Grim news Thursday for backers of the foreclosure prevention program (PL 111-22) that the Obama administration promoted and Congress enacted in May. Midyear statistics compiled by the online marketplace RealtyTrac found a total of 1.9 million foreclosure filings were reported on more than 1.5 million properties across the country -- a 9 percent increase over the previous six months and a 15 percent jump over the first half of 2008.
The numbers were further proof that the real estate downturn hasn't ended, and that the administration's economic relief efforts have yet to tamp down a dramatic rise in default notices, auction sales and bank repossessions. The numbers were particularly disturbing because big lenders including Citigroup Inc., Wells Fargo & Co. and Bank of America Corp. had agreed to suspend foreclosures while the administration worked out its plan to modify mortgages for troubled borrowers.
The program attempts to aid homeowners on the brink of foreclosure by helping them refinance into 30-year, fixed-rate mortgages insured by the Federal Housing Administration. It changed the yearly insurance premiums that participating homeowners must pay to the FHA from 1.5 percent of the value of the mortgage to "up to 1.5 percent," essentially giving the government the flexibility to lower the premiums. And it extended through Dec. 31, 2013, an increase in deposit insurance coverage by the Federal Deposit Insurance Corporation and National Credit Union Administration.
Experts say higher unemployment is the biggest factor behind the still-rising number of loan defaults, but add the large number of borrowers "under water" -- who find themselves owing more on their mortgages than their homes are now worth -- represent a potentially significant future risk. These kind of warnings increase prospects for a second economic stimulus package that will include a significant amount of new housing relief, though the White House is in no hurry to draft another plan.
"Stemming the tide of foreclosures is a critical component to stabilizing the housing market, so it is imperative that the lending industry and the government work in tandem to find new approaches to address this issue," said RealtyTrac Chief Executive Officer James C. Saccacio.
Update: White House Deputy Press Secretary Bill Burton, asked in light of the latest numbers whether more money is needed for these kind of relief efforts, replied, "We have to let the programs that we've put in place have their full impact before we talk about spending any more money to shore up the problems that there are with foreclosure."
