Surging Foreclosures Preventing Recovery of Economy

May 26th, 2009

Surging foreclosures are preventing all attempts at recovery of the economy. The watered down version of the housing bill has again made loan decisions dependent on the banking and financial lobby.

It is now two years since the housing crises has debuted. The foreclosure crisis continues unabated without any signs of recovery. On 20th May 2009 President Obama signed the latest response of the government to the crisis. It targets help to millions under the cloud of foreclosure. But the recent efforts may not have enough punch to tackle the enormity of the problem.

Debates had been dragging on for months but at the end a vital provision has been cancelled that would have empowered bankruptcy judge to modify mortgage terms. Congress buckled under the heavy pressure put on it by the banking lobby. The bill has been trying to see the light of day since last year but again the attempt failed to include the key provision.

Once more the decision to change or not to change loan terms has remained in the hands of the lenders. Meanwhile homeowners’ area stuck in a situation where they can neither afford the monthly payments nor refinance or modify their loans. Even short sale is proving to be difficult thanks to the adamancy of lenders.

60 year old Courtney Scott is a retired nurse residing in Atlanta. She has been trying for the past one year to get her loan modified. She complained, “This has just been round and round. Every time we do what they say they need us to do, something happens where we need to resubmit it or they say there’s a backlog and it’s going to take more time.”

The backlog of unsold vacant foreclosure houses is piling up as more foreclosures rush in. In April the increase has been by 32% from what it was a year ago according to ReatlyTrac. It is apprehended that 2.4 million new foreclosures will be listed as per the findings of Center on Responsible Lending. About one out of five homeowners have already gone underwater with their loans being more than the falling worth of the properties according to the findings of Moody’s.

Job losses are slowing down but unemployment continues to harangue the nation. Mark Zandi of Moody’s Economy.com said, “You mix all of that together, and the foreclosure problem is getting worse not better. We’re counting on the president’s loan modification plan to really kick in here. But it hasn’t yet, and we need to see it.”