I wrote several months back that unless the courts are given the power to alter the terms of a mortgage–the way bankruptcy judges can alter just about everything else–the road to a real estate recovery would be long, bumpy and increasingly painful.
And, here’s the proof.
RealtyTrac reports that home foreclosures have set yet another record for the month of July—-As Reuters reports, this, even though there are reportedly federal and state programs out there that are supposed to bring relief to the home market.
Why do I say “reportedly?” Because, frankly, they really aren’t working all that well. Relatively few people have managed to get mortgage modifications and, when they do, it is almost always a modification of just the interest—which means, in the long run, they may end up actually being even more in debt to the bank.
According to the RealtyTrac figures as reported by Reuters, “Foreclosure activity jumped 7 percent in July from June and 32 percent from a year earlier.”
Not surprisingly, the situation is worse in the very states that enjoyed the real estate bubble the most–Florida, Arizona, Nevada and the nation’s number one basket case right now, California, where things got so bad, they had to pay people with IOUs–though that is now supposed to end September 4th.
Unemployment is still rising…and, even when the numbers slip, it is because more and more of the unemployed have simply stopped looking for work which has the odd result of removing them from the official unemployment rate figures.
It doesn’t take a federal reserve official (maybe it does?) to figure out that as more people are thrown out of work, more people will end up being thrown out of their homes….unless something more radical is done.
And, the funny thing is, the more “radical” thing isn’t so radical at all. In fact, judges already have the power to modify mortgages for second, vacation homes—a nice gift for those rich enough to have two houses. Strange how that somehow becomes a “radical” solution when proposed for those poor folks who only have one roof over their heads?
Obama has long said he favors giving power to judges to bring about the changes needed that might actually make a real dent in the foreclosure epidemic, but then became all but mute when the legislation made its way through the Congress and down to defeat.