Livinglies's Weblog

Anyone reading this site will not find it surprising that the number of foreclosures is rising by unprecedented numbers at unprecedented rates. At the same time, the FBI is getting involved claiming mortgage fraud is on the rise at well.

Let’s tell it like it is: Until this scam was perpetrated by Wall Street on the American Public, the cases where people overstated their income or the value fo the house was manipulated were rarely far out of range of reality. It is only now that the major fraud of inflating stated fair market value by 40% or more that the FBI and lenders are looking for ways they can deflect attention to the cases where the borrowers actual numbers don’t match up to the original loan documentation.

Lenders should be careful what they wish for however. And the FBI is only doing a small part of its job, if it does not investigate the “fraud” of both lender and borrower. In most cases, the fraud case against the lender is more complex but far more egregious than anything the borrower did, all of which was well known to the lender,the mortgage broker and everyone else at the closing who didn’t care about anything except getting the borrower’s signature on those papers. 

Nobody cared and the borrower was clueless as to what was really happening. The lender was “underwriting” the loan knowing they had no risk. The mortgage broker knew he had steered the borrower into the loan that would give him the greatest commission and fees — the yield spread premium payments jumped geometrically during this period. The real estate brokers wanted the closing over because the higher the price, the greater their commission, and they wanted “closure” before the inevitable happened — a correction to real fair market values. The appraiser knew that he had to come in a little higher than the contract amount or he wouldn’t be hired again. And so on.

LOS ANGELES – More U.S. homeowners fell behind on mortgage payments last month, driving the number of homes facing foreclosure up 65 percent versus the same month last year and contributing to a deepening slide in home values, a research company said Tuesday.

Nationwide, 243,353 homes received at least one foreclosure-related filing in April, up 65 percent from 147,708 in the same month last year and up 4 percent since March, RealtyTrac Inc. said.

Nevada, Arizona, California and Florida were among the hardest hit states, with metropolitan areas in California and Florida accounting for nine of the top 10 areas with the highest rate of foreclosure, the company said.

Irvine, Calif.-based RealtyTrac monitors default notices, auction sale notices and bank repossessions.

One in every 519 U.S. households received a foreclosure filing in April. Foreclosure filings increased from a year earlier in all but eight states.

The combination of weak housing sales, falling home values, tighter mortgage lending criteria and a slowing U.S. economy has left financially strapped homeowners with fewer options to avoid foreclosure. Many can’t find buyers or owe more than their home is worth and can’t get refinanced into an affordable loan.

Efforts by government and the mortgage industry to stem the tide of foreclosures aren’t keeping up with the rising number of troubled homeowners.

The April data show nearly half of the properties received an initial notice of default, suggesting many homes were new entrants to the foreclosure process.

“We’re still sitting at roughly the same percentage of loans handled in any way successfully as we were a year ago, and the volume (of foreclosure filings) still keeps going up,” said Rick Sharga, RealtyTrac’s vice president of marketing. “It’s apparent that what they’ve tried so far isn’t working.”

The U.S. House passed a bill last week that would offer government insurance on $300 billion in new mortgages to refinance loans for an estimated half-million borrowers facing foreclosure, particularly those who now owe more than their houses are worth because of declining values.

House lawmakers also passed a bill that would send $15 billion to states to buy and fix foreclosed homes.

Still, should the homeowner aid package clear the Senate, it faces a potential hurdle in the White House, which has threatened to veto the plan, arguing it’s too risky and amounts to a lender bailout.

Even if a legislative compromise is reached, it could come too late for homeowners with adjustable-rate mortgages scheduled to reset to higher rates this month and the next.

More than 1 million home foreclosures are forecast for 2008.

“It doesn’t look like the volume is going to slow down any time soon,” Sharga said.

More than 54,500 properties were repossessed by lenders nationwide in April. In all, about 2 percent of U.S. households were in some stage of foreclosure during the month, RealtyTrac said.

Still, as foreclosed properties pile up, they add to the inventory of homes on the market and can drag down home prices. The impact is felt mostly in regions where foreclosures are concentrated, such as Southern California, the Las Vegas area, South Florida and parts of Arizona.

Nevada posted the worst foreclosure rate in the nation, with one in every 146 households receiving a foreclosure-related notice last month, nearly four times the national rate.

The number of properties with a filing jumped 95 percent versus April last year but declined 5 percent from March.

California had the most properties facing foreclosure at 64,683, an increase of 112 percent from April 2007. The number of properties declined less than 1 percent from March.

The state posted the second-highest foreclosure rate in the country, with one in every 204 households receiving a foreclosure-related notice.

California metro areas accounted for six of the 10 U.S. metropolitan areas with the highest foreclosure rates, led by Merced, with one in every 66 households receiving a foreclosure notice.

Arizona had the third-highest foreclosure rate, with one in every 224 households reporting a foreclosure filing in April. A total of 11,620 homes reported at least one filing, up nearly 181 percent from a year earlier and up 26 percent from the previous month.

Like Las Vegas and inland regions in California, areas of Arizona saw a sharp run-up in speculator-driven home prices and new home construction during the housing boom.

Florida had 35,264 homes reporting at least one foreclosure filing last month, a 146 percent jump from a year earlier and a 17 percent hike from March. That translates into a foreclosure rate of one in every 242 households, the fourth-highest in the nation.

The other states among the 10 with the highest foreclosure rates in April were Colorado, Maryland, Georgia, Ohio, Michigan and Massachusetts.

Filed under: bubble, CDO, CORRUPTION, currency, education, Eviction, foreclosure, GTC | Honor, interest rates, Investor, Mortgage | Tagged: borrowers, foreclosures, fraud, lenders, mortgage brokers, underwriting |