AP Reports, “Rising unemployment accelerates foreclosure crisis”, Economy continues downward spiral. Credit Default Rates Up.

WASHINGTON – Relentlessly rising unemployment is triggering more home foreclosures, threatening the Obama administration’s efforts to end the housing crisis and diminishing hopes the economy will rebound with vigor.

In past recessions, the housing industry helped get the economy back on track. Home builders ramped up production, expecting buyers to take advantage of lower prices and jump into the market. But not this time.

These days, homeowners who got fixed-rate prime mortgages because they had good credit can’t make their payments because they’re out of work. That means even more foreclosures and further declines in home values.

The initial surge in foreclosures in 2007 and 2008 was tied to subprime mortgages issued during the housing boom to people with shaky credit. That crisis has ebbed, but it has been replaced by more traditional foreclosures tied to the recession.

Unemployment stood at 9.5 percent in June and is expected to rise past 10 percent and well into next year. The last time the U.S. economy was mired in a recession with such high unemployment was 1981 and 1982.

But the home foreclosure rate then was less than one-fourth what it is today. Housing wasn’t a drag on the economy, and when the recession ended, the boom was explosive. (The economic recovery of the 1980’s was fueled by Reagan’s tax cuts and a shrinking of Government – a formula we won’t see from this Administration).

No one is expecting a repeat. The real estate market is still saturated with unsold homes and homes that sell below market value because they are in or close to foreclosure.

“It just doesn’t have the makings of a recovery like we saw in the early 1980s,” says Wells Fargo Securities senior economist Mark Vitner, who predicts mortgage delinquencies and foreclosures won’t return to normal levels for three more years.

Almost 4 percent of homeowners with a mortgage are in foreclosure, and 8 percent on top of that are at least a month behind on payments — the highest levels since the Great Depression.

In the last 12 months, 15% of mortgages have had forclosure completed.

http://news.yahoo.com/s/ap/20090716/ap_on_re_us/us_foreclosure_crisis_unemployment

Obama’s Trillion Dollar Mortgage Modification Program, which he promised would help 9,000,000 (9 Million), has in fact provided temporary relief to less than 75,000 (Seventy Five Thousand). Many of the 75,000 have, after receiving a modification, now slipped into foreclsoure anyway. 

Credit card defaults keep climbing

Default rates in May continue to rise as borrowers struggle with the weak job market.

NEW YORK (CNNMoney.com) — Banks continue to write off credit card debt as consumers hurt by record high unemployment default at an increasing rate.

Regulatory forms filed this week by some of the nation’s largest banks showed default rates on credit cards rose in May. The default rate is a measure of loans that the bank does not expect to be repaid.

“Data from May showed continued signs of stress for card issuers, reflective of worsening unemployment trends and deteriorating macro [economic] conditions,” analysts at Bernstein Research said in a report Tuesday.

Bank of America the nation’s largest bank, said its default rate jumped to 12.5% in May from 10.5% the month before. Other major banks, including Citigroup, JPMorgan Chase and Capital One also reported increases in May default rates.

http://money.cnn.com/2009/06/16/news/companies/credit_card_losses/index.htm?section=money_latest

Despite 90 Day Mortgage Moratorium in 2009 – Foreclosures Up 15%

Foreclosures rise 15 percent in first half of 2009

Foreclosures keep soaring as unemployment becomes main cause of housing woes

ap

WASHINGTON (AP) — The number of U.S. households on the verge of losing their homes soared by nearly 15 percent in the first half of the year as more people lost their jobs and were unable to pay their monthly mortgage bills.

The mushrooming foreclosure crisis affected more than 1.5 million homes in the first six months of the year, according to a report released Thursday by foreclosure listing service RealtyTrac Inc.

The data show that, despite the Obama administration’s plan to encourage the lending industry to prevent foreclosures by handing out $50 billion in subsidies, the nation’s housing woes continue to spread. Experts don’t expect foreclosures to peak until the middle of next year.

Foreclosure filings rose more than 33 percent in June compared with the same month last year and were up nearly 5 percent from May, RealtyTrac said.

“Despite all the efforts to date, we clearly haven’t got a handle on how to address the situation,” said Rick Sharga, RealtyTrac’s senior vice president for marketing.

More than 336,000 households received at least one foreclosure-related notice in June, according to the foreclosure listing firm’s report. That works out to one in every 380 U.S. homes.

http://finance.yahoo.com/news/Foreclosures-rise-15-percent-apf-516022846.html?x=0

Since the election in November one home in every 76 has received at least one foreclosure notice.

Government Update: 1 Out Of 8 Mortgage Holders Are Now Delinquent Or Are In Foreclosure

12 percent are behind on mortgage or in foreclosure

AP

NEW YORK – A record 12 percent of homeowners with a mortgage are behind on their payments or in foreclosure as the housing crisis spreads to borrowers with good credit. And the wave of foreclosures isn’t expected to crest until the end of next year, the Mortgage Bankers Association said Thursday.

The foreclosure rate on prime fixed-rate loans doubled in the last year, and now represents the largest share of new foreclosures. Nearly 6 percent of fixed-rate mortgages to borrowers with good credit were in the foreclosure process.

At the same time, almost half of all adjustable-rate loans made to borrowers with shaky credit were past due or in foreclosure. There were no signs of improvement.

The pain, however, is spreading throughout the country as job losses take their toll. The number of newly laid off people requesting jobless benefits fell last week, the government said Thursday, but the number of people receiving unemployment benefits was the highest on record. These borrowers are harder for lenders to help with loan modifications.

http://news.yahoo.com/s/ap/20090528/ap_on_bi_ge/us_foreclosures

Citibank Announces Moratorium On Mortgage Foreclosures – Private Plan That Won’t Cost Taxpayers A Dime

NOT A GOVERNMENT BAILOUT – A PRIVATE ACTION THAT WON’T COST TAXPAYERS A DIME – WHY IS CITI DOING THIS? IT MAKES GOOD BUSINESS SENSE – THAT IS WHY !

Citigroup says it is imposing a moratorium on most foreclosures as part of a series of initiatives aimed at helping at-risk borrowers remain in their homes — making Citi the latest big bank to announce sweeping efforts to try to curtail losses from souring mortgages.

Citi said late Monday it won’t initiate a foreclosure or complete a foreclosure sale on any eligible borrower who seeks to stay in a home if it is the borrower’s principal residence, the homeowner is working in good faith with Citi and has sufficient income to make affordable mortgage payments.

Citi said it is also working to expand the program to include mortgages the bank services but does not own.

Additionally, over the next six months, Citi plans to reach out to 500,000 homeowners who are not currently behind on their mortgage payments, but who are deemed as potentially needing assistance to keep current with their payments. This represents about one-third of all the mortgages that Citigroup owns, the bank said.

Citi plans to devote a team of 600 salespeople to assist the targeted borrowers by adjusting their rates, reducing principal, or increasing the term of the loan, steps known in the mortgage industry as a workout.

Of the four biggest U.S. banks — Citigroup, JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. — Citi has been on the shakiest footing as a result of the mortgage crisis, reporting losses in the past four consecutive quarters while its rivals have managed to post profits. The steps announced Monday are designed to stem those losses.

“Typically the lender loses the most money when a house goes into foreclosure,” said Barry Zigas, director of housing policy at the Consumer Federation of America. “(The lender) takes some kind of loss that’s usually much greater than what they sacrificed through some kind of workout.”

Sanjiv Das, chief executive of CitiMortgage, said, “It is in our interest that borrowers stay in their homes and actually make the payments.”

Citi is targeting homeowners in geographic areas with higher-than-average unemployment and foreclosure rates, primarily in Arizona, California, Florida, Michigan, Ohio and Indiana, Das said. The program is expected to affect about $20 billion in mortgages.

“As the unemployment rate is starting to creep up on us, there is going to be increasing distress in the marketplace,” Das said in an interview with The Associated Press. “It’s not going to distinguish between what type of mortgage they have.”

“There is a huge amount of anxiety among borrowers,” he said. “We will reach out to them before they become delinquent.”

Since early last year, Citigroup has helped about 370,000 families avoid foreclosure, representing more than $35 billion in loans, the bank said.

Citi has avoided negative amortization loans, option adjustable-rate mortgages, and other types of risky mortgages, defaults on which have skyrocketed since the start of the housing bust in the middle of last year. Still, the bank has nonetheless been hurt by the relentless downturn in housing that fed the mortgage and credit crisis, and in turn, the near-breakdown of the financial system.

With defaults mounting, other lenders, including JPMorgan and Bank of America, have also become more aggressive about modifications to mortgage agreements.

But a moratorium only solves so much, according to Zigas. “A moratorium on foreclosure will be effective at stopping foreclosure, it won’t be effective at stopping the underlying reasons of why people are in trouble,” he said.

By taking a proactive approach, Citigroup isn’t waiting until it’s too late to deal with delinquent borrowers, said Steve Curnutte, president of InsBank Mortgage in Nashville, Tenn. However, the problem is growing faster than most banks can handle, he said.

“It’s nearly an insurmountable undertaking,” said Curnutte. “The number of bad loans that they can modify using their resources is being quickly outstripped by the number of new loans that need to be modified.”

More than 4 million American homeowners with a mortgage were at least one payment behind on their loans at the end of June, and 500,000 had started the foreclosure process, according to the most recent data from the Mortgage Bankers Association.

Late last month, JPMorgan expanded its workout program to an estimated $70 billion in loans, which could aid as many as 400,000 customers. The New York-based bank has already modified about $40 billion in mortgages, helping 250,000 customers since early 2007.

JPMorgan also said it will not put any loans into foreclosure as it implements the expanded program over the next 90 days.

Bank of America, meanwhile, has said that starting Dec. 1, it will modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement reached with state officials in early October.

http://www.chicagotribune.com/business/chicago-big-banks-mortgages-nov11,0,5250204.story?track=rss

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