foreclosure sales

And I’m not surprised. This program was a fool’s errand from the beginning.

Just one in four of the 2.7 million homeowners who sought to participate in the Obama administration’s signature mortgage assistance program have succeeded in getting their monthly payments reduced.

The rest failed to qualify for the program or were disqualified after they were initially accepted into the program, according to an analysis by the Wall Street Journal of data on applicants to the program newly released by the Treasury Department.

In all, about 680,000 homeowners who applied for the Home Affordable Modification Program, or HAMP, had received permanent modifications of their loans and were making timely payments or were still in the trial phase as of December.

Almost 6.7 million U.S. homes were lost to foreclosure, short sales or turned back to lenders between 2000 and 2010, according to Moody’s Analytics. Another 3.6 million could meet the same fate through 2013.

The White House launched the HAMP program in 2009 as a broad attempt to reverse the rising number of home foreclosures by reducing families’ mortgage payments, typically by lowering the interest rate and extending the term of a loan. But the administration’s strict eligibility criteria resulted in far lower participation than expected.

I don’t think there is anything the government can do to stop these foreclosures. At the root of the problem is the fact that, led on by government subsidies and other favorable policies, America’s lending institutions gave trillions of dollars worth of loans to people who had no business taking them in the first place. The government inflated the housing markets by inciting banks to give out bad loans.

The only way to fix that problem is to make those bad loans go away. And the only way to make them go away is to allow them to go into default. Government policies aimed at fixing the problem by slowing or stopping the foreclosures are only going to prolong and exacerbate the problem.

These bad mortgages are like a flu bug. There’s no cure. All we can do is let it work through the system.

Tags: Barack Obama, housing, housing bubble, mortgages, subprime mortgages

Earlier:

• ISM Manufacturing Index increases in February

• Private Construction Spending decreases in January

• U.S. Light Vehicle Sales 13.44 million SAAR in February

• Graphs: ISM manufacturing, Construction Spending, Vehicle Sales



Fannie Mae reported that the serious delinquency rate decreased to 4.48% in December from 4.50% in November. This is down from 5.38% a year ago.



Freddie Mac reported that the serious delinquency rate decreased to 3.82% in January from 3.84% in December. (Note: Fannie reports a month behind Freddie). This is down from 4.15% in January 2010.



These are loans that are "three monthly payments or more past due or in foreclosure".



Click on graph for larger image in graph gallery.



Some of the rapid increase in 2009 was probably because of foreclosure moratoriums, and also because loans in trial mods were considered delinquent until the modifications were made permanent. As modifications have become permanent, they are no longer counted as delinquent.



The slowdown in the decline was probably related to the new foreclosure moratoriums last year. Going forward, a key question is if falling house prices will lead to an increase in serious delinquent loans.

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