01/25/2010

Foreclosures could hit 3 million in 2010

The U.S. Treasury Department was unsuccessful in recent negotiations with the country's largest financial institutions to procure contracts requiring participation in a second mortgage modification program to reduce the number of housing foreclosures this year, which could hit record numbers.

Leading lenders, including Bank of America and Wells Fargo, currently hold a combined $1.05 trillion in home-equity debt, a figure so enormous it threatens to again disrupt housing stability and lead to 3 million foreclosures this year, after contributing to the 2.8 million in 2009, Bloomberg reports.

According to Meg Reilly, a Treasury Department spokeswoman, the banks pursuing negotiations seem "committed" to joining a second mortgage modification program, though progress is slow.

In a statement, Barclays Capital representatives wrote, "The Home Affordable Modification Program (HAMP) is running into issues of too few permanent modifications, and re-default performance is expected to be poor."

Last week the Treasury said that out of about 4 million eligible homeowners, only about 66,000 have been permanently helped by HAMP since it launched last February, the Christian Science Monitor reports.

The Obama administration has vowed to keep pressure on the nation's lenders to help the taxpayers who bailed them out during last year's financial collapse.

Source: Avvo

P4P Comment

Despite public protestations, the government’s ability to alter the course of the recession is limited. The unwinding of excess debt is working its way through the system and this year should see a ready supply of foreclosures, although less sub-prime, much of which has already been cleared.