Four months into the Obama administration’s antiforeclosure effort, the White House’s best guesstimate is that “over 50,000” at-risk loans have been modified so that homeowners can afford their payments and keep their homes. A Treasury official told The Times’s Peter Goodman there is no precise data because a tracking system has yet to be completed. Still, the official predicted that by the end of August, the program would modify 20,000 bad loans a week.
That would be an enormous jump. But even 20,000 weekly modifications, starting two months from now, would most likely be too few.
Unless substantially more relief is forthcoming, Moody’s Economy.com projects that some seven million homes will fall into foreclosure this year and next.
Problem: 7,000,000. Hope and change solution: 50,000. Yay!
Of those, nearly 4.5 million will result in distress sales, prolonging the recession by adding to the downward pull on house prices, home equity and household wealth. And those dire projections may prove too optimistic.
Banks say they are overwhelmed by the clamor for relief and are working hard to meet demand. We have heard that before. In May 2007, a group of banks and loan servicers went to Washington to promise a solution for troubled borrowers. The problem has only gotten worse.
A more plausible explanation is that banks feel no great urgency to act. They are being buoyed by immense government support. And the Obama plan — which provides up to $75 billion in subsidies and incentive payments to help lenders and borrowers come to new loan terms — imposes no real penalty on lenders if the modifications don’t happen.
So instead of moving forcefully on foreclosure relief, the players in the mortgage chain — lenders, servicers and investors — have spent months parsing whether the incentives are adequate. Administration officials have spent countless hours clarifying the rules, trying to iron out the differences and pressing the industry to do more.
You know, Obama's Secretary of State proposed a program that would have solved this (HOLC). Oh well, that's off the table, I guess. If only we'd elected a Democratic President!
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Nice dovetail in home foreclosure posts . . .
"Some 342,000 homes were foreclosed in April, pushing a small army of children into a network of charity shelters. This compares to 273,000 homes lost in the entire year of 1932."
That's quite the cold splash of water, even given the large differences in population. Say, why don't we do that math? US population, 1932: 124,840,471. US today: 306,839,779 (est), 2.46 times as many people. Adjusting for that would make 1932's foreclosure rate yield 682,500 foreclosures per year. April 2009's rate yields, 4,104,000 per year. That's six times the rate of 1932. Also note that April was still in an era of partial foreclosure forbearance, and that's over now, so the rate is probably going to climb from that, not fall.
eta: [info]rozasharn looked up data and did math in comments below! Adjusting for homeownership rates on top of population, her math shows we're at four times the foreclosure rate of 1932. Thanks, [info]rozasharn, for being less lazy than me! ^_^
http://solarbird.livejournal.com/851128....
I know live journal isn't normally where you'd expect to go for great economics reporting, and she is more libertarian than liberal, but the best one stop shopping source for economic links I know of; she, corrente, and Anglachel, respectively, are where I found most of the econ blogs I read.
That same post also had this:
The Centre for Labour Market Studies (CLMS) in Boston (US spelling: Center for Labor Market Studies (Northeastern University, Boston), because if you google Centre for Labour Market Studies, even with Boston, you get a different economic group) keeps a count of unemployment using the pre-WWII measurement system, which makes comparisons to the Great Depression possible. That number rose to 18.2% in May, the most recent number noted. He also mentions - I forgot to include this in my last post - that hours per week have fallen to the lowest since the number started being recorded, to 33 hours per week.
7,000,000 homes at 20,000 per week
that's 350 weeks, or nearly 7 years, to clean up 2 years' worth of problems.
yay! we're not japan! our lost decade is only going to be 7 years long! /snark