Despite throwing hundreds of billions if not trillions of dollars at the problem, the Obama administration will not be able to exert its increased influence over the financial marketplace to thwart an anticipated spike in home foreclosures.
Key Lenders Ratchet Up Foreclosures
According to a report appearing in yesterday’s issue of The Wall Street Journal (WSJ), Fannie Mae, Freddie Mac, J.P. Morgan Chase & Company as well as Wells Fargo & Company have already increased their foreclosure activity over the past few weeks. Those institutions had stopped or slowed down foreclosures in February as they awaited details of the federal government’s housing-rescue plan to emerge which included incentives to help mortgage providers to reduce homeowner payments to manageable levels.
The WSJ says that lenders have determined which borrowers can benefit from their help and which ones are beyond remedy. That latter category of homeowners are the ones now facing foreclosure.
This move by lenders comes even as they are recipients of billions of dollars in taxpayer money, funds which are to be used in part to help keep people in their homes. Spokesmen for each of the lenders are stressing that foreclosuring a home is an action of the last resort, once all other means of remedy have been exhausted.
Adverse Impact On Home Values
Analysts are worried that any spike in home foreclosures could have an adverse impact on home values. In California, which has experienced some of the worst of the real estate meltdown over the past two years, home prices were beginning to stabilize and sales increase, particularly in the hardest hit areas. With a spate of foreclosed property entering the market, housing values could slip again, slowing down the Golden State’s recovery.
In 2008, 1.7 million homes were lost to foreclosure an amount expected to increase to 2.1 homes for 2009 according to Moody’s Economy.com. Chase has over 80,000 homes awaiting foreclosure, a number not too unusual for major mortgage providers.
Ineligible According to the Obama Program
Perhaps most shocking for some homeowners, especially those who voted for the Obama-Biden ticket last fall is that they won’t be getting the help they expected when they cast their vote for the team. Many of these borrowers are unemployed, underemployed or have other credit problems which are exacerbating their troubles. Even the delays in foreclosure have not helped as these same homeowners have been seeing an increase in fees and interest owed during the moratorium period.
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