One bank already had a moratorium on foreclosures in place and two other followed shortly after by the end of the month.  However, the request for a moratorium only went out to the largest banks and then very late in the month of February.

That moratorium may have prevented February from being the worst month for foreclosures since this crisis started, but it did not keep it out of the top 3 and did not help to save 290,000 properties.

Slightly more than 290,000 properties – one in every 440 housing units – were slapped with a foreclosure filing in February, up nearly 30% from a year earlier. That total, a roughly 6% increase from January, was the third-highest monthly total – following those in August and December 2008 – since the foreclosure-listing service’s report was launched in early 2005.

The results, which come amid widespread foreclosure-prevention efforts, show filings spike after moratoriums expire. After a 45-day voluntary moratorium in Florida ended at the end of January, foreclosure activity increased 14% from a month earlier, RealtyTrac said. Many New York proceedings delayed by a 90-day extension appear to have hit the system in February, boosting foreclosure activity by 23%, the report said.

US Foreclosure Filings In February Up 30% On Year -RealtyTrac

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The Geithner/Obama plan to ‘help’ home owners called the “Homeowner Affordability and Stability Plan” and the guidelines – Text Version – that spell out how it is to be executed called the “Making Home Affordable” Guidelines have some holes big enough to drop a country (the size of the United States) through.

Problem 1 – Not Big Enough

The program is only designed to cover 7 – 9 million Americans despite the fact that there are between 50 – 80 million Americans holding mortgages.  In 2008 over 2 million people went through foreclosure and 2 million+ more are expected to go through foreclosure in 2009 by the most modest estimates.  8.3 million people currently owe more on their homes than those homes are worth, which means they can not sell their homes and relocate if they lose a job or even get a promotion requiring a move.  Furthermore, if home prices drop just another 5% (and rates have been going down that much every month in 40% of states in the US (not just California as the problem is spreading) then 2.2 million additional borrowers will be underwater.  Plus, almost 2 million people left the United States and moved to Central America last year as jobs evaporated, which also helped to fuel the evaporation of new home buyers capable of buying a home.

This drop in home prices works like an avalanche.  As it drops more, it picks up more snow and increases in speed consuming more and more formerly safe, stable and financially secure Americans that are in its path.  There are only about 40-50 million American homes that are owned free and clear with no mortgage.  But even these are at the risk of lower prices, increasing property taxes, and rising incidences of property crime as suburbia is turns into gang infest ghost towns.

Problem 2 – Wrong Focus

Then there is the issue that after paying $2 trillion to bail out Wall Street this plan only offers up $75 – %80 billion to actual home owners.

$2 trillion if divided amongst 75 million mortgage holders could have provided $26,000 to each home owner to revalue those mortgages, write down principle, and lower mortgage payments or even payoff mortgages all together!  This could have enabled people to tighten their finances, fix their budgets, and if they need to move, sell or buy a home, they could have done it.  And that is 75 MILLION households, not 7 million that just happen to be covered by 2 failed institutions (Fannie and Freddie).

Instead the government has put good money after bad in a never ending hole for capital currently nick named the financial markets.  They complain about the hocus pocus of hedge funds while poring more money into the banks that own, run and invest in hedge funds instead of the people that own real assets (homes).

Problem 3 – Too Little Too Late – Incentive to Foreclose or go Bankrupt

Essentially the government is simply creating an incentive for homeowners to go through foreclosure or bankruptcy.  The real estate market is not in the tank it is going down and down into the tank.  We are NOT at the bottom yet.  Throwing money on the fire does not stifle the flames, it causes it to burn more.

More and more homeowners that are underwater are realizing that their only real option is to sell their home to the highest bidder, their bank holding the mortgage. 

When that isn’t enough the other option is to walk away from their debt all together in bankruptcy.  Through a bankruptcy consumers can dismiss tens of thousands of dollars in debt on their unsecured credit cards, renegotiate their mortgage rates, their mortgage principal, their car loans and more.  Even if they go through Chapter 13 – Reorganization, they stand a better chance of renegotiating their credit card interest rates down to single digits at a time when credit card companies are racing to raise rates up to 30% before new laws go into effect in July 2009.

Plus, the credit card companies are eliminating credit limits for card holders left and right.  They are dropping credit lines, canceling cards and more.  For those people that worked very hard to keep their credit up and pay their credit cards on time, they are seeing their credit rating sabotaged by banks cutting their limits for no reasons that have to do with that consumer.  They might as well already be in bankruptcy!  Their credit rating goes in the tank, their interest rate goes up to 30%, their cards are canceled, Chapter 13 starts to look like a blessing because all the perils of bankruptcy have already been experienced by people that pay their bills on time!

Problem 4 – Government Reinvention of Sub Prime Loans

So after subprime loans supposedly got us into this mess, the government plan relies heavily on sub prime tools to get people ‘out of this problem’.

• ARMs
• 40 Year Loans

Those ‘evil’ adjustable rate mortgages(ARMs) that trapped millions of people are essentially exactly what the government is offering.  They are enabling people to finance at interest rates of 2-4% for 1-4 years to make their homes ‘more affordable’.

Hello! That is exactly what mortgage brokers did with sub prime loans.  They even went one step better offering 0% mortgages. 

The government is essentially prolonging the problem.  This does enable people to live and fight another day from one perspective.  It also enslaves them to their homes, to the banks and now to the government (with a loan that might not be able to be forgiven in bankruptcy) from another perspective.  Would you rather be enslaved to your home, the bank and the government, or rather sell your home back in a foreclosure or escape the bondages of your debt in a bankruptcy and be on the path to healing your finances (with your full income that you have now).

The second thing that the government is offering is a 40 year mortgage.  There is a historical reason why 40 year mortgages have not been offered to the masses.

40 Year Mortgages are a rip off and they do not make homes more affordable. 

A 40 year mortgage will force a person to pay far more on a mortgage than a 30 year mortgage.  The interest like a credit card where a person pays a minimum payment, almost never stops.  After the first 10 years, you might as well have rented your home, because you will not have much more principle built up in your home.  The banks will earn significantly more interest from you during that time.  In fact you will pay for your home multiple times over in interest even though you will still owe the principle!

This isn’t change we can believe in this is just a really bad idea.  That pretty much sums up all of the plans offered so far in fact.

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That might be welcome news to people witnessing a rate of existing home sales that just dropped in January nationwide.  It might also be welcome news because existing home sales prices dropped in January from from $199,800 in January 08 to $170,300 in January 09 (down from $175,700 in December 08 the month before).

So how might those people sell their home at $199,800 or even $210,000 instead of taking in $170,300? 

What’s the Catch????

They have to sell their home back to the bank. Its called foreclosure. 

For a person that paid $240,000 for a home in 07, and financed $210,000 through the bank only to watch their home go under water when the market price dropped to $170,300 last month, they may have no other choice.

If they happen to be lucky enough to still have a job but are being relocated, they may not be able to afford to pay out $40,300 to pay off their mortgage, even if they can find a REAL buyer that will pay $170,300 for their home.  Not to mention the $13,000 in realtor fees, and $4k in closing costs.

Just giving their house back to the bank (that is getting bailed out by the government with billions of dollars) may be their only option.

Sure Barack Obama’s plan might enable them to refinance at 2% a month and shave $8k off their mortgage principal, but that still leaves them underwater by more than $32k on a house they have to move away from just to keep their job!

The government has engineered a market where the best option for homeowners is foreclosure.  That’s not hope you can believe in, that’s a nightmare come true.

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If banks lose the ability to sell off your mortgage to Freddie Mac and Fannie Mae that will leave them with no other choice but to negotiate a better deal with you in several areas whether you are trying to refinance a mortgage or even buy a foreclosure property from them.

Today, for the most part, banks do not have to deal with you very much when you are in trouble nor even when they are in trouble.  They have a get out of jail card from Freddie and Fannie, but if that option goes away sometime soon, they might have to make a deal and work with their customers to stay afloat and that could be just the lifeline you need to save your house or even to get a great deal.

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Foreclosure filings last month were up nearly 50 percent compared with a year earlier, according to one company’s count released yesterday. Nationwide, 261,255 homeowners received at least one foreclosure-related filing in May, up 48 percent from the same month last year, and up 7 percent from April, foreclosure listing service RealtyTrac said.

Washington Post

That increase is in the filings related to foreclosure.  Its kind of a measure of the red tape that is filed as opposed to the actual foreclosure itself.  Its akin to measuring the number of divorces by all the divorce related letters, and correspondence of the lawyers involved in the proceedings, which could be measured in feet of paperwork with scores going up like a nightmare version of an xbox 360 game.  Its very similar unfortunately for foreclosures.

However the increase in foreclosures is not just a red tape escalation, but the real deal.  The number of total mortgages in a state of foreclosure as measured in a percentage was 2.47 percent up from 1.28 percent during the first quarter a year ago.

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This is definitely a dubious milestone in the housing and mortgage crisis and one that is going slightly unnoticed while Oil is spiking close to $140 a barrel with predictions of hitting $150 before the Fourth of July.

If gas rates hit $5 or $6 per gallon this summer, it sure will not help any of the unfortunate homeowners trying to save their homes from foreclosure. It won’t even help the banks trying to minimize their losses, and it definitely won’t help banks offer new loans to people to buy homes and help the market actually begin to hear.

There was a time when it appeared that the mortgage crisis might abate and markets could recover within a year or two. We are now coming up on what some would consider the one year mark, things are rapidly getting more desperate and the solutions put forward so far . Possibly even more troubling could even be the number of people that are beginning to give up on entering or staying in the housing market. With potential homeowners actually leaving the marketplace and opting to rent instead, the housing market will continue to contract faster than waistlines trying to determine the answer to the question does Hydroxycut work.

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HSBC Finance, which typically holds its mortgages on its books, ended 2007 with 9,627 foreclosed properties, up from 8,809 at the end of the third quarter, company records show. While the average number of days to sell a foreclosed property has dipped from 186 to 183

Developments : HSBC’s Mortgage Modification Methods

People are staying in their existing home or more often opting for rental possibilities.  Many people still have the ability to pay monthly rates, and if the banks won’t given them credit, they would just as soon rent a place and get back to their jobs and life in general.  Why waist time trying to convince a mortgage broker that your credit can make the grade when your credit situation and income haven’t changed, but the metric for good credit and bad credit has changed.  Renters can resume their lives and spend all that extra time and money picking up good flight deals and traveling a bit while the mortgage industry sorts out its self made problems.

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Part of that drop is being fueled by foreclosures which are still on the rise.  It is projected that 1 million additional homes will foreclose in 2008.

Foreclosure filing rates surged 65% in April according to the AP:

More U.S. homeowners fell behind on mortgage payments last month, driving the number of homes facing foreclosure up 65 percent versus the same month last year and contributing to a deepening slide in home values, a research company said Tuesday.

Nationwide, 243,353 homes received at least one foreclosure-related filing in April, up 65 percent from 147,708 in the same month last year and up 4 percent since March, RealtyTrac Inc. said.

AP Article

Its going to be a long road out of this housing market crisis for the US.  One that is going to be about as painful for US households as drug rehab is for heroin addicts.

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The second concept is known as lien theory. Lien theory requires the lender to foreclose on a lien on the property in the court of the jurisdiction relevant to the transaction. Only a court action can give them the ability to acquire possession of the property. At that point the property can be offered up for sale and the funds from the sale can be used to extinguish the debt.

In both lien theory and title theory if there is any money left over from the sale after the debt has been paid, the Boer war is entitled to receive that money. If the lender has to spend any money to sell the property, these are known as cost of sale, the lender can recoup that expense is well before the borrower receives any money from the sale. The sales are often managed by a representative of the court, typically known as an executor. Unfortunately, lenders are often in a hurry to recoup their losses and avoid further risk. Sales often happen fast and with minimal effort. Excess funds during a sale are not always common.

If an owner had a large amount of escrow in their home, they could potentially have refinanced and avoided the foreclosures in the first place. So banks or lenders often end up selling homes at an amount just above what they need to cover their unpaid debt, leaving very little if anything for the borrower. Monitoring the behaviors of the parties during a sale will typically yield little benefit. Its difficult to prove that lenders are doing anything wrong when they take no effort to fix up a home for sale and give it enough curb appeal to garnish a better rate. A lender can hardly be expected to put more good money after what is already proven to be bad.

Similarly, home owners that have lost their homes often do not want to give up the property and their efforts to delay exit or foreclosure can also harm the ability of the home to sell at a good price. The two sides in these case can become embroiled in arguments and controversy, even engaging lawyers and private investigators armed with a telephoto spy camera, but it rarely amounts to anything useful for either side.

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1. The Real Estate Market has been inflated
2. Mortgage Lenders have engaged in fraud that increased the real estate market inflation
3. Builders have also served to inflate the market
4. Both the mortgage market and real estate market are in correction now

Here’s what these trends mean for you.  The prices have been high, even too high and that put money in the pockets of builders and mortgage bankers and brokers.  That money came from people just like you.  Now, if you want to give your money away for nothing, then you are wasting your time reading this column.  Feel free to click away now.

The correction is taking place today and on the home shopping front the best place to find homes that have had their prices corrected the most is in the foreclosure market.  These homes have corrected significantly and some may even be value buys.  Why would you pay say 40% more for the same house through normal channels when you can possibly save $80,000 on a home that is in foreclosure.

Here are just a few examples in one of those counties that used to be one of the most inflated markets in the country, southern California.

You can find recent san diego foreclosure listings to review or la jolla foreclosure listings to review. and information from any realtor, but in doing so you essentially have to set up a relationship with that realtor.  That’s fine, but in the world of the internet, if you can do the research before connecting to a realtor so much the better.

Foreclosure listings work differently than normal real estate listings and the rules are different across the country.  Typically, you do not get the same time period to review a home or even have it inspected.  These properties are typically sold ‘as is’.  That means you could end up with a lemon.  You should approach these homes a potential money pits or homes that are only partially constructed.  You may even need to take out a construction loan and fix the place up before you can get real financing.  The point is, do not expect to go in and make a bunch of demands on the seller (the bank).  You are buying the house at what should be bottom basement prices.  This purchase should be all about the price.  If the price isn’t a sweet heart of a deal, then go somewhere else.  DO NOT fall in love with a foreclosure home when you are buying it.

If you can not approach a foreclosure property with this type of discipline, then you will be better off paying the 40% premium and looking for normal real estate listings in San Diego to buy.

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