FORECLOSURES GONE BAD

As foreclosure rages, bank owned homes are expected to increase its number and will prevail in the coming years as the result of the 350,000 who opted for adjustable mortgage from 2004-2007, as released by the Standard & Poor the previous week.

S & P reported that most homeowners from that 350,000 are now struggling to pay unpaid interests and worst, these homes, which loans were mostly taken out 2004, are scheduled to reset its higher rates before this year ends up to the 1^st Quarter of 2010.

Some pessimistic businessmen were saying that recession was triggered more by the housing sector, followed by the bankruptcies that have now reached 185,055. But the most sounding business analysis is saying that foreclosures and bankruptcies actually resulted from joblessness. The unemployment rate now rose to 10.2%, the highest since April of 1983; totaling to 558,000 unemployed persons nationwide, according to the Bureau of Labor Statistics.

The good news is that the Obama administration, through the U.S. Treasury Department will begin taking actions against mortgage servicers; who are not doing enough ways to ease troubled homeowners, as a part of the President's promise of $75 Billion pledge to restrain foreclosures.

Lenders will face unspecified consequences, which may include sanctions and monetary penalties if found failed to perform under the Home Affordable Modification Program.

The modification program enabled banks to obtain federal aid through the Treasury's Troubled Asset Relief Program (TARP) but, in return they are required to help homeowners who are at "imminent risk" of default by extending and/or lengthening repayment terms, lowering interest rates, and making all necessary changes to the mortgages to stop the foreclosure.

In addition, the Treasury Department is also now requiring lenders, to speed the process for changing their loan terms and to submit regular status updates. Bank of America tops the list of worst performers in measure of trial modifications.

Eligible loans under the modification program must be in default, or 60 days past due, in foreclosure or bankruptcy, and must have originated before 2009. The underlying property(ies) must be owner-occupied and conform to Fannie Mae and Freddie Mac loan limits (which can be as high as $729,750 in some areas), excluding the ones under the Federal Housing Administration and Veterans Affairs loans. A borrower's mortgage payment must be at least 31% (or more) of gross monthly income.

The program was announced early this year by the administration, to curb foreclosures that has depressed property values and hampered economic growth. The program had been partly affected by the rising unemployment rate.