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The New Normal… NYT Reports: Expect Four Million More Foreclosures Despite Obama’s Mortgage Modification Policy

In today’s New York Times (10/9/09) the lead story in the Business section is: “In Trial Phase, Mortgage Bills Fall for 500,000. Is that supposed to be good news or news at all? I am not sure. I guess it depends on whether you think the glass is half full or half empty.

The reality is that by now the Obama administration had anticipated (or promised) about 5 million modifications: not 10 percent of that number!

So the real news is that Mark Zandi, chief economist at Moody’s and one of the top real estate prognosticators in the US is fully anticipating another 4 million foreclosures, as reported in the article today. Now I call that News. That’s right four million! Thus, one can expect at least 35% of those foreclosures to occur right here in Florida.

Further Peter Goodman, the NYT’s reporter failed to actually discuss the percentage decrease that occurs s in modifications or whether there was material principal reduction to date. Well I will tell you: the average successful mortgage modification is between 20%-22%. Little if any principal is reduced. Thus we can anticipate that many of these half million modifications will become part of the 4 million in foreclosure. In fact, based on prior studies, modifications without principal reduction lead to foreclosure half the time.

So don’t expect real estate values to start increasing any time soon as long as folks keep losing their homes. Yes, the economy is no longer in free fall and things are better than last fall: Stock market is rising, retail sales have stopped falling and job losses are decreasing. However, until people are employed and can afford their houses payments again and there are meaningful principal reduction or forbearance of underwater equity nothing much will change. The folks who brought us this mess: the politicians and regulators in Washington, the “bright minds” on Wall Street and the banks, will have to first realize that keeping people in their homes is better for them and for the rest of us too. Welcome to the New Normal.

From Deep in the Trenches,

Roy Oppenheim

Tags: bailout, florida foreclosure, Florida foreclosures, Loan Modification, mortgage modification, Obama Administration, obama foreclosure plan

2 responses to “The New Normal… NYT Reports: Expect Four Million More Foreclosures Despite Obama’s Mortgage Modification Policy”

  1. Terry Preuss says:

    With the facts you have given us, it makes me wonder when the banks will just figure it out that it makes more sense to reduce the principal and allow people to keep their homes and investments. Instead, they chose creating blight, and instability in lives and in neighborhoods and prepare the waters for a feeding frenzy of the financial sharks who are waiting, waiting, waiting!!!! It’s shameful. How can we stop it??? This will create a very narrow real estate elite over the next decade.

  2. Alfredo Babler says:

    Half full I half empty? From. The hopelessly pragmatic point of view, half is just that, half. Mr. O is simply a puppet on a string. He also seems to be a trained pathological liar, and perhaps even some sort of manchurian candidate. President of the us, president of the un security council, Nobel peace price winner, and master teleprompter reading slave of the Windsors. Rothschilds and Rockefellers. He is an actor. And do you really think he is going to come through for any of us? Come on! Wakie-wakie already. They might try and pump up the dollar one more time, but it is all a lie. Now they want a other stimulus package. How long do you think they can continue to print money without any backing other than our debt? $500 million a day in interest is what we are in for right now. Andrew Jackson is spinning in his grave!