And with the expiration of foreclosure moratoriums, many lending institutions have insinuated that they are going to aggressively pursue the clearing up of their backlog of delinquent loans.
Currently, nationwide home sales are showing signs of stabilizing due to the abundance of cheap repo homes, low mortgage rates and government incentives.
The pace of housing construction activity moves in such a way that it created a balance between supply and demand, while housing price drops slowed significantly.
However, industry experts believe that the projected increase in the number of foreclosed homes would pull down home values and may lead many homeowners to go underwater.
It is estimated that 15.4 million distressed homeowners or one in every five who have first mortgages would owe more on their mortgage than the value of their properties.
Tom Kelly of Chase Bank responded positively when asked about the possibility of a second wave of foreclosures. Since April 6, the bank was able to modify 138,000 troubled loans under the Obama Administration’s program.
However, a great number of Chase borrowers failed to qualify for modification and most of them are facing possible foreclosure.
Meanwhile, the Obama Administration is intensifying its efforts to avert another surge in the number of repo homes. So far, over 240,000 troubled homeowners have qualified on a trial basis for the Home Affordable Modification Program which involves alteration of their loans to make their monthly payments equal to 31 percent of their total income.
