Newsweek, MSNBC----
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.
It was the fourth-straight month in which more than 300,000 households receiving a foreclosure filing, which includes default notices and several other legal notices that homeowners receive before they finally lose their homes. Banks repossessed more than 79,000 homes in June, up from about 65,000 a month earlier.
On a state-by-state basis, Nevada had the nation’s highest foreclosure rate in the first half of the year, with more than 6 percent of all households receiving a filing. Arizona was No. 2, followed by Florida, California and Utah. Rounding out the top 10 were Georgia, Michigan, Illinois, Idaho and Colorado.
The Obama administration in March launched a $50 billion plan to give the lending industry financial incentives to modify mortgages to lower payments, but it’s off to a slow start.
As of early July, about 130,000 borrowers were enrolled in three-month trial modifications under the plan, and 25 mortgage companies have signed up to receive potential payments of up to $18.6 billion, according to the Treasury Department. But analysts and housing counselors say it isn’t having much of an impact.
“The plan isn’t going well, at least not yet,” said Mark Zandi, chief economist at Moody’s Economy.com. “It’s a creative plan with lots of incentives, but it’s very complex.”
In testimony prepared for delivery at a Senate hearing on Thursday, Bank of America executive Allen Jones said the company has about 80,000 loan modifications in the works under the new government guidelines, including some that aren’t in the three-month trial phase yet.
“We have achieved this level of success by devoting substantial resources to this effort,” Jones said, noting that the company has more than 7,000 employees handling calls and working on modifications. Industry experts, however, say the response from most mortgage companies has been lackluster.
“They’ve been slow to make sure they understand it and put all the processes and people in place,” said Joel Lewis, vice president of financial services at Convergys Corp., which runs call centers for the financial industry and other companies.
A week ago, Treasury Secretary Timothy Geithner and Housing Secretary Shaun Donovan sought to ramp up pressure on the industry, saying in a letter to participating mortgage companies that the industry needs to “devote substantially more resources to this program for it to fully succeed.” They also summoned mortgage executives to a July 28 meeting with top government officials.
Though the program was launched months ago, few companies are upgrading their computer systems to process loans rapidly, said Bill Kelvie, chairman of Overture Technologies in Bethesda, Md.
“They need to automate the process, and they need better technology, and they need to do this quickly,” he said.
Mortgage scams increase as Foreclosures rise
(FBI seeing a 400 percent increase in claims over a five-year span.)
The letter may look like a government form. The logo may seem official. The Web site address may sound like an agency that can help.
But there's a good chance it may all be a scam.
The ongoing mortgage foreclosure crisis has sparked a cottage industry of so-called "foreclosure rescue" companies. But advocates and government officials warn that a significant number are little more than fraudulent operations designed to separate distressed homeowners from their money, and sometimes their houses as well.
"They prey upon the financially unsophisticated," said Gail Cunningham of the National Foundation for Credit Counseling. "Anyone can easily fall victim to such scams. When you're hurting, we may all become financially unsophisticated."
Many of these companies have popped up as the mortgage meltdown accelerated, said Gary Almond of the Better Business Bureau in Los Angeles, one of the areas hardest hit by the housing crisis. "As the degradation in the market progressed, more (companies) got on the bandwagon," he said.
Because of the role the mortgage industry plays in the nation's economy and the types of crimes mortgage fraud represents, these companies have even drawn scrutiny from the FBI. The feds currently have nearly 2,350 mortgage fraud cases, up almost 400 percent from five years ago.
"With people losing homes, you're at your most vulnerable," said Roscoe Howard, a Treasury Department spokesman. "It's a lot like being a poor swimmer and being thrown into a lake, you're going to reach for whatever you can."
Even for wary consumers, it may be hard to tell if the line being thrown by a company will sink you.
A letter sent out earlier this month by Bridgewater, N.J.-based Financial Solutions Today LLC is a good example of the difficulty assessing a company.
The letter is designed to resemble a W-2 or other form from the Internal Revenue Service, with boxes across the top and a similar typeface. It suggests the recipient "may be eligible for a special modification program according to guidelines created in conjunction with the Government Stimulus Program HR 1106: Helping Families Save Their Home Act."
The bill that bore that number in the House of Representatives actually used the plural "Homes" in its title, a subtle misspelling that consumer advocates say is the type of thing that should be a red flag for recipients.
The letter also states "only an attorney or licensed debt adjuster can legally represent a borrower for a mortgage modification."
That's not true, said Dan Crevina, director of operations and marketing at the BBB of New Jersey. "There's no need to have representation to call the bank," he said. "They're going to do the same thing that the consumer can."
Financial Solutions Today President Frank Riccio said the letter in question was changed, although he claimed the modification took place weeks before the copy obtained by The Associated Press was received. "That was just an overflow," he said. "I don't like the way it looks."
Riccio declined to discuss his business practices beyond the letter and did not return follow-up calls.
Yet Financial Solutions Today, which also does business as Home Rescue Today LLC, is accredited by the BBB. That means it was reviewed by the consumer watchdog and pledged to "abide by a set of ethical standards for marketplace conduct," according to the BBB Web site. The BBB has received only one complaint against the company, which Crevina said was about spam e-mails, and was resolved.
One comment in the Financial Solutions letter even echoes the advice from advocates and government agencies when consumers are considering turning to a private company for help: "Beware of companies that ask you to pay for services upfront."
Nonprofit agencies that are working with government programs to help homeowners in danger of foreclosure don't charge for the services they offer, and some states prohibit lenders from charging fees in advance of providing services.
Homeowners can call the federal government's Hope Now program at 888-995-HOPE, or visit the program's Web site to find legitimate assistance. The site has a calendar of free events around the country where help is available on site, and lists approved nonprofit counseling agencies nationwide that offer free help.
Details about government programs and counseling referrals are also available here.
The companies operating scams use a variety of ways to find their targets. Besides advertising heavily, they also search public records for default notices or mortgages written in the last few years by banks known to issue risky loans, and then send letters or make calls to those addresses.
Last month, the FTC filed lawsuits against five companies as part of a crackdown on mortgage modification and foreclosure rescue scams, the latest in a series of suits aimed at such swindlers. One of those companies, Federal Loan Modification Law Center LLP, generated 168 complaints to the BBB office in LA.
The FTC said these companies touted so-called guarantees and high success rates to mislead consumers about their services; charge upfront fees that legitimate nonprofit organizations do not charge; and use copycat names or look-alike Web sites to appear to be a nonprofit or government entity.
The agency also sent warning letters to 71 other firms "that are marketing potentially deceptive mortgage modification and foreclosure assistance programs." It would not identify those companies.
Some would no doubt be familiar to Crevina at the New Jersey BBB. He's dealt with at least a dozen companies that stopped answering BBB inquiries, and he now simply refers new complaints about them to enforcement agencies. "There are certain names that I hear and I know automatically how we're going to end up handling it," he said. "And the list is growing."
Slums of Suburbia
(Sorting through the rubble of California's foreclosure tsunami.)
John Cowgill is standing in the rain on quiet Victory Avenue in Manteca, Calif., a gridlike town of 65,000 people located just outside of Stockton.
A realtor with PMZ, the biggest real-estate firm in the northern San Joaquin Valley, he is responsible for the vacant and vandalized house standing behind him; inside, grafitti covers the walls, the banister is torn off a staircase, and glass shards from a broken chandelier peak out from the carpeting. Blocks away, the road comes to an abrupt end as rows of neatly planted crops replace rows of houses.
"Look at this house and the one over there. What's different?" Cowgill asks. At one house, the lawn is neatly trimmed and a small purple bicycle leans near the front door. At the other house, black iron bars are affixed to the door, a sight more commonly associated with the heart of the inner city than the outskirts of suburbia.
Nearby, a rusty sports car sits in the driveway. "Manteca was a desirable place to live," he explains. "But this Wild West financing meant anybody could end up here. That's what this thing did. It scrambled communities."
The "thing," of course, was the real-estate roller coaster that came screeching to a spectacular halt after a half-decade cycle. As housing prices in the Bay Area skyrocketed, many moved to places like Manteca, spilling over the mountains into the northern San Joaquin Valley.
They were drawn by the thousands of acres of cheaper suburban homes offering the promise of the good life for people willing to commute two or three hours. With acres of land to spare, swelling suburban developments, and a young skyrocketing population, the valley was the surest bet in the California housing market—until, starting in 2006, it wasn't.
Home prices tumbled by more than half, the largest declines in the country. Foreclosure rates in Stockton, Modesto, Merced, Bakersfield, Fresno, and Visalia soared to rank among the highest nationwide, a trend that continues to persist even after their housing markets have started to see signs of recovery.
In Merced County, where a new state university brought a building frenzy with it, home prices plummeted by nearly three quarters, leaving the average home worth less today than it was in 2000—that is, if it existed in 2000. While the pace of foreclosures has slowed this summer, valley officials worry that it will spike back up once a government-imposed moratorium on repossessions is lifted.
Across the valley, the unemployment rate is 15.4 percent. Many local officials are pushing for Washington to declare the region an economic disaster area, which would bring federal government assistance.
The irony in all these empty houses is the valley's rapidly growing population, which presumably needs a place to live. By 2050, it is expected to more than double to 7.9 million, accounting for 14 percent of the state's population, up from 6 percent today. More development was inevitable, researchers and officials agree; they just think it should have been managed differently. Though expanding, the valley's population is overwhelmingly young and poor, with a median age of less than 30 and poverty rates that rival Detroit and Appalachia. Big, sprawling, single-family suburban houses were the wrong fit.
But the farmland was cheap, the zoning codes were lax, and, with Proposition 13—state legislation limiting property taxes—squeezing their budgets, city governments were eager to sign off on expansion. "Part of the sprawl problem we have is that [municipalities] are expanding housing to try to get a little more tax money to survive, and that's what's destroying the ag[riculture] and the open space and everything else," says Rollie Smith, the valley's federal HUD director. "But Prop 13 really makes it impossible for these places to do anything else." With no regional-planning mechanism to stop them, the borders of the valley's 62 cities sprawled outward.
The result was one of the most stunning changeovers of land use in our time. In a region where it's nearly impossible to hold a conversation without at least one mention of the valley's unique agricultural advantages, the rate at which farmland was converted to urban use doubled in a decade.
It was paved over at a stunningly inefficient rate: an acre for every eight people, according to Edward Thompson at American Farmland Trust. The real problem is more technical, he says; because most of the valley's cities are located right on top of the most productive land, their rapid expansion was destroying the best of the best.
Valley leaders say they're on the case, putting together a blueprint for a green future, focusing on dense development and a renewed emphasis on city centers, and shifting toward a solar- and wind-energy-based economy. To that end, federal stimulus funds are helping.
For the first round of funding, the valley picked up $617 million. For the second, they're hoping for $137 million. But their wish list is more than $10 billion and, as Mike Dozier, the regional point person for stimulus planning, puts it, getting money to the right places can be like "like nailing Jell-O to the wall." Smith, the HUD director, agrees.
The valley's cities are small and poorly coordinated, he says, so they have more trouble jumping through bureaucratic hoops than well-developed metro areas. Plus, while stimulus funds are coming through for efforts that revitalize crumbling old neighborhoods in the valley's bigger cities, the smaller, newer ones are getting passed over. As for those exurbs of new, vacant foreclosured homes? Good luck.
To conservationists, that may be tough love, but it's the right place to invest the valley's money. Still, Smith says even the cities are not getting enough to revitalize their centers and lure people back from the suburbs. On that front, the state's raid on local general funds and redevelopment money is expected to have a particularly brutal effect. No one knows exactly how much the valley will lose in budget cuts, but all seem to agree: it will be far more than what's coming in through the federal stimulus. "The one nice thing about this crisis is that it stopped that crazy land grab that was going on outside the cities," Smith adds.
In Stockton, a builder named A. G. Spanos, which had previously specialized in the kind of big-box development that drew the ire of smart-growth advocates, recently announced plans for a $2 billion green housing project.
The 1,800-acre development would include high-density housing, community gardens, and hundreds of acres of open space. It sounds as green as can be, but there's a catch: it would expand the city's footprint another mile and a half to the north. On the one hand, it's the most optimistic housing prospect the valley has seen in a long time. On the other, as a columnist at The Stockton Record put it, the project might be green, but it's still sprawl.
It's not hard to see why officials would be willing to overlook such a project's imperfections. In early July, HUD Secretary Shaun Donovan visited the valley to survey the empty lots and foreclosed homes that make up Merced's desolate subdivisions.
After walking through the streets, he reportedly remarked, "I've been to New Orleans [after Hurricane Katrina] and to Cedar Rapids [Iowa] a year after the floods, and some of this reminds me of the same streets I walked down." It did not pass unnoticed that he was the second cabinet member flown in to survey the valley that week. One county to the south, Secretary of the Interior Ken Salazar had made similar comments after touring Fresno to see the fallout from the valley's water wars. In such an environment, it's understandable why any development would be greeted as a sign of hope.
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Sources: MSNBC, Newsweek, Google Maps
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