In what may be the first statewide order of its kind, the South Carolina Supreme Court has temporarily suspended an estimated 5,000 pending home foreclosures to give homeowners more time to take advantage of a new government program that helps them refinance their mortgage, The Associated Press reports (“Top SC Court Halts Thousands of Foreclosures to Let Owners Refinance; May Be First in Nation,” May 5, 2009).

In March, the Obama administration announced a plan to help homeowners avoid foreclosure that would provide billions of dollars in incentives to lenders for modifying home loans.

As part of that plan, government–owned lenders Fannie Mae and Freddie Mac, the two largest mortgage holders in the nation, unveiled a flexible refinancing program that would assist homeowners in obtaining a lower interest rate on their mortgage and mortgage payments homeowners could afford.

South Carolina’s temporary mortgage suspension plan comes as a result of a request from Fannie Mae’s attorney, Ronald Scott, who argued that a temporary suspension of foreclosure sales was necessary to ensure that homeowners who qualify for the federal programs wouldn’t lose their homes before being able to take advantage of the program.

Under the court’s ruling, South Carolina judges will be prevented from finalizing foreclosure sales statewide on properties with mortgages held by Freddie Mac, Fannie Mae, or any other lender that is participating in a federal housing assistance program.

Mortgage experts say that the ruling may be the nation’s first court-ordered foreclosure stop for an entire state.

Freddie Mac spokesman Brad German said that this ruling, issued by a court that has statewide jurisdiction, is the first he’s heard of in the country. He said, “We’re not aware of anything like this, anywhere else.”

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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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Homeowners in the country’s hardest-hit housing markets may get far less help than anticipated from President Obama’s $75 billion housing stability plan, according to an analysis by real estate Web site Zillow.com. (more…)

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One part of President Obama’s $75 billion housing bailout plan that deals with “judicial modifications” has received the support of some lawyers and consumer advocates who feel it may be just the push lenders need to ramp up home loan modification efforts, reports the Dallas Morning News (“Threat of Judges Changing Mortgage Terms May Motivate Lenders,” Feb. 23, 2009). (more…)

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President Obama announced today a $75 billion foreclosure prevention plan that offers subsidy incentives to lenders who modify mortgage loans for troubled homeowners facing foreclosure and offers payment incentives to homeowners who make an effort to stay current on their modified mortgages, CNNMoney reports (more…)

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The Office of Thrift Supervision — the government agency responsible for regulating more than 800 savings and loans that hold a large portion of the nation’s mortgage loans — has asked its lenders to put a temporary moratorium on foreclosures, The Washington Post reports (“Regulator Calls for Lenders to Stop Foreclosures For Now,” Feb. 11, 2009). (more…)

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In an effort to speed up the short sale process and help homeowners avoid foreclosure, mortgage giant Fannie Mae has begun a three-month trial program that allows the company to pre-approve the “short sales” of homes, reports The Wall Street Journal (“Fannie Mae Tests ‘Short Sales’ as Alternative to Foreclosures,” Jan. 9, 2009). (more…)

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In an attempt to increase the availability of credit for homebuying and to reduce borrowing costs, the Federal Reserve has begun buying troubled mortgage-backed securities as part of an initiative the central bank originally announced in November (more…)

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You’ve received an eviction notice even though you’ve never missed a rent payment. This dilemma is a growing reality for renters throughout the country who are being pushed out of their residences because their landlords have fallen behind on mortgage payments, reports the Associated Press (“Advice for Renters if Landlord Faces Foreclosure,” Dec. 26, 2008). (more…)

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Interest rates on 30-year fixed-rate mortgages have fallen to their lowest level in more than four years, averaging 5.33 percent, according to financial publishing company HSH Associates. (more…)

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