Actively seeking some success stories about the loan modification, they are few and far between.  Instead we read about how one part of a mortgage company is uninformed about what the other is doing.  Take for example the Franklin family of Airville, Pennsylvania.  They applied for and faithfully adhered to the loan modification program guidelines.  However, the day after Christmas they received a letter stating that foreclosure proceedings had begun.  This after their credit was ruined and they ended up owing more than their original amount after months of paperwork and red tape.

The Red Tape Chronicles of MSNBC reveals that the company said a mistake had been made, but the Franklin family does not believe it,

On a single day in early January, she [Debbie Franklin] says, one Chase representative told her that the loan modification plan had been denied, another said it was approved and a third told her the foreclosure had been “suspended.”

“I check my county auctions every Monday to make sure my house isn’t on there,” she said. “I don’t believe anything they say anymore.”

My advice to the Obama Administration is to focus on real mortgage relief rather than just rescuing the housing market.  There are people able to pay for mortgages but unable to refinance because homes are not worth as much as their mortgages. With a simple loan modification like reducing the interest rate, that $200 or $300 could be the difference between someone keeping or losing their home.

As the values of houses have begun their slow climb out from under the depths of the the watery ocean in which they were swimming, so are borrowers getting out from underwater on their mortgages.  According to CNN Money, fewer borrowers are underwater on their mortgages than in the last quarter.  However, the article cautions that this is largely due to the fact that more people have already lost their homes to foreclosure.

Nevertheless, some of it is good news,

In some markets, residents were helped by improving home prices. As prices rise, it narrows the gap between what homeowners owe and what they could sell for. As a result, hard-hit metro areas such as Merced, Calif., and Orlando, Fla., recorded huge declines in the number of underwater borrowers. Merced was down to 40% while Orlando fell to 64.6%.

Prices have begun slowly creeping back up in many parts of the country.  Real estate experts are saying the recovery is expected to take at least two to five years in most parts of the nation, although some areas that were already suffering economically before the recession hit nationwide will likely take longer.

Flickr Creative Commons photo by Rain Rannu.

Through the last two years, market leaders have said “This is it! We’ve reached bottom!” but they always leave the caveat on the table that “we just don’t know how long the bottom will last - is it V shaped or more like a U?”

The latest report that foreclosure filings have slowed brings new cries of “This is it!” except now we hear the cries as whispers,

But nationwide April foreclosure filings — notice of default, scheduled auction and bank repossession — fell 9 percent from March and 2 percent from a year ago.

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This was the first year-over-year drop since RealtyTrac started tracking annual foreclosure rates in January 2006.

I’ve also heard that a new round of foreclosures are coming, but the newest round is not because of predatory loans, but because of the economy.  Where people lost jobs and consumer confidence dropped, people got in trouble.  In the longer view, with economic indications showing some strengthening (the unemployment rate dropped) so the housing recovery should follow.

What doesn’t kill us only makes us stronger!

The rate of homes in foreclosure may have finally peaked, according to CNN.com reporting on figures released by RealtyTrac.com which tracks foreclosures across the nation.  The drop in foreclosure filings fell by 9 percent from March to April, however experts believe it could possibly take years before foreclosure rates are back to normal.

Currently approximately one in four homeowners owe more on the home than the real estate is worth, which has caused to default,

These “strategic defaults” now account for nearly one in three foreclosures, according to a recent report from the University of Chicago Booth School of Business and Northwestern’s Kellogg School of Management. That’s up from 22% 12 months earlier.

The strategic defaults have been polarizing among readers who study financial planning.  Some say that if you obligated yourself to pay X amount for a home, then you should stand by that obligation.  Others believe the homes only weigh down owners when this happens.. if they walk away they can recover financially in seven years.

Still, it’s a good thing that the foreclosures seem to have plateaued.

I rarely cross-reference articles that I write for different sites, but felt this information about alternatives to foreclosure would be helpful to all readers.  From banks.com, here’s just one option that is a possibility before a foreclosure becomes necessary.

Sell and Bring Cash to Closing – Sell the house, but take out another loan so you can bring cash to the closing. You may then just have to repay the smaller amount that you borrowed rather than taking a huge hit on your credit score.

Perhaps it’s not a great choice for a lot of people, but it would save your credit score.  Read the entire article here.

If you lose your job in Pennsylvania, but your credit has been okay up until then - help may be forthcoming.  The Pennsylvania Housing Finance Agency offers help where all that’s needed is a break.  According to CNN Money.com, candidates are carefully screened but the end result is it gives people who have recently lost a job the chance to find another one without losing their house in the process.

“You must have a reasonable prospect of resuming full payments within 36 months and of paying the mortgage in full,” [Brian] Hudson [program director] said.

Loan payments are made directly to the servicers and a lien is placed on the property. The aid is repaid at a 5.25% interest rate over 10 years on average, though the borrower’s financial circumstances are taken into account.

Bravo to Pennsylvania for offering this amazing program to its citizens who are trying to survive the hardships of this economy!

Photo by mknobil via flickr creative commons.

Mortgage companies may be breathing a sigh of relief right now because fewer homeowners were delinquent in their mortgage payments this past quarter than the one before.  According to CNN.com, this could mean that the mortgage market is starting to heal,

This figure is significant because it shows a reduction — even if just slight — in the volume of loans heading toward the foreclosure process. This has not happened since 2006.

Always being an optimist, I hope the healing has begun.  However until I stop hearing about friends who’ve just received their formal foreclosure notice, I’m not buying into this sunny outlook quite yet.

There are thousands of homeowners huddled in their houses today, hiding in the giant shadow of looming foreclosure.  I talked with one earlier today and our conversation turned to the phenomenon of Deed in Lieu of Foreclosure.

Sometimes mortgage companies will agree to work with homeowners, but only if they can prove their ability to pay future house payments if a loan modification is granted.  Other times, it’s simply better for the homeowner to cut his/her losses and walk.

Before you take that drastic action, however, it’s ALWAYS better to stay in contact with the lender.  See if they can help.  In most cases, people have confided in me that the mortgage company won’t do anything until they’ve missed X number of payments.  After this has happened, they are told they won’t help until they get caught up.  O.o

Every now and then, however, a mortgage company will realize it’s more sensible to work with a homeowner and accept a deed in lieu of foreclosure. The company will tell a homeowner they can remain in the property for a certain amount of time, but will need to vacate by a specific date. The homeowner has the opportunity to find another place to live (and is sometimes paid so they don’t destroy the property), while the mortgage company saves on the massive cost of performing an actual foreclosure.

I just asked a local lender about the possibilities of a Deed in Lieu Of from his company. He advised homeowners to contact the Loss Mitigation Department, but overall that they would allow the Deed in Lieu Of was very rare.

Read more about other options other than foreclosure here at Being Frugal.

Nevertheless, good luck!

The last of the housing market data is being tallied from 2009, and it looks like things have ended on something of a weak note. Housing starts dropped 4% in December. Multi-family housing starts gained, but that small victory was completely overwhelmed by the fact that single-family housing starts were down so much.

In my mind, it appears that the news illustrates continued stress on families. Demand for multi-family units indicates that there are plenty of families in financial trouble, and even suffering through foreclosure, looking for less expensive housing. Single-family housing starts are above the bottom seen in 2009, but they are far from showing strength. Improvement in this area is likely to be slow, depending on a change in the employment situation.

Until families can afford single housing units gain, housing starts are likely to continue to struggle.

Even as we hear about a recovering economy, the fact of the matter is that there are some places that have higher rates of foreclosure than others. Here is a chart on foreclosure distribution from 2005 to 2009 found at The Mortgage Reports.

You can see the large spike after the financial crisis toward the end of 2008. And it does appear that foreclosures are declining right now. As long as we see something of an improvement in terms of employment and the overall economy, there should be continued declines in the rate of foreclosure.