As the government is trying hard to see that homeowners continue to remain in their houses, more strategic defaulters are walking away from their homes causing further rise in foreclosures. These walkers are underwater borrowers whose loans have become more costly than the fallen value of the properties.

As per the findings of Experian-Oliver Study, strategic defaulters increased 68 times in California from 2005 to 2008. During this time the median price of single-family units in California fell to $346,410 from $522,670 as pr the findings of California Association of Realtors. In other areas the increase in intentional defaulters trebled or went up by 18 times.

The study by Experian-Wyman noted that borrowers had sound credit ratings at the time of application for the mortgage. 50% of these types of borrowers are more likely to walk away from an underwater loan than others, even though they are able to pay the dues each month. The report has been based after studying 12 million loan takers.

None would default if the shortfall in the equity is below 10% of the total value of the property according to another study conducted by University of Chicago, Northwestern University and European University Institute. On the other hand 17% would default even if they were able to pay when the equity shortfall touched 50% less than the property value. It meant that the market price of a mortgaged property was much less than the amount of loan contracted.

There is something infectious about this walking away phenomenon. Borrowers who come to know that somebody else is doing the walking away trick are 82% more likely to repeat the act.

A worrying side to this strategic defaulting is that it now becoming socially acceptable. Joel Naroff of Naroff Economic Advisors said, “The most disturbing aspect of this is that it’s becoming acceptable to do. What does that mean down the road for housing and the economy if people are happy to walk away and destroy their credit? They’re saying, ‘Why pay a high amount if they can get something, even a rental, for less?’ ”

In reality one does not immediately move away after stopping payments. Foreclosure process takes a lot of time and this encourages the borrowers to continuing staying on the premises without paying anything in the form of rent, mortgage dues or even taxes.

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ForeclosureRepos.com offers the most valuable foreclosure information online! Find the best foreclosures by state using our database. Strategic Defaults are Leading to more Foreclosures in many States

It seems that a correct analysis has not been done about the forces acting behind the high default rates and modification failures. Even though foreclosure cases are costly and may invite court sanctions the lenders are proceeding with the same. Equally baffling is the question as to why a lender would advance a loan and then lose the very document by which it can take back the property kept as security. Thus it seems that financial bodies have various other ways of making money.

The answers to these questions will go to the very core of the question of America’s vanishing prosperity. Wall Street was able to sell the debts as investments by re-categorizing liabilities to be assets. Since the debt is not important any type of debt would serve the purpose. The loan is sold and then a bet made about it falling into default. This game is called Credit Default Swap or CDS.

The CDS is type of derivative that is most extensively traded. These make up the largest financial bazaar in the world. These CDS are popularly used only for the purpose of spiking profits by betting on the changes in the market. It is a matter of gambling.

As per data provided by Bank of International Settlements or BIS, the total derivate status of banks swelled to $516 trillion in 2007 from $100 trillion in 2002 – calculating to more than 500% in 5 years. Recently BIS stated that the trade in derivatives has crossed 1,000 trillion dollars. The GDP of all the nations of the globe put together is a mere 60 trillion dollars!

In gambling the players can bet as much as they like. They may bet on money that is not in their pockets and this where the risk increases. There is no instrument to regulate these and in the balance sheets no liabilities are shown.

The derivative is a financial tool whose worth is not its own value but derived from elsewhere – commodities, equities, bonds, rates of exchange or interest, stock market, inflation and even weather indexes etc. Basically these are bets. One can hedge bets by gambling on something owned will spike by placing a side bet that will fall.

The defaults in mortgages did not generate the crisis because mortgage securities equate to only $7 trillion of the jumbo derivative market.

A superficial line of thinking pinned the blame on the sub-prime loans. The real culprit is the manner in which Wall Street makes dollars out of thin air. One has to track the money to get to the root. It was not the consumer who was behind this crisis but the greed of Wall Street in making these derivatives.

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ForeclosureRepos.com offers the most valuable foreclosure information online! Find the best foreclosures by state using our database. Foreclosures – Causes for Huge Numbers and Failures of Modification

Many towns like Lakeville and Burnsville do not have the resources to see to the many vacant foreclosed houses that are not only eyesores but also posing health problems to an extreme point.

The number of vacant houses in Dakota County has been rising while the number of desks lying empty in the city administrative offices also increasing. Both combined are casting a grim shadow over the localities that were once proud of house ownership.

The recession has worsened the foreclosure situation with more properties lying vacant and crumbling. Simultaneously the budgets of the cities have been dangerously curtailed. Many of them do not have the human or other resources to tackle this problem. Dave Olson of Lakeville Community and Economic Development said, “It’s a challenge. On top of everything else, [attending to the homes] is not revenue generating.”

In Burnsville Ron Anderson has been an inspector of properties from 1999. He said that his section has been paralyzed with this sharp increase in foreclosed units. Earlier this year an ordinance was issued by the city addressing the employees of the department to attend to the issues arising out of foreclosed houses.

The cost would be realized from special assessments made on the properties. But when the budget caused the staff to be reduced down from two full-time and one part-time worker to one inspector the workload became unmanageable. The ordinance came to be rescinded. In Lakeville the staff has also come down to one inspector.

Olson informed that his section is reliant on a list of sheriff’s sale given by the Dakota County Community Development Agency each month. In a sheriff’s sale the county takes over charge of selling the unit. Other troubled homes are disposed of through short sale with the lender agreeing to the borrower selling the unit for less than the money owed to it.

Till September 1,349 Sheriff’s sales have been noted. In 2008 the number was 2,063. In Apple Valley, Eagan, Lakeville and Burnsville the numbers are around 300 – it being modestly lower than the previous year.

The tendency all across the country has been for the states and the local administration to take up the cudgels themselves in tackling the problem of abandoned foreclosed houses. But with revenue collection being down there are budget constraints making the task difficult. The abandoned houses are attracting crime and disease.

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ForeclosureRepos.com offers the most valuable foreclosure information online! Find the best foreclosures by state using our database. Foreclosures are Compelling Cities to Become Reluctant Caretakers

The banks have been given generously from bailout funds because of the idea that these financial entities are too big to fail. But with nothing being done to stop foreclosures the idea seems to be dumb.

Following the crisis that started in 2007 many financial bodies managed to survive thanks to government intervention. Large financial houses are still running because of the generosity of tax payers and an entire generation will have to pay for their continuing to be alive.

The failure of these banks was largely due to mismanagement and moving away from the core of their normal activities. Otherwise the various banks had very little in common – investment banks, retail banks, diversified banks, specialized lenders and even insurers. These various institutions are matched by equally diversified regulators – in fact the number of the latter actually exceeds the latter.

Some are of the opinion that in future more stringent regulation both at the national and international linked level will deter such collapses. Coordinated efforts would be able to protect the interests of the individuals and the nation. A situation would then never arise when the public purse would have to be stretched to this extent. It is like believing that given wings pigs will fly!

In other words it is impossible for the regulators to stop failure of business. The basic thing for a thriving market is good business leads to prosperity and bad business leads to failure. In a sense the failure of Lehman was a victory of capitalism. It was badly administered, it had on its staff greedy and excessively paid personnel and the services it gave were of marginal value to society. It undertook risks that did not succeed and so it went bang. That is how capitalist economy operates.

Right now the problem is how to bring about more stability while erasing from the psyche this dictum of some being “too big to fail”. Also it is necessary to take a more realistic view of regulation. The idea of institutions being “too big to fail” makes the taxpayer vulnerable to limitless liabilities that do not have any controls. Private risk taking of these institutions has to be reined in.

The entire system is such a vast interconnected network that failure might lead to breakdowns in electricity supply, oil refineries, petrol-chemical plants and also nuclear power stations. Only robust systems can uphold this vast network. If the failure of individual parts leads to destruction of the whole then the whole system has to be overhauled.

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ForeclosureRepos.com offers the most valuable foreclosure information online! Find the best foreclosures by state using our database. The Idea of Banks being too Big to Fail is too Dumb to Stop Foreclosures

Todd Shirley and Victor Hernandez of Skyline Properties and Ballard Realty are real estate agents. Taking the cue from their peers in California and Florida they have introduced bus tours to make foreclosure hunting easier for potential buyers.

Foreclosures have been increasing and so too a demand for buying foreclosed units. Twice a month the enterprising duo take around investors, developers and enthusiastic buyers on bus tours through Seattle to view the homes up for sale. The tour is free. The pair talks to their clients about the condition of the market and give handouts detailing the condition of each house. Sometimes doughnuts and bottled water are also offered.

Shirley has long been helping the investors and hunters to make the best deals from foreclosed units. With demand having shot up the idea of bus tours popped up. It seemed to make more sense than taking out the buyers in groups of three or four.

From the third quarter of 2008 to the third quarter of this year foreclosure activity has shot up by 37.8% in the Seattle-Tacoma-Bellevue region according to RealtyTrac.

Hernandez has experience as a contractor knowing all about the real estate market. The duo shares their expertise with the potential buyers keeping in view remodeling with an eye on the environment.

In the middle of last October there were a dozen on board their bus tour named Property Dog, viewing houses that were poles apart in all respects from a impeccable house boat to a gutted one of 1906. There is hardly anything glamorous about the tour – the showpieces are vacant, cold and dirty. Many have had their utilities shut off and the pipes emptied to stop freezing. The agents take the clients down to the dingy basements with flashlights and warnings. Shirley reminds them “Keep in mind that these homes have typically been empty for a minimum of 180 days due to the length of the foreclosure process.”

But despite the trimmings the homes generate interest among the various types of potential buyers on board the bus. Two factors run common to all the units – low price and bank ownership.

Shirley calculates that something below 2% in the Puget Sound region is included in this group but the variety keeps on widening with nearly all the neighbourhoods having something to offer within the price range.

Hernandez noted that some of the houses are ideal for conversion to use of solar power partly because of being located atop hills and the particular home’s location.

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ForeclosureRepos.com offers the most valuable foreclosure information online! Find the best foreclosures by state using our database. Agent Introduces Bus Tours to Make Foreclosure Hunting Easier

The census count is facing difficulties because of foreclosures. Many families have been evicted from their homes and camping with friends, relatives, cars or shelters. Robert Groves the director of Census Bureau has expressed his concern.

He said that some questionnaires would be mailed in 2010 and these will arrive at many empty houses. This will compel the census workers to conduct door to door surveys to find out who lives where; all this mean extra funds.

Speaking to reporters Groves said, “One absolutely unambiguous impact of the foreclosures is there’s going to be more people knocking on doors. It’s going to be more expensive to do that.”

Waves of unemployment have left over 13% of those with a mortgage to lag behind in their monthly payments or they are already in foreclosure according to report released by Mortgage Bankers Association. The worst affected states are Arizona, California, Florida and Nevada. Some experts feel that another wave of foreclosure would hit the country in 2010. The moratorium that many lenders had placed on foreclosures would come to an end by then causing this upsurge.

Groves explained that the census personnel would have to concentrate on locating those evictees who have moved in with relatives to tide over the bad time. Many continue to nurse the hope that this crisis is only temporary, But whatever their status it is vital that they be included in the census count in the following spring.

Groves also reiterated that his officials are giving due attention to the counting of the those who have newly become homeless like the families who previously belonged to the middle class category but have now been pulled down by the recession.

The Census Bureau contends that by posting replacement forms and the using of a shorter questionnaire together with dispatching of bilingual forms in the Spanish speaking localities these problems would be addressed. New hands have been hired for areas where counting is difficult. However Groves has his doubts as to whether these steps will be sufficient to achieve the goal of getting back 67% response from the questionnaires that are being mailed. In 2000 this had been rate of answer. He said “I think it is a harder job for us – this census.”

The census of 2010 would also be more expensive. Since the last decade the costs have doubled – if not more than that. It would now entail approximately $14.7 billion.

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ForeclosureRepos.com offers the most valuable foreclosure information online! Find the best foreclosures by state using our database. Census Count Facing Difficulties Because of Foreclosures

Will 2010 spell better times for the housing industry? One does not know. As of now, the US is perhaps going through one of the most critical phases.

Unemployment is at its peak and people are faltering on mortgage payments. Hence, foreclosures have become common. The California Association of Realtors observes that 2010 will not be any different. Home prices will go up slightly and activity will be robust at lower ranges.

However, this is dependant on one major factor: the number of foreclosures will be more or less static. They won’t increase by leaps and bounds.

The association’s deputy chief economist, Robert Kleinhenz, says that the housing industry will be revived only if the volume of distressed properties does not increase. The revival of the real estate sector is also dependant on the unemployment scenario.

The Federal government has also given a stimulus package to help revive the housing industry. With this stimulus money, loans of homeowners will be modified. The government has also announced a tax credit of $8,000 to people who are buying homes for the first time.

However, that credit support will be taken off by November 30. Now the Association wants the credit line to be extended beyond November. The facility should be made available to all home buyers, argues the Association.

Kleinhenz says that it is very difficult to predict the number of foreclosures. Defaults have come thick and fast in the second and first half of the year but the number of foreclosures has remained steady. There has not been a significant increase in foreclosures.

Banks do not have a single formula to address defaulters. Some loans are being modified by them and not others. However, banks are not taking over the properties of defaulters. This could be because banks do not want to flood the market with foreclosed properties.

The founder of ForeclosureRadar, Sean O’Toole says that banks are hesitant to foreclose properties for one reason – they do not want to drive down property values further. Prices are low already and coupled with the low interest, this is the ideal time for buyers. In fact, bidding wars have become common which is definitely helping to stabilize prices further. In some areas, home prices have even increased.

The economists feel that California home prices will increase 3.3 per cent next year. The market will remain active in 2010 and gradually the real estate sector will improve.

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ForeclosureRepos.com offers the most valuable foreclosure information online! Find the best foreclosures by state using our database. Foreclosures to Stay, Slight Improvement in Real Estate in 2010

The city officials helped by volunteers have taken a positive approach to fight the blight of foreclosures. The crisis has left behind the curse of vacant houses haunted by fires and vagrants. The helpers are trimming lawns, boarding the doors and windows and fixing damaged fences. Some are cleaning out rubbish and then billing the owners for the labour.

City ordinances have given the push to this work. In most of the states these measures are being taken to tackle the menace of vacant foreclosed properties said James Brooks of National League of Cities. He is the programme director for community development. If these steps were not taken irreversible damage would have been done to the improvements that had been after decades of planning and expenditure.

The cities are attempting to get the financial entities to get involved but meanwhile nobody is sitting back – the public works directors has rushed in with a lawn mower. Brooks said, “Yes - Cities are doing that all over the place because, in some cases, they have to.”

The code enforcement officers in Cape Coral are now doubling up as managers of properties said Frank Cassidy, division manager for code compliance. From January 2007 when foreclosure properties were being tracked here the city staff has trimmed 5,234 lawns in abandoned houses. In 2008 Cape Coral realized $414,000 from liens placed on these foreclosed units. Cassidy commented “We’ve had to change our tactics to deal with violations.”

Over 350 cities have issued ordnances that make it mandatory for banks and other lenders to see to the maintenance of the houses they have taken over. If they fail to comply, fines are imposed informed Diane Roman Fusco speaking for Safeguard Properties. Many of the cities have ruled that the owners of vacant properties would have to register themselves with the authorities to enable proper tracking.

One of the pioneers in this line of action was Chula Vista, in the state of California. It passed rules and imposed fines touching $1,000 for dereliction said Dough Leeper, the division manager of code enforcement of Chula Vista. If the city is compelled to mend any fence or clear up a pool the owners are generally charged $128 per hours. Leeper said “It’s much cheaper for them to do it themselves.” Chula Vista has imposed $1.5 million as fines and has been able to realize $600,000 since the beginning of the programme.

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ForeclosureRepos.com offers the most valuable foreclosure information online! Find the best foreclosures by state using our database. City Officials and Volunteers are Fighting the Blight of Foreclosures

Noted journalist Alyssa Katz has written a comprehensive history of ownership of residential houses in USA – Our Lot: How Real Estate Came Down to Own Us. In a talk with Paul Solman, she has discussed the root cause of the foreclosure crisis.

Katz says that it is very difficult to categorically state when the foreclosures will reach its peak. According to Mortgage Bankers Association and others it will not happen till the middle of 2010. This prediction is founded on some preconceived notions about joblessness, real estate rates and adjustments made on ARMs. But of equal importance is how much further the pain in the economy would continue. If jobs continue to vanish and hours of work cut down then borrowers will not be able to make mortgage payments.

Many have been blaming the borrowers for contracting loans they could not possible run. But why were the loans peddled in the first place to these types of borrowers who were not conversant with the nuances of the mortgage? It was like peddling lies. The mortgage company peddled the loan by fixing up lawyer and an appraiser all from on-stop shop. There were no kind of policing and checks. Nobody wanted to find out if the capacity of the buyer enabled repayment. All that was done was to din into the heads of the borrowers that purchasing a house was good investment. Behind it all was the erroneous but firm belief that property prices could never, never go down!

Most of the borrowers at the time of the housing boom were happily surprised that the mortgage companies were advancing loans without a tweak. In low-income neighbourhoods the discriminated underdogs were overwhelmed by the well-dressed business community bending down to smart talk them into deals. Till few years ago the banks had made clear lines that they would not loan money in these areas. This sudden U turn obviously had some deep self interests involved.

Many mortgage holders are feeling that they have been victimized by well orchestrated scams. It is surprising that no reference has been made to the part played by the Community Reinvestment Act of 1977, passed during the time of Carter. Katz explained that the CRA was meant apply only to depository institutions and to federally controlled banks. The Act tells them to respond to the loan requirements of the people of the locality where they hold the deposits. It meant that the financial entities would have to grant responsible loans and not irresponsible ones in huge numbers to those who would never be able to repay.

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ForeclosureRepos.com offers the most valuable foreclosure information online! Find the best foreclosures by state using our database. The Root Causes of the Foreclosure Crisis as Seen Through the Eyes of Alyssa Katz

It is vital to follow the right path after facing foreclosure. Recovery can be made by swift action even after surrendering the house to foreclosure. One has not only to survive but also to thrive, said Howard Dvorkin of Consolidated Credit Counseling Services of Fort Lauderdale.

One can take off smoothly if action is taken quickly starting right from the moment of receiving the first notice saying that the bank is going to take over the property. He said, “If you’re not paying your mortgage, chances are you have extra money. Make sure you’re sticking it somewhere so you can get housing after you get the eviction notice.”

It is difficult to find rental accommodation through a rental company without a good credit card but there may be private landlords who would be more amenable. The individual landlord might be willing to take a chance by asking for an extra deposit or make another family member cosign the lease.

Freddie Mac has a programme – REO Rental Initiative that might be of help. It permits the former owners of foreclosed houses to continue to stay on as tenants in the same houses that have been repossessed by Freddie Mac. The information is available on the Internet at www.freddiemac.com. In the search box one has to type in REO Rental Initiative.

Dvorkin offered some extra proposals laced with warnings about getting back on one’s feet after the foreclosure trauma. One should introspect and look inwards trying to find out what brought about this situation. This critical self analysis will prevent a repeat occurring.

Secondly one should learn to budget – balance expenses with expenditure. Here again discipline is required to cut down on avoidable expenses. Here again there is help on the Internet by clicking on consolidatedcredit.org.

Thirdly from now on one should try not to incur heavy bills and pay them off whenever these come. This will greatly help in repairing the damage done.

Dvorkin said, “There are lenders who will give you money [after a foreclosure]. Within a month they’re offering you car loans and new credit cards. But if you ended up in foreclosure because you couldn’t control your spending, consider whether you’ll really have a sudden ability to rein that in.”

Credit damage can be repaired by making use of secured credit cards and small loans. He explained, “Over time, once you show a good record of doing that, the bank will extend you some additional credit. That is reported to the credit bureau.”

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ForeclosureRepos.com offers the most valuable foreclosure information online! Find the best foreclosures by state using our database. Following the Right Path after the Foreclosure Trauma is Vital