Foreclosures — already up 24 percent during the first quarter of 2009 — are poised to climb even higher as major lenders initiate a new round of foreclosures after a temporary moratorium, the Associated Press reports (“Foreclosures Up 24 Percent in First Quarter as Temporary Halts Expire,” April 9, 2009).

Many lenders including Freddie Mac and Fannie Mae agreed to temporarily halt foreclosures for several months in advance of Obama’s “Making Home Affordable” plan, which began in early April and may end up helping as many as 9 million homeowners avoid foreclosure through mortgage modifications or refinancing.

Obama’s plan comes too late for nearly 200,000 homeowners who had their homes repossessed by banks last quarter, according to RealtyTrac, a foreclosure data service. Nationwide, 804,000 homeowners received a foreclosure notice last quarter, a 24 percent increase from the same time period in 2008.

Foreclosures May Worsen Before They Get Better

More than 340,000 properties received at least one foreclosure notice in March alone, a 17 percent hike over the previous month and a whopping 46 percent increase over the previous year..

In March, foreclosures “came back with a vengeance” and are likely to keep rising, said Rick Sharga, senior vice president of marketing at RealtyTrac.

Shaun Donovan, Obama’s housing secretary, says that he expects there to be a further increase in foreclosures in coming months. Donovan speculates that these foreclosures may be on second homes, investor-owned properties, or vacant properties abandoned by homeowners who owed more on their mortgage than their home was worth.

However, Donovan is optimistic that the nation could see a decline in foreclosures beginning this summer.

Success of Government Program Questioned

Despite government optimism that the Obama administration’s foreclosure rescue program would help stem the tide of foreclosures, industry executives say that the plan’s success is ultimately dependent on how well it is received by lenders. So far, lenders have yet to embrace the voluntary program despite $75 billion in government incentives to modify loans.

“The effectiveness of the plan overall obviously is going to depend on the level of industry participation,” said Paul Koches, general counsel of Ocwen Financial, a mortgage loan servicing company.

Currently, homeowners say that lenders aren’t granting enough loan modifications and that the modifications don’t do enough to help struggling homeowners, despite repeated prodding this past year by regulators, reports AP. According to data released last month, less than half of all loan modifications made at the end of last year resulted in reducing a homeowner’s mortgage payments by more than 10 percent.

While homeowners say mortgage modifications don’t go far enough, lenders say they have their hands full and are swamped with calls from distressed homeowners who need help avoiding foreclosure.

“You can’t wave a magic wand and make the loans suddenly modified,” said Sharga of RealtyTrac. “They’re all individual transactions.”

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