Foreclosure Filings Top 300,000 for Sixth Straight Month

Foreclosure filings are still on a rampage as noted by the Bloomberg headline U.S. Foreclosure Filings Top 300,000 for Sixth Straight Month.
A total of 358,471 properties received a default or auction notice or were seized last month, according to data provider RealtyTrac Inc. That’s up 18 percent from a year earlier, and down 0.5 percent from July, the Irvine, California-based company said in a statement. One in 357 households received a filing.

Nevada had the highest foreclosure rate in August, with one in every 62 households receiving a filing, even with an 8.4 percent decrease in foreclosures from July, RealtyTrac said. August filings were up 53 percent from a year earlier, with 17,902 Nevada properties receiving a foreclosure filing.

The second-highest foreclosure rate in August was recorded in Florida, with one in every 140 households receiving a filing, followed by California, where one in 144 households received a foreclosure filing.

A 9.6 percent month-to-month decrease in filings helped lower Arizona’s foreclosure rate to fourth-highest in August from third-highest in July, RealtyTrac said. One in every 150 Arizona households received a foreclosure filing last month, still more than twice the national average, the company said.

Bank of America Corp. and Wells Fargo & Co., among the worst performers of banks in the foreclosure-prevention plan, stepped up their pace of mortgage modifications by at least 60 percent last month. Bank of America more than doubled its number of modifications started to 59,891 in August from July, while Wells Fargo increased by 64 percent to 33,172.

In the RealtyTrac survey, Michigan, Idaho, Utah, Colorado, Georgia and Illinois accounted for the other states with the top 10 highest rates of foreclosure filings. Six states accounted for 62 percent of the nation’s foreclosure filings.

California had six metropolitan areas among the top 10. Stockton and Merced ranked second and third; Riverside-San Bernardino-Ontario, Vallejo-Fairfield and Modesto were fourth through sixth; and Bakersfield was 10th. Two Florida metropolitan areas were in the top 10, with Orlando- Kissimmee at No. 8 and Cape Coral-Fort Myers at No. 9, according to RealtyTrac, which collects data from more than 2,200 counties representing 90 percent of the U.S. population.
HAMP Success Rate 12 Percent

In the Making Home Affordable Program, 12 Percent Of Eligible Borrowers Helped so far.
Twelve percent of distressed homeowners eligible for mortgage modifications under the Obama administration's signature effort to reduce foreclosures have been helped so far, the Treasury Department reported on Wednesday. That's an improvement over the previous monthly report on servicer participation in the Making Home Affordable modification program, which revealed that only 9 percent of eligible homeowners had started trial modifications from the start of the program in April through July.

Overall, 360,165 out of 2.9 million eligible distressed homeowners have started trial modifications under the $75 billion Home Affordable Modification Program (HAMP), which gives mortgage servicers an incentive to reduce monthly payments to 31 percent of a borrower's income. Nineteen percent of eligible borrowers were offered trial modifications, up from 15 percent in the previous report.

Servicers that offer modifications get $1,000 upfront and another $1,000 per year so long as the homeowner stays current, and homeowners can get $1,000 a year toward reducing their principal for up to five years.

"Several months into the Home Affordable Modification Program...homeowners and their advocates report that the program is not providing a sufficient number of loan modifications to homeowners, the modifications offered often do not meet the guidelines of the program, and the program itself still presents serious barriers to mass loan modifications," said Alys Cohen, a staff attorney with the National Consumer Law Center in prepared remarks before the housing subcommittee.

"Moreover, even if HAMP operated at its full capacity as envisioned by Treasury officials, HAMP's loan modifications still would be substantially outpaced by foreclosures, and the modifications themselves lack the mandated principal reductions that many believe are necessary to stem the foreclosure tide."
Definition of Success

The definition of success seems to be getting someone in the program. In previous loan modification programs, close to 50% of borrowers got behind again within a year. Moreover, if one has to stretch out payments for 40 years, reduce the principle, reduce the interest, and make other adjustments, does that really make the home affordable?

HAMP Fact Sheet

Here is the Making Homes Affordable Fact Sheet
Treasury will partner with financial institutions and investors to reduce homeowners’ monthly mortgage payments.

- The lender will have to first reduce monthly payments on mortgages to a specified affordability level (specifically, the lender must bring down monthly payments so that the borrower’s monthly mortgage payment is no greater than 38% of his or her income).

- Next, the program will match further reductions in monthly payments dollar-for-dollar, from 38% down to 31% debt-to-income ratio for the borrower.

- To ensure long-term affordability, the modified payments will be kept in place for five years and the loan rate will be capped for the life of the loan. After five years, the interest rate can be gradually stepped-up by 1% per year to the conforming loan survey rate in place at the time of the modification.

- To reach the target affordability level of 31%, interest payments will first be reduced down to as low as 2%. If at that rate the debt to income level is still over 31%, lenders then extend the term or amortization period up to 40 years, and finally forbear principal at no interest, until the payment is reduced to the 31% target.

- Treasury will share the costs of reducing the payment from 38% DTI to 31% DTI dollar for dollar.

- Note: Lenders can also bring down monthly payments to these affordability targets through reducing the amount of mortgage principal. The program will provide a partial share of the costs of this principal reduction, up to the amount the lender would have received for an interest rate reduction as long as the lender reaches the target rate of affordability at 31% debt-to-income.
Note that the efforts are heavily weighted towards lowering the monthly payment. To truly make the home affordable, principle reductions are needed.

Moral issues aside, it makes little sense for borrowers to accept the HAMP payment reduction terms if it leaves the borrower hugely underwater, and especially if it turns a no-recourse loan into a recourse loan.

Finally, because of rising unemployment, there are many who cannot afford anything but free. These issues are guaranteed to limit the effectiveness of the program.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Obama Wins Health Care Debate

Tonight President Obama did what he had to do - deliver a powerful speech on health care. The Huffington Post has full Text and Videos of Obama's Health Care Speech for those who missed it.

Bear in mind this is NOT an endorsement of Obama's plan. Indeed, president Obama does not even have a plan. Rather, he will sign whatever regulation gets passed by Congress.

Victory for Obama is getting something, anything, passed no matter how good or bad that legislation is. Moreover, we can easily see what he is willing to give up to get health care legislation passed.

For Republicans Something Better Than Nothing

The only standing ovation Obama received from the Republicans was on the issue of tort reform. That is the price Obama is willing to pay to get bipartisan support. All it takes is for a few senators to believe "something is better than nothing".

For icing on the cake, Obama praised Senator McCain. Once again, all Obama needs to do is win a handful of Republican senate votes to have this sail through as bipartisan effort. He will settle for a couple of senate votes.

Jeers Over Illegal Alien Coverage

Measured by very loud jeers, and rightfully so, no one in Congress believes Obama's claim about illegal aliens receiving care. President Obama is being disingenuous and most in Congress know it. However, most won't publicly admit it.

It is highly likely illegal aliens will not pay into the plan but will receive care anyway.

President Obama repeated his claim that no one will lose existing coverage. He cannot possibly know. If businesses decide it is cheaper to dump employees into the government plan they will do so in mass.

Where's The Good Faith Deposit?

Earlier today Caroline Baum stated Obama’s Promises Could Use a Good-Faith Deposit
So what should the president say or do this evening in his attempt to enlist support for his health-care overhaul? He could start by explaining the seeming inconsistency in his plan to save money by spending money.

“If I went to my board of directors with a similar proposal for ‘cost reduction,’ they would laugh me out of the conference room -- and then my job!” writes reader Michael Dunlop, vice president of operations/IT at Parts Associates Inc. in Cleveland.

Spend and Save

The Congressional Budget Office estimated the cost of various health-care plans approved by House of Representatives committees at $1 trillion over 10 years. Obama says he will pay for the bulk of the increase in spending by rooting out $500 billion in Medicare waste.

A good-faith deposit would resonate with the public after all the talk: 28 speeches on the subject of health care, or 121 if you include speeches and remarks where Obama mentioned health-care goals, according to political Web site Politico.

It would be a lot easier to start with cost containment, as outlined by David Walker, former comptroller of the Government Accountability Office and longtime deficit hawk, in a Sept. 4 Wall Street Journal interview. If the U.S. creates “new obligations” before it gets its fiscal house in order, “we’ll have a Thelma and Louise moment where we go over the cliff,” Walker says.

A CBS poll also found that 67 percent of Americans are confused about health-care reform and 60 percent think the president has failed to explain his plan clearly.

The poll numbers comport with reality on the ground. Lawmakers went home for the August recess to find constituents anxious about change and wary of signing away their current medical benefits and signing on to ObamaCare.

The president is going to have to convince those with health insurance why they will be better off under his plan.

That includes reconciling his promises to individuals with business economics. Obama has reiterated that individuals can keep their current plan. Yet employers may find it’s cheaper to pay a government-imposed penalty than provide coverage.
Did Obama Provide A Good Faith Deposit?

Tonight, after listening to the speech, inquiring minds are asking if Obama provided a "good faith estimate".

The answer is a resounding "No".

Unfortunately the question is moot. The intent of tonight's speech was to win a handful of votes, not to provide clarity to anything.

Republicans Reply

A Republican surgeon gave a solid reply to Obama's speech. Please consider a Reply to Obama speech by Charles Boustany
I read the bill Democrats passed through committee in July. It creates 53 new government bureaucracies, adds hundreds of billions to our national debt, and raises taxes on job-creators by $600 billion. And, it cuts Medicare by $500 billion, while doing virtually nothing to make the program better for our seniors.

The President had a chance tonight to take government-run health care off the table. Unfortunately, he didn’t do it.

...

We do have ideas the President hasn’t agreed with. We’re grateful the President mentioned medical liability reform, and we hope he’s serious. We need to establish tough liability reform standards, encourage speedy resolution of claims, and deter junk lawsuits that drive up the cost of care. Real reform must do this.

Let’s also talk about letting families and businesses buy insurance across state lines. I and many other Republicans believe that that will provide real choice and competition to lower the cost of health insurance. Unfortunately, the President disagrees.

You can read more about all these reforms at healthcare.gop.gov. These are common-sense reforms we can achieve right away – without destroying jobs, exploding the deficit, rationing care, or taking away the freedom American families cherish.

This Congress can pass meaningful reform soon to reduce some of the fear and anxiety families are feeling in these very difficult times. Working together in a bipartisan way, we can truly lower the cost of health care while improving quality for the American people. I’m Dr. Charles Boustany. Thanks for listening.
In his Speech Obama was critical of the amount Bush spent on the war. Wait a second. Isn't Obama the peace president? If so where are the troops? Obama stated this will not add a penny to the deficit. If so, why do we have a $trillion deficit. The answer is we count only what we want to count. This is a criticism of both parties, not just Democrats.

Obama reiterated his idea that everyone must participate in a "Government Knows Best" mandate. He did not say what that will mean in terms of costs to generation Y, the Millennials. For more on Millennials, please see Spending Collapses In All Generation Groups.

What's clear is generation Y and the wealthy will be subsidizing everyone else in socialized medical scheme. Some will agree with the idea, others not, but Obama pretends the issue isn't there. Obama also pretends this is not socialized medicine.

If this was a genuine debate, Charles Boustany won. But this was not a genuine debate. This was a Hail Mary play hoping to resonate just enough to pick up a few votes. My scorecard says something will pass. For Obama, this is victory. Everyone else must decide for themselves. One thing is clear: Generation Y is getting the shaft.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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