Dramatic Rise in Home Foreclosures and Jobless Claims

[Guest Brendan]

Speaker Nancy Pelosi issued the following statement today on deteriorating economic news, including a steep rise in foreclosures and increased number of Americans filing for jobless claims:

 

America's working families are facing worsening economic conditions. The number of homeowners receiving foreclosure notices increased 25 percent from a year ago and the number of newly laid-off Americans filing for jobless benefits is at a seven-year high. In these difficult times, the American people expect solutions from Congress and the Bush Administration.

 

The need for action is clear and urgent, but the Administration is failing to move aggressively to stem the tide of foreclosures and refusing to use the authority it has been given by Congress to help homeowners. Addressing the underlying problem of home foreclosures and stopping the drop in home values is necessary to restore confidence in our financial system, get credit moving again, and boost economic growth.

 

The House has already passed strong economic recovery and job creation legislation, which leading economists agree is critical. Now we need Republicans in the Senate and President Bush to join us in our efforts to boost the economy for all Americans.

[Guest LAW]

The Administration's goal is to promote stability for both the housing market and homeowners. To meet these objectives in the context of a very challenging market, the Administration developed a broad approach implementing state and local housing agency initiatives, tax credits for home-buyers, neighborhood stabilization and community development programs, mortgage modifications and refinancing, continued Federal Housing Administration (FHA) engagement, and support for Fannie Mae and Freddie Mac. In addition, Federal Reserve and Treasury MBS purchase programs have helped to keep mortgage interest rates at record lows over the past year.

 

The President's housing market recovery efforts began immediately after taking office in February 2009. As of August 2010, the Administration's comprehensive response, as outlined above, has yielded the following results:

 

• Stabilizing housing prices drive improving expectations in some regions: After 30 straight months of decline, home prices have leveled off in the past year; futures indices have shifted upward since January 2009 as signs of recovery continue although overall housing outlook measures remain mixed.

 

• Historic low rates continue to promote affordability: Families continue to benefit from the lowest rates in history on 30-year fixed mortgages. Since April of 2009, record low rates have helped 7.1 million homeowners to refinance, resulting in more stable home prices and $12.7 billion in total borrower savings.

 

• More than twice as many modification arrangements begun compared to foreclosure completions: More than 3.15 million modification arrangements were done from April 2009 through the end of June 2010. This includes more than 1.3 million trial Home Affordable Modification Program (HAMP) modifications started, over 472,000 FHA loss mitigation and early delinquency interventions, and 1.4 million proprietary modifications under HOPE Now. The number of agreements offered continues to more than double foreclosure completions for the same period (1.24 million).

 

• More than 4.2 million families have benefited from housing counseling since April 2009: Working with a HUD approved housing counselor can help borrowers manage debts apart from a mortgage – car payments, credit cards and personal loans, for example – and help them to avoid falling into default.

 

• More than 37,000 homeowners received a HAMP permanent modification in July: While the pace of program entry has slowed due to upfront documentation requirements in place since June 1, this policy change streamlines the process to help more eligible homeowners convert to a permanent modification. Homeowners in permanent modifications are experiencing a median payment reduction of 36 percent, or more than $500 per month.

 

Despite these positive indicators, some data in the August report underscores continued market fragility, suggesting recovery will take place over time. For example, foreclosure starts went up slightly in July from the previous month, but remain well below July 2009 levels.

 

Foreclosure completions also inched upward as the volume of serious delinquencies continues to work through the pipeline. The impact of new and expanded resources introduced in July is expected to contribute to progress captured in future Housing Scorecards. For example, the FHA announced a short refinance option targeted to help people who owe more on their mortgage than their home is worth because their local markets saw large declines in home values. The option will allow certain underwater non-FHA borrowers – those current on their existing mortgage and whose lenders agree to write off at least 10 percent of the unpaid principal balance of the first mortgage – the opportunity to qualify for a new FHA-insured mortgage.

[Guest ALWAYSRED]

Please Discuss your theory on this.

 

THE OBAMA ECONOMY: HOME SALES FALL BY A RECORD 27.2% IN JULY“The Sale Of Existing U.S. Homes Sank 27.2% In July - The Biggest One-Month Drop Ever . . .” (Jeffery Bartash, “Exisiting Unsold Homes Plunge 27.2% In July,” MarketWatch, 8/24/10)

 

• The Number Of Unsold Homes Jumps, Leaving U.S. With A 12.5 Month Supply Of Unsold Homes. “The National Association of Realtors said existing-home sales fell to a seasonally adjusted annual rate of 3.83 million in July from a revised 5.26 million the month before. Sales of single-family homes fell to the lowest rate in 15 years. Inventories of unsold homes rose 2.5% to 3.98 million in July, representing a 12.5-month supply, the highest level since at least 1999.” (Jeffery Bartash, “Exisiting Unsold Homes Plunge 27.2% In July,” MarketWatch, 8/24/10)

CNBC’S Bob Pisani: “And I Want To Emphasize, 3.83 Million Sales Of Existing Homes, That Is Well Below The Consensus—4.7—And It’s Kind Of Rare To Get This Kind Of Miss. I Mean They Were Just Way, Way Off.” (CNBC, “Squawk On The Street,” 8/24/10)

 

“The Steep Decline In Sales In July Reflects Both A Souring In The U.S. Economic Recovery And The Expiration Of A Government Tax Credit Program That Has Been Supporting The Housing Market For More Than A Year.” (Meena Thiruvengadam And Sarah N. Lynch, “Existing-Home Sales Plunged In July,” The Wall Street Journal, 8/24/10)

 

“Housing Led The U.S. Out Of Seven Of The Last Eight Recessions. This Time, It May Kill The Recovery.” (John Gittelsohn and Bob Willis, “Housing Slide in U.S. Threatens to Drag Economy Into Recession,” Bloomberg, 8/23/10)

 

• Mounting Foreclosures And Depressed Home Prices Have A Serious Impact On The “Broader Economy.” “‘If foreclosures continue to mount and depress home prices, that could send the economy back into a recession,’ said Celia Chen, an economist who tracks the industry for Moody’s Analytics Inc. ‘The housing market and the broader economy are closely intertwined.’” (John Gittelsohn And Bob Willis, “Housing Slide In U.S. Threatens To Drag Economy Into Recession,” Bloomberg, 8/23/10)

Housing Market Is Being Dragged Down “By A Weakening Economic Recovery.” “The housing market is also being hampered by a weakening economic recovery. Unemployment remains stuck at 9.5 percent and many prospective buyers worry they might not have a job to pay the mortgage. Prices are low, but that's largely because foreclosures are running about 10 times higher than before the housing bust. And while mortgage rates are at the lowest levels in decades, many people can't qualify because banks are being selective in the tough economy.” (“Sales Of Existing Homes Plunged In July,” MSNBC, 8/24/10)

 

OBAMA ADMINISTRATION’S EFFORTS TO STEM FORECLOSURES BRANDED “A FAILURE”

“The Obama Administration's Mortgage Relief Program, Originally Intended To Shield Three Million Households From Foreclosure, Now Looks As If It Will Permanently Help As Few As One-Sixth Of That Number.” (David Streitfeld, “U.S. Mortgage Relief Effort Is Falling Short of Its Goal,” The New York Times , 8/20/10)

 

• As Of July, 616,000 Trial Modifications Under The HAMP Program Have Been Cancelled. “While millions say they need help avoiding foreclosure and many struggling households applied, data released Friday showed the dropout rate from the Making Home Affordable Program was very high: 96,000 trial modifications were canceled by lenders in July. The number of canceled trials now exceeds 616,000.” (David Streitfeld, “U.S. Mortgage Relief Effort Is Falling Short of Its Goal,” The New York Times , 8/20/10)
• Housing Experts Are Now Declaring The Program “A Failure.” “Those numbers are leading some housing experts to call the program, which modestly rewards lenders for modifying mortgages, a failure. But administration officials say that many households were helped even if their modifications were only temporary.” (David Streitfeld, “U.S. Mortgage Relief Effort Is Falling Short of Its Goal,” The New York Times , 8/20/10)
• With Little Success To Show For The Program, Enrollee Numbers Are Now Plummeting. "About 422,000 mortgage modifications overseen by the government were considered permanent as of July, up from 389,000 in June. But the pool of candidates is shrinking rapidly. Only 17,000 trial modifications were started in July, down sharply from the 150,000 enrolled in September when the program was new.’” (David Streitfeld, “U.S. Mortgage Relief Effort Is Falling Short of Its Goal,” The New York Times , 8/20/10)

FORECLOSURES ARE CREATING “SHADOW INVENTORY” OF REPOSSESSED HOMES,

FURTHER DEPRESSING THE HOUSING MARKET

America’s “Shadow Inventory” Of Bank Owned Homes Is Estimated To Be Around 600,000 Properties. “‘My best guess right now is that REO held by Fannie, Freddie, and FHA, and other government entities, and banks and thrifts is just under 600-thousand, but unfortunately it is on the rise,’ says Lawler. Now compare that 600,000 number to the 564,000 homes that the National Association of Realtors reported sold in June. That's all homes, not just distressed homes. So fewer homes sold than exist in REO.” (Diana Olick, “Foreclosure Math: Shadow Inventory Adds Up,” CNBC, 8/12/10)

 

• That Equals A Four-Month Supply Of Distressed Houses That Exert Downward Pressure On Home Prices. “But now, and I promise this is the last number, take a look at the number of distressed sales each month, about 150,000. That means that we have a four month supply just of foreclosed properties. Yes, there are plenty of cash buyers out there, looking to scoop them up, but they will do so only at very reduced prices. So here we go again on price pressure.” (Diana Olick, “Foreclosure Math: Shadow Inventory Adds Up,” CNBC, 8/12/10)

For Existing Homeowners, The Shadow Inventory Affects Their Ability To Borrow. “But for people who currently own homes, it’s bad news: To them, falling prices mean lower resale values, less borrowing power for loans requiring homes as collateral and the mere fact that they shelled out a lot of money for an asset that is depreciating.” (Robbie Whelen, “Glut Of Houses Holds Back Housing Market, Economy,” The Wall Street Journal, 8/3/10)

 

• Until The Housing Sector Improves, The Economy Cannot Recover. “Most importantly, an overstuffed inventory means production of homes will eventually slow down, which means fewer construction jobs, less demand for raw materials and less business for the industries that serve the housing sector. Bottom line: the economy typically cannot recover unless the housing sector recovers.” (Robbie Whelen, “Glut Of Houses Holds Back Housing Market, Economy,” The Wall Street Journal, 8/3/10)
• It Could Take Up To 2.5 Years To Clear America’s Excess Supply Of Houses. “Mr. Brosen, using a fairly conservative projection of 500,000 for the number of housing starts in 2010 (the Commerce department says 549,000), predicts that new households can absorb 900,000 units of the “excess” supply in a year. By that calculation, it should take 2.5 years to clear excess supply and get back on track.” (Robbie Whelen, “Glut Of Houses Holds Back Housing Market, Economy,” The Wall Street Journal, 8/3/10)

Read more: http://gop.com/index.php/briefing/comments/the_biggest_one-month_drop_ever#ixzz0xbGAJTqm

[Guest Secret]

Read the new report, "DEBT AND HOME FORECLOSURES: THEIR EFFECT ON NATIONAL SECURITY CLEARANCES," by Sheldon I. Cohen

 

"Since the collapse of the housing market in 2008, debt resulting from job losses and home foreclosures has had a devastating effect on people holding national security clearances. That, more than any other factor today, is causing the revocation or denial of security clearances, resulting in the loss of good paying jobs, and putting skilled workers further and further behind in their effort to dig out of debt."

 

http://www.sheldoncohen.com/publications/Article%20on%20Guideline%20F.pdf