Is HAMP Just Delaying the Inevitable?

The number of foreclosures fell slightly in February to about 308,000, a two percent decrease from January, according to information from RealtyTrac released Thursday. That’s roughly one out of every 418 U.S. homes. RealtyTrac says two things were responsible for the slowing in February. The first is the government’s Home Affordable Modification Program (HAMP) that is helping some home buyers temporarily and permanently lower their payments or interest rates. The other factor was the record-breaking winter storms that took place along the east coast. The snow shut down many government offices and courthouses for several days.

So a two percent decline does not necessarily mean that foreclosures are on the downward slope for good. Total foreclosures are still up six percent over February 2009.

“The six percent year-over-year increase we saw in February was the smallest annual increase we’ve seen since January 2006, when we began calculating year-over-year increases, but it still marked the 50th consecutive month of year-over-year increases in foreclosure activity,” said James J. Saccacio, chief executive officer of RealtyTrac.

It also marks the 12th consecutive month with more than 300,000 foreclosure filings. And some are hinting that government programs like HAMP may just be delaying the ultimate number of foreclosures left to come.

“This leveling of the foreclosure trend is not necessarily evidence that fewer homeowners are in distress and at risk for foreclosure, but rather that foreclosure prevention programs, legislation and other processing delays are in effect capping monthly foreclosure activity — albeit at a historically high level that will likely continue for an extended period,” Saccacio said.

Unemployment is still high at 9.7 percent and not expected to move too much throughout the rest of the year. Lost jobs are one of the top reasons why homeowners go into foreclosure, so a bleak unemployment picture could certainly lead to more defaults. Compounding the problem is the issue of so many borrowers being underwater on their mortgages. Basically one in four homeowners owe more than their homes are worth, a situation that often leads to borrowers walking away from their mortgages.

Rick Sharga, also of RealtyTrac, predicts that foreclosures will start to make annual decreases by the end of 2011. “We are banking on economic recovery, which means job creation and people will be able to afford their homes.”

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