Owning a home used to be the American Dream.
When we were young, just married and thinking about starting a family, putting together money for a down payment for a home was at the top of the list.
Now that dream is an nightmare for too many Americans as more and more face foreclosure and plans to allow homeowners to renegotiate mortgages to lower payments are stalled by paperwork backlogs and home prices that continue to fall.
Many Americans now owe more than their home is worth. Hundreds of thousands of homes sit empty — decaying, foreclosed shells with no buyers and a questionable future. Another million or so homeowners are seriously delinquent in their mortgages and could face foreclosure this year.
So much for the dream.
The collapse of the housing market is generally blamed for the current recession that grips America and the world. Too many questionable loans put homeowners into homes they couldn’t afford. Mortgage brokers put together packages of "no document" loans, often financing homes for more than their face value from the start.
Now many Americans walk away from their dream home, knowing they can’t afford to live there. To make matters worse, the scam artists have moved in, preying on those in trouble.
Even with the Obama administration’s loan modification and refinancing programs moving forward, the end of the foreclosure glut is not around the corner, a panel of government officials and consumer advocates told attendees of the recent National Assn. of Real Estate Editors conference.
Among the factors slowing progress are loan servicers still gearing up for the task, the recession, re-defaults and for-profit foreclosure prevention firms handing out misinformation.
With about three-quarters of mortgage servicers onboard, the loan modification program "is not performing up to expectations yet," Deputy Treasury Secretary Seth Wheeler said. About 150,000 trial modifications have been completed and, as servicers work to beef up their staffing and training, tens of thousands are in the works. The goal is to rework 9 million mortgages over the next several months, Wheeler said.
Economic conditions, however, are working against refinancing, said John Walsh, chief of staff of the Office of the Comptroller of the Currency.
"The continued decline in home prices of course makes refinancing more difficult," Walsh said. And unemployment is "only beginning to take its toll now."
The agency is tracking data and will report on progress at the end of the month. A 52% failure rate was reported in the fall for mortgage modifications.
David Berenbaum, executive vice president of the National Community Reinvestment Coalition, called on the media to stop running ads by "for-profit racketeers who charge on average $2,900 to consumers for poor advice." Examples he cited included counsel to not pay the mortgage or contact the service provider. HUD-approved counselors will help consumers for free.
Many need help now but the federal programs designed to help them aren’t working.
A growing number of American homeowners are falling into financial limbo: They’re badly behind on payments, but their banks have not yet foreclosed.
The backlog of seriously delinquent mortgages, which so far affects about 1 million borrowers, is a shadow over hopes for a rebound in the nation’s housing markets. It masks the full extent of the foreclosure crisis and threatens to depress prices even further just as some parts of the country are hinting at recovery. For lenders, it could portend even more financial losses tied to the mortgage meltdown.
"It just means foreclosure rates are going to keep rising," said Patrick Newport, an economist for IHS Global Insight.
Rising mortgage delinquencies were at the root of the recession, and many economists say an economic recovery will be difficult until the housing market recovers and home prices stabilize.
And even though a delayed foreclosure can be a blessing for some troubled homeowners, for others, it simply prolongs the financial distress, leaving them on the hook for the condition of the property. Even if they move out, they cannot move on.
"I have even begged them for a foreclosure," delinquent mortgage-holder Charlotte Jensen said. When she realized she couldn’t save her Glen Allen home last year, she filed for bankruptcy, packed up her family and moved out. Nearly a year later, Bank of America has yet to take back the home.
During the first quarter of this year, the share of all homeowners seriously delinquent on their mortgage but not yet facing foreclosure more than doubled to 3.04 percent, or about $227 billion in loans. There was a total of $97 billion in such loans during the same period in 2008, according to Inside Mortgage Finance. In more prosperous times, the rate is much lower — it was less than 1 percent in the first quarter of 2007, according to the industry publication.
Some of the backlog reflects the inability of lenders to keep up with the swelling rolls of delinquent properties.
Meanwhile, the federal government racks up enormous deficits pumping money into a failing economy and we still do not see results. America’s largest auto company is in bankruptcy. Another now belongs to Italian automaker Fiat. Republican governors, determined to see a Democratic President’s economic stimulus plan fail, refuse federal funds even if it means bankrupting their state governments.
Once again, partisan politics replaces the need for unity in a time of crisis. If this continues, the one-time American Dream will be far more than a nightmare.
It will be the epitaph on the tombstone of this nation.