While many people believe practically all foreclosures are the result of greedy borrowers who bought more than they could afford or proactively lied on their mortgage applications, according to a report by NeighborWorks, the loss of a job or reduced income is now the leading cause of foreclosures.

The organization, which administers the National Foreclosure Mitigation Counseling (NFMC) Program, said 54% of homeowners who received counseling via the program reported reduced or loss income as the primary driver of foreclosure.

“For the last year this nation has witnessed the highest unemployment rate and the largest number of job losses in over a generation,” said Ken Wade, CEO of NeighborWorks America.  “Our report proves what many already believed to be true – no longer are mortgage payment increases, or even health issues or divorce, cited as the top reason homeowners are facing foreclosure.”

Loss of income was cited as the top reason for foreclosure by 41 percent of homeowners in the October 2008 report, 45 percent in the February 2009 report, and 49 percent in the June 2009 report.

In our office at Home Solution Counselors a large number of clients report the same thing…loss of job or reduced hours.  While divorce is another driver which inherently reduces income the unemployment rate rising over the last year, it should be no surprise that loss of income is now the leading reason countless homeowners are facing foreclosure

If you or someone you know if facing a foreclosure or struggling to make ends meet with their mortgage payment please have them seek help early.  Texas foreclosure laws and procedures are not only quick but unforgiving.

-          The Bank Slayer

Finally they fessed up!  While Neil Garfield refers to mortgage servicers and trustees as pretender lenders. The U.S. Treasury has been playing pretend for months as well and final conceded that the Home Affordable Modification Program (“HAMP”) is a dud. The 10-month-old program is going nowhere, said the Treasury, because big institutions charged with implementing it are dragging their feet. Like this is a surprise?? Imagine how much “better” it will be after these banks pay off their government bailout money and are out from under the watchful eye of Uncle Sam.

After blowing through billions of our tax dollars to prop up the banks, the Obama administration rolled out the $75 billion loan modification plan to show its support for beleaguered homeowners. But it hasn’t worked as expected. Really? Are you kidding me? Is anyone surprised? Please show me the government programs that are run efficiently and effectively!!

Since President Obama announced this program and its ability to save 9 million homeowners our trusted banking partners have completed less than 2,000 permanent modifications according to government audits. To boot, 14.4% of all mortgage borrowers are in default and barreling towards foreclosure.

Additionally, Laurie Goodman, senior managing director at Amherst Securities Group says her research shows that 70 percent of modifications involving only interest rate cuts, rather than reductions in the principal borrowers owe, have failed after 12 months.

Kudos again to Gretchen Morgenson at the New York Times for a great article on HAMP.

- The Bank Slayer

Go figure.  FHA borrowers are defaulting at a 30% faster rate than non-FHA borrowers.  Shocking!

Since the FHA only requires a 3.5% down payment and the seller can chip in 3-6%, home buyers can move into a home for…drum roll please… all together now… Zip, Nada, Zero!   Not much skin in the game huh?

The FHA is facing mounting losses but officials claim they won’t need a cash infusion unless the economy slips back into a recession.  The FHA’s reserves for defaults has dropped to $3.6 billion.  But it’s OK because at least they know they have a problem; Housing Secretary Shaun Donovan says, “It is critical that going forward, we build that cushion back up.”

Ok, riddle me this and see if our officials are smarter than a 5^th grader.  Currently, there are $685+ billion in outstanding loans and 17% of these loans are in default.  How much money does the FHA need to have in the drawer to cover their losses?  Survey says…$89 billion, ding ding ding you win!  Wait didn’t they say they only have $3.6 billion.  Houston, we have a problem.

What do you think we should do?!?

- The Bank Slayer