Foreclosure Fears – Will Florida Be Worst Hit?

Thursday, August 12th, 2010

Written By Cliff Dunn

A new wave of home foreclosures could have its hardest impact here in the Sunshine State. Officials say that high unemployment numbers may make it especially tough for homeowners to make their mortgage payments, and there's little relief from federal programs designed to ease some of the pain.

It was a year ago this month that the Obama Administration announced the formation of the Home Affordable Modification Program (HAMP), which offers cash incentives to banks to reduce mortgage payments.

But financial institutions participating in the $75-billion program have been slow to make temporary mortgage pay­­ment reductions per­manent. A number of causes have been cited, and there's no shortage of finger-pointing.

"Paperwork has proved a major stumbling block for the president's foreclosure-prevention program," explains Fort Lauderdale-area attorney George Castrataro.

"Homeowners complain that their servicers constantly lose the documents they send in, while financial institutions argue that borrowers haven't been sending in their paperwork," he adds.

Moody's, which analyzes credit reporting data, says that about 4 million homeowners in the U.S. are at least 90 days delinquent on their loans, or are already in foreclosure proceedings.

Delays, including trial modifications, have kept many mortgages out of foreclosure, but by year's end about 2.4 million borrowers are expected to lose their homes an increase from 2.1 million foreclosures and short sales in 2009 and a 500% increase in the annual numbers from earlier this decade.

Hardest hit will be Florida, California, Nevada and states where home prices have dropped the steepest and the numbers of homeowners who are struggling have risen.

That means it isn't all bad news, especially for some potential real estate investors in South Florida.

"There are many good deals in this market," says Brad Cohen of Coldwell Banker Residential Real Estate on East Las Olas Boulevard, "but buyers must also think about maintaining their investment over the short term and look to have gains over the long term."

"East Fort Lauderdale is a rare market that offers an outstanding opportunity for solid real estate investment," adds his partner, Steve Schuman.

Even with that being said, a report this month from Moody's Investors Services said the impact of the federal modification program has been "underwhelming."

Federal officials say the program is on track to lower the mortgage payments of between 3 and 4 million homeowners between now and 2012.

At year's end, the program had assisted in getting over 787,000 home loans modified for three months, with an additional 66,465 modifications made permanent.

The program has its critics. Not all homeowners are eligible for modification; the program covers only owner-occupied homes, and leaves out a variety of mortgage types.

Banks complain they have trouble getting necessary documentation from homeowners. Homeowners are angry at the level of bureaucracy involved in HAMP. The program has also been criticized by federal watchdog groups. And many believe that financial institutions could do more to prime the pump.

"I don't think they're very motivated to do modifications," says Castrataro. "Often they appear more focused on fees and collection."

Castrataro says homeowners who face the prospect of foreclosure need to first be honest with themselves, and then act purposefully.

"Homeowners who want to keep their property should start with seeking a loan modification as early as possible," he advises.

Cliff Dunn has over 20 years of broadcasting and journalistic experience. He lives in Wilton Manors.