Foreclosures

Federal programs aimed at modifying loans to stem foreclosures aren't working, witnesses told a Senate Judiciary subcommittee, and some lawmakers called on Congress again to pass a bill allowing bankruptcy judges to modify home loans -- a procedure known as mortgage cram-downs. Separately, the Federal Reserve took steps to make lending terms more understandable as part of its efforts to avoid another mortgage meltdown, which triggered the deep recession worldwide.

Government initiatives to stem the country's mounting foreclosures are hampered because banks and other lenders in many cases have more financial incentive to let borrowers lose their homes than to work out settlements, some economists have concluded. Policymakers often say it's a good deal for lenders to cut borrowers a break on mortgage payments to keep them in their homes. But, according to researchers and industry experts, foreclosing can be more profitable.

Despite the continuing foreclosure crisis, banks have made little progress toward modifying the loans of stressed-out homeowners, drawing fire from advocacy groups who say both financial institutions and the federal government should do more. In its first report on the Obama administration's efforts to prod lenders to help as many as 4 million homeowners by reducing their mortgage payments, the Treasury Department said just 9% of eligible loans had been changed.

The backlog of California homes in default, but not yet repossessed, keeps growing. At some point, many of these properties will be repossessed and put back on the market. Until then they remain, clogging the system as "shadow inventory," most likely to be foreclosed and sold again. Key data points from ForeclosureRadar, an online seller of California default data: Default notices, which are sent when a borrower has missed several payments, were up 12% in July compared with a year earlier.

More than two dozen members of the Assn. of Community Organizations for Reform Now, better known as ACORN, gathered outside the home of a Los Angeles truck driver and his family Wednesday afternoon in an effort to keep the home from being sold. The small rally was a part of the activist group's "Home Wreckers" campaign targeting mortgage lenders that aren't adjusting loans under the Obama administration's $75-billion Making Home Affordable program and other home-saving efforts from the federal government, said Anthony Panarese, an ACORN organizer.

More than 50,000 homeowners are expected to begin streaming through the Los Angeles Convention Center today, hoping for a hand in restructuring their mortgages or avoiding foreclosure. The free five-day event, running through Monday, is organized by Boston-based Neighborhood Assistance Corp. of America. NACA hosted similar meetings nationwide this summer that attracted more than 180,000 participants. Counselors at 360 computer stations will scan homeowners' mortgage documents and send electronic files to nearly 2,000 on-site servicers and lenders, including representatives from Wells Fargo & Co., JPMorgan Chase & Co. and Bank of America Corp.

Signs are emerging that a much-feared escalation of California home foreclosures may not happen, as banks respond to government pressure and scale back their repossessions of troubled properties. Statewide, the number of homes taken back by lenders dropped sharply in the three months ended Sept. 30, falling 37% over the same period a year earlier, when foreclosures were at an all-time high. If the trend continues, it will give momentum to the fledgling recovery in the housing market.

A national housing nonprofit has launched an education campaign in Southern California to combat scams targeting homeowners in peril of foreclosure. Loan modification fraud is on the rise, costing troubled homeowners thousands of dollars up front for mediation and counseling services that are provided free by federally approved nonprofits, Eileen Fitzgerald, chief operating officer of NeighborWorks America, said Monday at a news conference on the steps of Los Angeles City Hall.

Mortgage giant Fannie Mae said Thursday that it would throw a lifeline to some people losing their homes to foreclosure by allowing them to lease those properties back for up to a year at market rental rates. The move is the latest in a series of steps by lenders trying to manage inventories of foreclosed homes on their books in an attempt to keep a wave of properties from slamming a housing market that has shown some signs of recovery. The news came as Fannie Mae reported a net loss of $18.9 billion in the third quarter ended Sept.

Maguire Properties Inc., one of the region's largest commercial landlords, has been hit with a legal complaint by Bank of America Corp. seeking to foreclose on one of Maguire's prime Irvine office buildings. The bank's bid to appoint a receiver to sell the 16-story tower near John Wayne Airport wasn't surprising because Maguire said in August that it would stop making payments on it and six other properties. Still, the move to foreclose is significant in that it is among the first of a wave of defaults, write-downs and workouts anticipated as part of a long-awaited bottoming out of the commercial real estate market, industry observers say. After being stuck in place for nearly 18 months, the business of buying and selling properties such as offices, warehouses and shopping centers is expected to begin a purge in the months ahead as owners and lenders accept losses and move on. Office and retail properties will take the biggest hit as worried consumers curb spending and companies delay rehiring, according to a study released this month by consulting firm PricewaterhouseCoopers and the Urban Land Institute, a real estate industry trade group and think tank.