After 6 months 50% of modified loans are once again in default..... Wow, who here is surprised?
More than half of loans modified in the first quarter of 2008 fell delinquent within six months, according to recent data from a top bank regulator. Redefault figures reached 58 percent after eight months, according to U.S. Comptroller John Dugan.
The trend has left officials investigating: Are the modified mortgages badly written? Or have cash-strapped, unemployed homeowners accumulated too much increased credit card debt to afford even reduced payments?
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I feel sorry for you "officials so X will give you a hint! The mortgage amounts are STILL too high relative to incomes. You can modify all you want, but when the principal amount is 5x the persons income they will likely default. There is just no margin for any unexpected cost when you are working with those ratios. Don't mod a loan unless the person can really afford it using the old tried and proven 28/36 ratios.
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More good news from the Press Enterprise...
It was only a few years ago that economists were talking about how the housing bubble was costing Inland Southern California its advantage as the affordable place for buyers. The area was at close to full employment, but home prices were going up too fast. It meant that even though there were abundant jobs in San Bernardino and Riverside counties, the typical worker could not afford the typical mortgage. Now more than 186,000 Inland workers are unemployed, many more are underemployed, and almost everyone is nervous about the state of the economy. It means that, despite a huge decline in home prices, there won't be enough buyers in 2009, Chapman University economists said in their annual forecast. The Inland Empire stands to lose 14,000 jobs in 2009, a drop of 1.1 percent, Chapman's economists predict, but the decline will ease by the fourth quarter. The two-county area lost about 38,000 jobs in 2008, according to a recent state report, and federal statistics indicate the job loss could have actually been much steeper. (no duh!) Unemployment, currently at a 13-year high of 10.1 percent, could go more than a full point higher. Most job sectors, except for health care and education, will see diminished payrolls. The job losses will likely hinder any housing recovery. By the end of the year we should see better housing numbers, or at least numbers that are less bad, Adibi said in an interview. In early 2005, when the median home price in Inland Southern California was about $340,000, only one in five people made enough to qualify for a typical 30-year fixed mortgage with 20 percent down. (what about 2006 and 2007 when only 1 in 10 could afford it?) The median single-family home price has dropped to about $209,000 in Riverside County, and $180,000 in San Bernardino County, according to a recent report by DataQuick Information Systems.
Adibi, who presented his forecast Wednesday in Riverside in front of an audience of mostly builders and developers, said there won't be enough demand for housing to bring the bulldozers back to the Inland area. He is forecasting a decline in Inland construction jobs for the third straight year. (wow, that's a stretch...not)
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Meanwhile back at the ranch, foreclosures are ready to soar as Fannie and Freddie's foreclosure freeze expires.
A moratorium that Fannie Mae and Freddie Mac put on foreclosure sales and evictions by their servicers in late November is scheduled to expire next week. Freddie had 5,000 to 6,000 loans headed for foreclosure before the freeze, though some might receive streamlined modifications. Fannie said it had contacted more than 10,000 borrowers and renters before the freeze about the possibility of a property heading for foreclosure.
"There probably will be two more waves of foreclosures coming," said Mark Carrington, the director of analytical sales and support at the unit of First American Corp. of Santa Ana, Calif.
"When the foreclosure moratoriums end, we'll see one wave of foreclosures," he said, and "2009 is going to be the start of the ramp-up of the option ARM loans facing foreclosure."
"Virtually everywhere we've seen moratoriums, there is a run-up in foreclosure activity, then a huge drop-off, and a spike back up when the moratorium is over," said Rick Sharga, a senior vice president at RealtyTrac Inc. in Irvine, Calif.
As of June 30, Fannie and Freddie owned or guaranteed 373,000 delinquent loans. Freddie had 151,515 "seriously delinquent" mortgages — meaning they were 90 days or more past due — as of Sept. 30.
"Right now, between moratoriums that were enacted last year and the pure volume of foreclosures, time lines could be double the standard of a year ago," said John Anderson, an executive vice president at Clayton Services Inc. in Shelton, Conn., which owns Quantum, a servicer of delinquent loans.
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So. let me get this straight. Unemployment is high and getting worse by the day. Values are falling. Defaults are rising. Re-defaults are running 50%+. Holy smokes, there's never been a better time to buy! (sarcasm off)