FORECLOSURE » Prevent Foreclosures

The housing market suffered a blow in 2010 as the result of a major drop in the sales of previously-owned homes. According to the National Association of Realtors, existing home sales reach a disappointing 13-year low in 2010. Unfortunately, there is very little hope for improvement in the coming years.

High Unemployment, Foreclosures and Too Many Houses to Blame

In order to help struggling homeowners have a chance at avoiding foreclosure, the Obama administration is looking to restructure the way mortgage servicers are compensated. The administration believes making this change could help make it easier for servicers to modify mortgage loan terms for those about to lose their homes.

Existing System Provides Little Incentive for Servicers

Americans receiving foreclosure notices reached a record high of 2.9 million in 2010, according to new data from RealtyTrac. The company, which keeps the largest database of foreclosures, auction and bank-owned homes in the country, revealed more than 1 million people lost their homes last year, even with notices leveling off at the end of the year.

Filings Not Much Higher than 2009

Foreclosed homes saw an increase over the summer due to a drop in the number people receiving assistance in lowering their monthly mortgage payments, according to a new report from the Office of the Comptroller of the Currency and Office of Thrift Supervision. The report, released on Wednesday, revealed the number of homeowners receiving help in the third quarter dropped 17 percent from the previous quarter and a 32 percent from the same period in the prior year.

Foreclosures Rose 11.2 Percent

While 2010 marked the end to a very fascinating decade, the year itself did have its own shares of ups and downs. Looking back at some of the biggest 2010 stories, you’d see the economy and stock market carried over some momentum from last year’s recovery effort, and the recession was declared officially over. On the other hand, unemployment still hovered around 10 percent, the housing market failed to bounce back and Americans are slowly starting to spend again.

There were also major cultural events that didn’t really a direct personal finance impact on 2010, but did take hold of the nation’s attention. You may remember the NBC late night fiasco where Jay Leno and Conan O’Brien tussled over The Tonight Show. There was Avatar, which led to a flood of 3-D movies. The Apple iPad was introduced, and Larry King abdicated his throne on CNN.

Mortgage servicer Wells Fargo is providing loan modifications to approximately 15,000 homeowners and payouts to thousands more as a part of a settlement with California’s attorney general. In an announcement made on Monday, Attorney General Jerry Brown said the mortgage servicer has agreed to provide $2 billion worth of modifications and an additional $32 million to borrowers to who lost their homes to foreclosure.

Modifications and Settlements for Homeowners with “Pick-a-Pay” Loans

A jump in both U.S. foreclosures and home price drops is expected for 2011, according to a new Market Watch report. The good news, however, is that some expect the foreclosure rate to finally peak and begin to drop next year.

Foreclosures and Decrease in Home Price to Jump

In an interview with Market Watch, Rick Sharga, a senior vice president for RealtyTrack (an online marketplace for foreclosure properties) revealed his belief that not only will foreclosures increase in 2011, but home prices will drop even further.

The number of homes facing foreclosure or recently repossessed by lenders–also known as shadow inventory– jumped 10 percent during the past year. This in turn extended the current rate of home sales to an eight-month supply.

2.1 Million Homes in Inventory

According to the report, issued by CoreLogic, a financial information provider, there were 2.1 million homes in the officially uncounted inventory as of the end of August. This is a major jump from the 1.9 million homes listed in this inventory 12 months prior.

The problem with this much inventory is that the extra supply will most likely continue to decrease home prices and make it that much more difficult for homeowners to sell at prices anywhere near what they originally paid. In addition, the housing market as a whole will have that much longer to recover.

The tens of thousands of homeowners with foreclosure proceedings halted and probed by investigators may be facing home loan modification instead. If 50 state attorney generals find that major mortgage loan servicers have robo-signed the documents to sidestep submitting valid foreclosure papers, homeowners could catch a break on their mortgages and servicers could be in a whole heap of trouble.

Robo-Signing Under a Microscope

FHA guideline changes have make obtaining mortgage loans much more difficult in the past few years and it’s possible this may have contributed to a huge drop in mortgage applications. Many people are already a bit fearful of taking on new mortgages thanks to their own financial instability, but those who may feel that they’re ready may be getting turned down by lenders, further contributing to the weakened state of the housing market.

FHA and Lenders Tighten the Reins