Article Index

Surge in Strategic Defaults Threatens Housing Market Recovery

A growing number of homeowners who owe more on their mortgages than their property is worth are opting for "strategic default," which means walking away from their homes, even though they can afford to make their monthly payment.

If the trend accelerates, it could put more empty houses on a market that's already overburdened with vacancies and snuff out any recovery in the moribund housing market.

Right now, more than 10% of borrowers are 25% or more underwater on 4.9 million mortgages. The total valuation could saddle banks with as much as $656 billion of bad loans, according to the latest report from Corelogic.

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Foreclosures Dropped in February, Helped by Rescue Programs and Poor Weather

U.S. mortgage foreclosure filings dropped for the second straight month in February and posted the smallest annual increase in four years as government housing-rescue efforts and poor weather constrained bank repossessions, a report released by RealtyTrac Inc. showed today (Thursday).

RealtyTrac, which sells mortgage default data collected from more than 2,200 counties representing 90% of the U.S. population, said filings declined 2% from January. But filings were up only 6% from a year earlier, the smallest increase in four years.

"The 6% year-over-year increase we saw in February was the smallest annual increase we've seen since January 2006, when we began calculating year-over-year increases," James J. Saccacio, RealtyTrac chief executive officer said in a statement obtained by Reuters.

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Disastrous December Collapse Exposes False Start to Housing Market Rebound

Reports of a rebound in the U.S. housing market have proven premature - just as we warned.

Home sales surged 28% from September to November, giving hope to prognosticators who declared the housing crisis over. But as Money Morning Contributing Editor Martin Hutchinson pointed out in a Dec. 31 article, sales plunged sharply the month after the government's new homebuyers tax credit was originally set to expire.

Existing home sales plunged 17% to a 5.45 million annual rate in December, taking the wind out of a housing market that was just beginning to show signs of life. The decline in December sales was the biggest since the National Association of Realtors (NAR) began keeping records in 1968.

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Housing Market Still in Shambles as Obama's Loan Modification Program Falls Flat

Despite a concerted effort by the Obama administration to rebuild the housing market, it continues to languish. The government's Home Affordable Modification Program (HAMP) failed to stymie foreclosures last year, and 2010 may not be any better.

Instead of declining, the number of foreclosed homes in the United States last year increased to a record 2.8 million, a 21% rise over 2008 and 120% over 2007, according to RealtyTrac. Foreclosures in the fourth quarter jumped 18% over the same period last year.

Not helping matters is HAMP, which was designed as an incentive for banks to restructure mortgage payments for homeowners facing foreclosures. The Obama administration set aside $75 billion to subsidize lenders that successfully modify troubled loans by reducing interest rates, extending loan repayments, deferring principle payments for as long as five years and adjusting other mortgage terms.

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Investment News Briefs

With our investment news briefs, Money Morning provides investors with a quick overview of the most important investing news stories from all around the world.

Fannie, Freddie Get Blank Checks; Holiday Retail Sales Rise 3.6%; Fed to Banks: Set Up CDs with Us; Health Care Bill Likely to Resemble Senate Version; JPMorgan Sues Former Bank Exec; Oil Tops $79 for First Time in Four Weeks

  • In what's been called a "perplexing" move by one analyst, the U.S. Treasury lifted a $200 billion cap on the amount of taxpayer dollars that can be injected into ailing mortgage firms Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) , providing unlimited support to them. The Treasury put into $60 billion into Fannie and $51 billion into Freddie, and were unlikely to need more than the $200 billion cap, wrote Keefe, Bruyette & Woods Inc. analyst Bose George in a note to investors yesterday (Monday). George views the Treasury's move as a way to more aggressively prop the U.S. housing market, and said the government could step up efforts of its Home Affordable Modification Program (HAMP), a mortgage-modification program designed for homeowners who can no longer afford them. But so far, HAMP and other government props have failed to stop a continuing wave of foreclosures, as Money Morning reported last fall. Shares of the firms, both government-sponsored enterprises (GSE) skyrocketed in trading yesterday. Fannie was up 20.95% to close at $1.27, while Freddie gained 26.98% to close at $1.60.

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Government Measures No Match for Second Wave of Foreclosures

When the Obama administration in March instituted programs to help homeowners modify mortgage payments or refinance for lower interest rates, the idea was to curb the foreclosure crisis that has gripped the United States for the past two years. But roughly seven months later, it looks like the federal programs have merely delayed the inevitable, […]

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