Why would anyone inflate Foreclosure statistics? It has to do with the may the statistic are compiled. Anyone receiving a notice of foreclosure having missed a payment is included in the statistics. Here is where the Catch 22 comes into play.
This quote from Credit Slips
“Complaints about mortgage servicers are piling up almost as fast as foreclosures. Yesterday CNN reported that the GAO has concluded that the Obama Administration’s HAMP and HARP programs to do loan modifications are off to a very, very slow start. The programs were announced in February, and to date we have 180,000 people in three-month trial modifications. That’s a far cry from the 3-4 million people the Administration believed would be helped. Consumer advocates say that servicers remain unresponsive to requests for loan modifications, citing the same stories of incompetent or inadequate personnel, lack of follow-up, and refusal to modify unless a homeowner is in default.”
Notice this last part I put in bold: refusal to modify unless a homeowner is in default.
There is a lot in this quote and you can read the full article at the link above to Credit Slips.
The logic goes like this:
180,000 people are in a program to help with their foreclosures, this means 180,000 are in default but not being foreclosed upon. 3-4 million people were expected to be helped by this program alone. These also are going to add to the foreclosures statistics but not actually be foreclosed properties as a result. And what about the people going into default so they can re-negotiate the terms of their loan?
There are people wishing to re-negotiate their mortgage, but the way it is now they have to be in default. They will become a foreclosure statistic but there is a good chance they will never be a foreclosure. How many millions of homes are being counted as coming on the market that fall into this category?
This means all the foreclosure notices going out that analysis has said will be competing with builders of new construction and resale may only be vapor competition. It simply won’t materialize. What does this mean about real estate markets all across the country?
The end result, there could well be a housing shortage during the fourth quarter of 2009. Now I know you are smiling. Right now Tucson housing inventories have dropped to under the 6 month level. Will it continue? If so how long before the rules of supply and demand begin to raise prices? How long indeed?
Compelling article and interesting facts.