WASHINGTON — More troubled homeowners are dropping out of the Obama administration's main foreclosure-relief program, which has been widely criticized for failing to help more people keep their homes.
The Treasury department said Wednesday that about 774,000 homeowners have dropped out as of last month. That's about 54 percent of the more than 1.4 million people who applied. And it's up from October, when approximately 756,000 had fallen out.
The program is intended to help those at risk of foreclosure by lowering their monthly payments. Borrowers start with lower payments on a trial basis. The program has struggled to convert them into permanent loan modifications.
Another 505,000 homeowners have secured lower payments permanently. That's about 35 percent of the number who enrolled on a trial basis, up slightly from October's reading.
However, the program reached more homeowners in November than in October. The number of new trial modifications increased to about 30,000, up from about 24,000 in October. And the number of trial modifications that turned permanent rose to about 31,000, up from about 26,000.
Foreclosure filings fell by 21 percent last month, their largest monthly decrease since 2005. However, the government warned that the decrease likely will be temporary. Lenders are expected to revise and resubmit paperwork in the coming months
Several major mortgage companies halted foreclosures this fall after acknowledging that they might have mishandled court papers.
Homeowners applying to the foreclosure-relief program say the program is a bureaucratic mess, with banks losing documents and failing to return phone calls. Banks blame homeowners for failing to submit needed paperwork.
Homeowners accepted into the program can receive interest rates as low as 2 percent for five years and can repay their loans over a longer period. Those who remain in the program see their monthly payments cut on average by about $500.
RealtyTrac has just reported that even though the volume of foreclosed homes plunged by 25% from Q2 to Q3 and 31% from Q2 of 2009, the discount on foreclosed homes has hit a five year high, as interest in even ultra bargain properties has collapsed following the expiration of the homebuyer tax credit, and confirming yesterday's bad Case Shiller (remember that one?) number. Per RealtyTrac: "foreclosure homes accounted for 25 percent of all U.S. residential sales in the third quarter of 2010 and that the average sales price of properties that sold while in some stage of foreclosure was more than 32 percent below the average sales price of properties not in the foreclosure process — up from a 26 percent discount in the previous quarter and a 29 percent discount in the third quarter of 2009." Yet despite the major price drop, buying interest has evaporated as nobody there is no longer any purchasing power left in the lower and middle sections of the housing market: "a total of 188,748 U.S. properties in some stage of foreclosure — default, scheduled for auction or bank-owned (REO) — sold to third parties in the third quarter, a decrease of 25 percent from the previous quarter and a decrease of nearly 31 percent from the third quarter of 2009. The average sales price of properties in some stage of foreclosure was $169,523, down 2.46 percent from the previous quarter and down 0.44 percent from the third quarter of 2009." And while the average price of non-foreclosed homes posted a slight uptick in Q3, the volume drop was even worse: "The average sales price of properties not in foreclosure was $249,721, up 6.42 percent from the previous quarter and up 4.36 percent from the third quarter of 2009. Sales volume of non-foreclosure properties decreased 29 percent from the previous quarter and nearly 31 percent from the third quarter of 2009."
More from RealtyTrac's Jim Saccacio:
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