The Great Recession, as the economic crisis has been dubbed, started with a housing bust. Today, the housing failure is still driving the economy down, with the unstoppable foreclosure machine gobbling up properties at an astonishing rate.
The Obama administration's program to slow down foreclosures has had limited success, to put it mildly. The Treasury Department said recently that only 270,000 homeowners had been offered loan modifications under the Making Home Affordable program. But only 131,030 loans had actually been modified as of early July, however.
Either way, it's a drop in the Florida Bay compared to reports that some 3.5 million homeowners face foreclosure this year – a rate close to 10,000 per day – because mortgage holders can't pay, are "under water" (stuck with a mortgage greater than the value of the property) or staring at an unaffordable upcoming increase in an adjustable rate mortgage. By one reliable estimate, some 15 million homes were "under water" as of March.
Periodically, news stories suggest that the situation is improving nationwide. Don't bet on it. The most likely reasons for a slowdown are state laws that extend the foreclosure process and, here and there, a state-imposed moratorium. These local rules will eventually expire, however, leaving imperiled homeowners stranded and increasing the rate of foreclosure activity.
The Obama administration is acutely aware of the problem, but it has yet to devise a new and desperately needed strategy. Treasury Secretary Timothy Geithner and Housing Secretary Shaun Donovan have summoned 25 of the nation's top bankers and other mortgage servicers to Washington to read them the riot act, demanding they be more aggressive about helping homeowners in peril.
Given the billions of taxpayer dollars used to bail out the nation's banks, this is not an unreasonable request. Some bankers would rather foreclose on a property instead of lower the value of a mortgage because a writedown means decreasing the (inflated) value of their assets. A rebuke from the administration, along with a threat to publish the list of banks that have been most selfish in modifying loans, may prod the mortgage industry into action.
To read the complete editorial, visit The Miami Herald.