Foreclosures

The Obama administration, stepping up efforts to stem foreclosures, will offer lenders and homeowners incentives to cut payments on second mortgages, write down balances on first mortgages that are underwater, and repay loans in a timely fashion. The new measures announced Tuesday would especially help many distressed homeowners who have both first and second mortgages -- and can't afford either.

Modifying nontraditional mortgages will succeed for many people, but most such modifications will end up in default within a year, a major ratings company predicts. The Fitch Ratings study examined subprime mortgages, jumbo loans and little-documented home loans that Wall Street bundled up to back mortgage bonds from 2005 through 2007.

The third-quarter foreclosure report released by PropertyShark.com last week paints another bleak picture. Los Angeles County foreclosures, totaling 15,749 by its methodology, were up nearly 196% from the same quarter in 2007, when there were 5,322. And compared with the second quarter of '08, which had 14,505 foreclosures, they were up 9% in the third quarter. If that's not dramatic enough for you, way back in the third quarter of 2006 the county recorded just 1,539 foreclosures.

A record number of homes were lost to foreclosure in California over the last three months. Foreclosures are up 228% from last year to a high of 79,511 homes. MDA DataQuick reported that more homes were taken back by lenders in the three months that ended Sept. 30 than at any time since the company started tracking foreclosures in 1992. In the previous three months, which also set a record, 63,316 homes were lost to foreclosure. That's a huge swing from an all-time low just three years ago of 637 in the second quarter of 2005.

Despite sub-5% mortgage rates and signs that home prices have bottomed out in some places, executives and economists are decidedly downbeat about the future of the country's mortgage industry as well as the housing market it depends on. The Mortgage Bankers Assn. said Tuesday that it expected home foreclosures in the U.S. to continue to rise before leveling off late next year. The reason: Job losses have replaced adjustable subprime loans as the main cause of defaults. Jay Brinkmann, the group's chief economist, predicted that unemployment would rise through next summer, causing delinquencies to rise.

You know you're in a tight spot when Bankruptcy Court begins to look like the least bad solution to a pressing economic problem. But the housing foreclosure situation is pretty ugly, so there we are. Unfortunately, U.S. Bankruptcy Court isn't allowed to be part of the solution to rising foreclosures, thanks largely to the mortgage banking lobby. It's worth asking: Why not? Consider the scale of the problem.

Widespread joblessness is causing more Americans to fall behind on their house payments, triggering a new round of foreclosures that some analysts fear could delay the nation's economic recovery. A mortgage trade group reported Thursday that more than 13% of the nation's mortgage holders were delinquent on their mortgages or in the process of having their homes repossessed during the second quarter of this year. That's the highest figure since tracking began in 1972. California's rate, 15.2%, was among the highest of all states.

At a church in Fullerton, a prayer group went from 40 people to nearly 600 in the last year. And in Anaheim, the pews are so packed on Sundays that one priest wants to add a ninth Mass to meet demand. Parishioners arrive disheartened, some at wit's end, to ask God, priests, nuns and office staff to help them find work and save their homes. But although prayer soothes the soul, it doesn't pay the mortgage.

A national community organizing group Thursday announced a campaign of civil disobedience designed to help families resist eviction and remain in their homes after foreclosure. Activists with ACORN, the Assn. of Community Organizations for Reform Now, said they would encourage people facing eviction to use text messaging and cellphones to quickly summon volunteers to their homes.

A woman whose historic Ontario home faces foreclosure was evicted after city officials said they caught her selling its period flooring, baseboards and other fixtures on the Internet. A Superior Court judge granted the city a warrant last week to vacate and secure the classic Mediterranean Revival home, locking out owner Kim Shewalter. "They changed the locks," said Shewalter, 46, who let her home go into foreclosure after her mortgage payments adjusted to $6,500 a month.