Reports Keep Feeding Gloomier Outlook for Foreclosures

Foreclosure noticeThey seem to be coming more frequently – studies or hard numbers showing the foreclosure crisis is nowhere near peaking. The latest sobering report shows that Florida’s filings reached nearly 400,000 for 2009 and the state is overrun with a backlog of 800,000 foreclosure cases.
Florida, which usually ranks in the top three states hit hardest, is taking unprecedented steps. More counties are selling foreclosed properties online, with thousands of bidders showing interest from around the world. In December, the state’s high court ordered the start of a mediation program to streamline the foreclosure caseload.
The Florida update was only one of various troubling reports on the crisis this week.
The Federal Housing Administration, which provides mortgage insurance on loans made by FHA-approved lenders, reported that about 9.1 percent of FHA borrowers were delinquent at least three payments in December, up from 6.5 percent a year ago, according to the Washington Post.
The Post described the troubling FHA numbers as signaling a possible crush of foreclosures that would further deplete a federal agency that is vital to the housing market’s stability.
Here’s the FHA’s potentially perfect storm: problem mortgages made in 2007 and 2008 – at the height of the mortgage crisis – are now maturing into what is historically the period when borrowers are most likely to default. Mortgage failures occur most often two to three years after closings.
If the FHA is overwhelmed, the federal government would have to resort to a bailout program to cover losses. That would be a first for the FHA.
Earlier this week, the New York Times reported that when a home’s value falls below 75 percent of the amount owed on the mortgage, a homeowner starts to think seriously about walking away –  even if the homeowner can afford to pay the mortgage. The new research reported by the Times is troubling because of the growing numbers of homeowners who are “underwater” on their mortgages, or those who owe more in mortgages than their home is worth.
In a media report out of South Florida last month, another concerning foreclosure trend was highlighted. Frustrated primarily by a lack of principal forbearance in the government’s mortgage relief program and the prospect of negative equity for years, some homeowners are opting to walk away – instead of sticking with, or even trying, a foreclosure rescue.

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