The trouble with foreclosure plans is precisely that – everybody would want to have a bite of the cake. As more foreclosure prevention schemes come into being, the big dilemma is that there may be no way to distinguish those who need to have their loans readjusted from those who just want to avail of the benefits.

Both the Federal Housing Finance Agency (FHFA) and the Federal Deposit Insurance Corporation (FDIC) have proposed anti-foreclosure programs that allow mortgages to be modified. Both have also placed certain eligibility requirements for borrowers to avail of the benefits. For instance, the FHFA requires homeowners to be able to demonstrate a change in financial situation or some form of hardship.

However, these can be interpreted very broadly to mean a simple job change or more medical bills. While programs restrict eligibility, they will not stem foreclosures.

In fact, these programs may even incite homeowners to skip payments to qualify for a loan reduction. Though missed payments may make it difficult for homeowners to obtain future credit, it is a still tempting proposition especially to those who have little debt, or to those who have no plans in making future loans.

Presently, foreclosures are on the rise, with mortgage companies not knowing how to deal with the deteriorating houses.

Meanwhile, private citizens seem to have a better idea when it comes to solving the foreclosure problem. Barnes and McWhorter, for instance, buy packages of houses from lenders, and sell them to investors in smaller packages. The house is then sold for a slightly lower rate than the standard neighborhood rent.

With this scheme, houses are more easily sold and are saved from deteriorating. It would do well for the current administration to take a hint or two from the Detroit pair.

An estimated 12,681 properties in the state are undergoing foreclosure filings that include bank repossessions, default notices and auction sales notices. The numbers represent a 31 percent rise from the 2007 period.

Illinois is the ninth state in the U.S. with the highest number of abandoned homes.

The hardest hit area in Illinois is Cook County with 6,885 foreclosure filings in October. The numbers are more than 50 percent of the overall filings in the state.

Will County received 990 filings while 807 properties were filed in DuPage County.

RealtyTrac Chief Executive Officer James Saccacio said that a drastic drop in new filings has been noted after a law has been passed requiring lenders to delay foreclosure process.

He said that while the goal of the legislation, which is to abate foreclosures, is admirable, an integrated approach such as loan modification is still needed to fully address the problem.

Meanwhile, some realtors in Chicago are dealing with homeowners on short sales. This is the stage when owners are forced to put their homes on the market for less than the total value of the property.

Realtors help homeowners who are already behind their mortgage payments negotiate with banks for the sale of the property. After the agreement to sell the property has been made with banks, realtors will list the said property. This approach gives homeowners a better chance to buy a new home.

Brian Ortiz, a RE/MAX realtor, said that banks have been open and responsive to short sales. He adds that banks are hiring additional employees to address the turnaround problem of short sales.

On the other hand, the John D. and Catherine T. MacArthur Foundation will be investing $68 million in low-interest loans and grants to help alleviate foreclosure problem in Chicago.

According to MDA DataQuick, a real estate monitoring firm, median home prices in the state in September declined by 1.8 percent.

Data showed that nearly half of the decline in the home median price was attributed to depreciation and the other 50 percent by a change in sales and the way distressed properties are financed.

California is seeing a high foreclosure rate in counties of Merced, Modesto, San Bernardino, Riverside and Stockton.

Meanwhile, the surge in foreclosures has encouraged Californians to take advantage of the situation by purchasing forfeited properties at bargain prices. October home sales increased by almost 64 percent to 42,293 from last year.

In San Francisco Bay, about 45 percent of preowned houses sold in October had been in some form of foreclosure proceedings. Home sales activity in the county increased by 39 percent from last year’s 7,613 and about 5 percent from last month.

Median home prices declined by 12.1 percent from last year to $699,000. and home sales dived by 21 percent. Furthermore, the October median price dropped 41 percent from the $631, 000 value in the same month a year ago.

The median home price in San Francisco Bay dropped by 6.3 percent in September from the peak value of $665,000, for the same period last year. Contra Costa County, on the other hand, experienced a dropped in median prices by over 46 percent from last year to $285,000. Home sales in Contra Costa increased by almost 87 percent.

Southern California reported a dropped in median price by 33 percent in October and a drastic increased in home sales by 67 percent. About 51 percent of the total transactions in Southern California’s six counties are foreclosure resales.

She was not looking for a house to buy then, but when she saw a listing of foreclosure property near her parents’ house, Coblentz decided to give it a try.

Now, the house Coblentz bought has been appraised for $88,000. She is currently spending a total of $570 monthly for house payment, taxes and insurance.

There are several ways you can find a foreclosed property:

• Look around your neighborhood for any abandoned and vacant properties.
• Check filings or records on homeowners who are late on their mortgage payments or those who are on some form of foreclosure proceedings. Filings are published in various publications, including “Flint-Genesee County Legal News.”
• Several Web sites also provide foreclosure listings. Also, realtors have access to a database of multiple listing service of Michigan foreclosures.

Buyers should get a pre-approved letter for a loan from a mortgage lender or bank or a proof of financial capability to pay before making an offer for a property.

Now that buyers know some advantages of purchasing a foreclosed property, how to find one and make an offer, they should also be aware of risks involved in buying a distressed home.

Some of these homes have been vacant or abandoned for about six months or more. Buyers should not expect houses that have been in the market for a long time to be in good condition.

Theft and vandalism are just two reasons that may cause a property to deteriorate.

Since most of foreclosed properties are sold on as-is basis, buyers should order for their own inspection of the property before deciding to buy.

During the hearing, witnesses Sheriff Thomas J. Dart of Cook County in Illinois and Mortgage Bankers Association Chairman David G. Kittle exchanged arguments on whether to change bankruptcy laws as the bill suggests. If approved, judges would have the right to adjust mortgage rates of troubled homes as a solution to foreclosures.

Dart described the stunned expressions of homeowners when they learned of their eviction. Others would even go home after work just to see their belongings on the sidewalks and their children with nowhere to stay.

Houses which once lined neighborhoods are now boarded up or scheduled to be demolished. According to Dart, he had evicted 1,771 because of the foreclosure problem, and had 4,500 families more for this year.

Meanwhile, Kittle argued that helping homeowners run away from bad debts would affect everyone else. Homebuyers would be made to pay more fees and interest rates, and bigger down payments by lenders if Durbin’s proposal is approved. He estimated that a $295 monthly tax on homeowners if lenders would be made to absorb more mortgage debt.

This would also lead to more foreclosures as homeowners file for bankruptcy. He cited the same reasons for opposing the federal government’s $700 billion budget to bailout financial institutions. For Kittle, it is inevitable that some people and businesses would have to fail.

If the crisis continues, 6.5 million Americans, or one out of 8 homeowners, are estimated to lose their homes to foreclosure in the next five years.

Among the few supporters of Durbin’s anti-foreclosure bill has been Sen. Patrick J. Leahy, the Senate Judiciary Committee Chairman.

The National Association of Realtors has said that out of 152 metropolitan areas, 120 have posted drops in median home sale prices, as compared to last year. It has expressed an 8 percent drop from that of the same quarter a year ago.

Foreclosure sales have made up about 40 percent of all the transactions in the third quarter, taking down the median price by 9 percent reaching $200,500.

Besides the decline of home prices, home sales have also declined. But four states have home buyers who have taken the bargain. These states are California, Nevada, Virginia, and Arizona.

As for the areas of Sacramento and Riverside in California, a huge portion of foreclosure sales have taken place in discounted prices since the home prices have dropped from 37 percent to39 percent. These two cities are recorded to have the greatest annual price drops.

What greatly affect the current situation of the housing market are the falling home prices, strict lending standards, and a tough economy. In fact, by the end of this year, RealtyTrac Inc. expects bank-owned properties to reach more than a million. This actually represents almost one third of all the properties for sale in the United States.

On the other hand, economists say that the economy have come into a recession, after more than two decades, and this could be the worst downturn to be experienced.
With the rising unemployment rates, worsening economic conditions, and tightening credits, the number of delinquent loans has increased.

With the continuing rise of foreclosures, the government has seen the need to use some of its funds from its $700 billion financial rescue programs.

FDIC said in a statement last Friday that the loan modification program would cost the government about $24.4 billion. The said funds would come from the recently approved bailout program of the US Treasury. The bailout program aims to help the finance industry of the country.

The proposed plan of the agency was announced by its Chairman, Sheila Bair, two days after Henry Paulson, Treasury Secretary, dismissed the government’s proposal of underwriting delinquent home loans. Bair has spent the last weeks lobbying for the agency’s foreclosure prevention plan.

Reports said that most of the money for the bailout program has been given as capital to banks. The said injection of capital was part of the Troubled Asset Relief Program (TARP). In a probable answer to critics of the said move, Secretary Paulson was quoted to have said that the previously proposed program on future foreclosure properties was something that would require the government to subsidize or spend. He said that the TARP move was different. Unlike the program on foreclosures, the money for the TARP is considered as an investment and not a spending.

FDIC, however, still maintained its ground. The agency has published its statement on their official website. FDIC said that indeed, foreclosures may be costly for borrowers, lenders and communities. However, the agency believe that the costs do not change the fact that it is a must for the government to provide incentives to modify the terms of accounts that may eventually lead to foreclosures.

Robin Myer, a 55-year-old mother in Grand Haven, could always do something to feed her daughters, but she could not do anything when the bank refused her partial payments and warned her about foreclosure. Luckily, she found sales agent Mary VanderLaan of Prudential Clyde Hendrick Realtors, who helped her sell her home within two months, before it went into foreclosure.

Myer lost her home and earned nothing from the sale, but she maintained her good credit, making her qualified for another loan in the near future.

Theresa Hanson, a 51-year-old resident of Detroit, Michigan, has been crushed by three losses one after the other: her job of three decades, her husband to divorce and her home to foreclosure. But she is strong.

She has started studying at M-Tec to get certified as a nursing assistant with help from a federal retraining program that gives her $1,200 monthly. She goes to the Gleaners food truck parked near the Saint Patrick’s Catholic Church every Friday to get groceries.

Spring Lake couple Joe and Toni Gundy both lost their jobs almost simultaneously in November 2007, when they had just taken out a home loan. Fortunately, their savings carried them through to 2008, without going through foreclosure. When their account was down to 26 dollars, Joe found work at the Sara Lee facility in Zeeland.

Fifty-five-year-old Shirley Perez survives on unemployment money, local services and Gleaners food. She lost her house cleaning job when the firm she works left Michigan.

Young mother Kayla Thompson lives with her boyfriend and their two children at a mobile home park in Fruitport. They are struggling under piles of debt and threats of eviction every now and then. But they get by.

Similar stories are lived out by many more in Michigan foreclosure-laden neighborhoods, as more and more homeowners are driven out from foreclosure homes. They do not lose faith; they survive.

In October this year, Maryland foreclosures increased by 32 percent compared to the previous month, based on findings by RealtyTrac Inc. With one unit of every 774 households foreclosed, the total number of foreclosure properties in the state in October was 2,973.

According to Lucinda Jones, civil records supervisor at the Anne Arundel County Circuit Court, foreclosures in the county soared to 240 units in October from 161 units in September. She said that if Maryland foreclosure rates are not changed by intervention programs, county foreclosures could reach 270 in November.

Lee Spencer, manager of the Pasadena branch of First Metropolitan Mortgage, complained that the federal bailout programs are sloped towards the welfare of the banks and not to the homeowners hardest hit by the economic downturn.

He called on state legislators to work with accountants and lawyers so that what they will come up with to solve Maryland foreclosures will really be realistic and beneficial for homeowners.

In November, the state has received commitment from six mortgage firms to help troubled borrowers avoid foreclosure. The mortgage firms committed to delay foreclosure proceedings for 60 days and to cancel all fees and penalties accruing during the 60-day period. It is expected that the agreement will benefit about 25 percent of home loans across Maryland.

In addition to the state program, Anne Arundel County Executive John R. Leopold has allocated $350,000 to provide mortgage counseling to borrowers trying to refinance. The semi-private county agency Community Development Services Inc. has been also helping borrowers negotiate with mortgage lenders and has been requesting for a federal grant to acquire foreclosed properties for affordable housing redevelopment.

For this to materialize, the program would need $24.4 billion which will come from the $700 billion Troubled Asset Relief Program (TARP). The proposal met stiff resistance from the administration which stressed that the TARP fund should be allocated for investment, and not buy out foreclosures.

The Treasury Department has already released $290 billion from the TARP fund to buy investments from banks to stabilize the financial market. $40 billion was also used to salvage insurance giant AIG. Democrats have criticized this resistance to the foreclosures plan, pointing out the willingness of the administration to help banks which triggered the financial crisis, but is unwilling to directly provide help for beleaguered taxpayers.

However, the doors are still not closed and Chairman Sheila Bair will be engaging in fresh discussions with U.S. Treasury Secretary Henry Paulson with hopes of gaining new grounds. Bair has also approached legislators from Congress for support. House Financial Services Committee Chairman Barney Frank is optimistic that the administration will change its stance on the foreclosures reduction program and TARP funds could finally be released. House Speaker Nancy Pelosi is also supporting the FDIC mortgage modification proposal.

Chairman Sheila Bair has expressed the urgency of the situation as the increasing number of foreclosure homes have resulted to a negative impact to the housing market in terms of the reduction of median home prices. According to Bair, the market has started to overreact, calling for the need to stem this flow of foreclosures.