08/23/2010

Federal foreclosure prevention program is struggling

Reporting from Washington-- Just as the housing market recovery has stalled, so has the Obama administration's main program to ease home foreclosures.

Only 36,695 homeowners received permanently lowered mortgage payments in July through the much-criticized Home Affordable Modification Program, the smallest increase since December, administration officials said Friday.

And the number of people dropping out of the program continued to soar. Overall, nearly half the homeowners who entered the program since it launched in March of last year have dropped out.

Many had hoped the $75-billion program would be a silver bullet to the foreclosure problem, but it's turned out to be a dud, said independent banking analyst Bert Ely. That's not surprising, he said, given the depth of the housing market crash and recession, combined with a slow recovery.

"Even with a substantial reduction in mortgage payment and even some reduction in principal, you still have people who are over their head financially because of their reduced financial circumstances," Ely said. "Isn't it time to just rethink this whole business of modification … and let the market clear through foreclosures and short sales?"

J Puzzanghera, Los Angeles Times

P4P Comment

Unemployment is the main cause of foreclosure of American property. Until the job market picks up, the process of homes being repossessed will only continue.

For those investors with access to $40K to $45K cash, this represents a great opportunity to buy a renovated foreclosed American property for a fraction of true cost.