Mortgage Foreclosures: Merely Delayed

Back in April I had meant to write a column about mortgage foreclosures and the effects of the Democrats not really solving the problem but merely delaying it.  But I didn't write it, so it's too late to say 'I told you so'.

Business Week has the gory details;

June 10 (Bloomberg) -- U.S. home foreclosures reached a record for the second consecutive month in May, with increases in every state, as lenders stepped up property seizures, according to RealtyTrac Inc.

Bank repossessions climbed 44 percent from May 2009 to 93,777, the Irvine, California-based data company said today in a statement. Foreclosure filings, including default and auction notices, rose about 1 percent to 322,920. One out of every 400 U.S. households received a filing.

“We’re nowhere near out of the woods,” Rick Sharga, RealtyTrac’s senior vice president for marketing, said in a telephone interview. “We’re likely to set a quarterly record for home seizures if June is anything like May.”

Lenders are completing the “inevitable progression” of taking properties from homeowners who stopped paying, Sharga said. He predicted last month that another 5 million delinquent mortgages will end in foreclosure in addition to properties that had already been repossessed.

Almost 3.1 million properties have been seized by banks since April 2005, Daren Blomquist, RealtyTrac’s marketing communications manager, said in an interview today.

Even the New York Times knows why;

The Obama administration’s $75 billion program to protect homeowners from foreclosure has been widely pronounced a disappointment, and some economists and real estate experts now contend it has done more harm than good.

Since President Obama announced the program in February, it has lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes.

As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.

Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system.

If the New York Times gets that, you have to assume the President and his team see it too.If they are planning on the ostrich defense (head in the sand) then they are in big trouble come November.  But I think they may actually be craftier than that.  Their approach to the growing problem will be to kick the problem a few more months down the road to get past the election cycle.  But that's going to cost money and I'm not sure Congress has an appetite to help people in over their heads with more tax payer dollars.  The administration might be willing to continue along the ideological route to it's goals (apparently minus ideologically the impure Rahm Emmanuel) but Congress seems much less likely to be on-board for more spending.