US Mortgage Foreclosure Rate: The Disappearing American Dream

The American dream of owning your own home is disappearing for the middle-class. Mortgage foreclosures continue to plague our country. In January 2010, 274,399 U.S. properties had foreclosure filings against them. Even though the mortgage foreclosure rate fell by 10% in January,  experts expect the mortgage foreclose rate to be even higher this year.

The mortgage foreclosure problem began with the issue of subprime mortgages. Approximately 80% of mortgages issued to subprime borrowers were adjustable rate mortgages. In 2006, these subprime borrowers got a double whammy. While houses began to decline in value, interest rates began to rise. Conseqauently, it became increasingly harder to refinace these homes, Since then, the situation has only continued to worsen. As of September 2009, over 10 million homeowners had negative equity in their homes. In 2008, more than 1.7 million homes were lost through foreclosure. In 2009, more than 2 million homes were lost through foreclosure, and in 2010, the number of homes lost through foreclosure are expected to be even higher.

Since the mortgage foreclosure rate is directly related to unemployment, it's not going to come down until the unemployment rate does. A no-brainer, as people continue to lose jobs, it becomes harder to make mortgage payments. And unfortunately, home mortgage programs developed by the Obama Administration to ease the problem have barely made a dent.

Approximately, 60% of the mortgage foreclosures are from six states. These states are: California, Florida, Arizona, Illinois, and Michigan. The top ten mortgage foreclosure rates by state for January 2010 are:

• Nevada
• Arizona
• California
• Florida
• Utah
• Idaho
• Michigan
• Illinois
• Oregon
• Georgia

In an effort to stablize mortgage foreclosures and get the economy back on track, the Obama Administration implemented the "Making Homes Affordable Program" in March 2009. The "Making Homes Affordable Program" was designed to help homeowners who have mortgages owned or guaranteed by Fannie Mae or Freddie Mac refinance their homes even though they have decreased maket value.  are unable to refinance their homes because they have decreased in value. To be eligible, you cannot be more than 30 days late in the last 12 months on your mortgage payment, and the first mortgage cannot exceed 125% of the current market value. To find out more about the program and the eligibility requirements, click here.

Unfortunately, although the program was estimated to help 7 to 8 million homeowners, the program hasn't achieved the promising results they expected. One of the biggest problems is that even though the program lowers the mortgage payment for a period of three months, there is no guarantee for a permanent reduction. In an article by the New York Times, they reported that even though Bank of America had over a million outstanding loans that are eligible for modification only one percent resulted in a permanent modification. Banks have dragged their feet on approving the loans. Banks make more money off foreclosure fees than they do modifying loans. The Treasury Department also stated that of the 760,000 homeowners that are endanger of losing their homes only 5% were approved for permanent reductions under the program. Furthermore, once approved, many homeowners are still unable to make their mortgage payments. Critics have claimed the program has raised false hopes for homeowners who are simply unable to afford their homes for whatever reasons.

According to James Saccacio, CEO of RealtyTrac, the decline isn't necessarily good news. Last year followed the same pattern. There was a double dip increase in December 2008 followed by a 10% drop in January 2009 and a surge over the next few months.

First American CoreLogic also believes mortgage foreclosure rates will increase in 2010. Although the mortgage foreclosures rates remain below the peak of the summer of 2009, they are expected to increase in 2010. As people continue to lose jobs and the unemployed losing their benefits, the scenario will not improve. The short-sighted vision of Congress will definitely not improve the mortgage foreclosure crisis.

The sale of existing homes isn't doing any better. According to the National Association of Realtors (NAR) existing home sales fell 7.2% between December and January. This represents the lowest level since record-keeping began in 1963.  NAR chief economist, Lawrence Yun, said the decline was not encouraging and raises concern about the strength of the recovery. Furthermore, first-time homebuyers decreased to 40% in January from 43% in December while the sale of existing homes to investors increased from 15% in December to 17% in Janaury. For the week ended February 19, mortgage applications to buy homes fell to their lowest level since May 1997. Applications for refinancing have also dropped.

In comparison, new home sales showed a significant decline for both month over month and year over year figures. New home sales have decreased 11.2% since December 2009 and 6.1% since January 2009. At the same time, median prices have dropped 2.44% since January 2009.

Any way you look at the housing market, it isn't doing well, and it makes one wonder whether the economy is really recovering. Until new jobs are created and the unemployment rate is reduced, the mortgage foreclosure rate and the sale of new and exising homes will remain dismal. As usual, the Senate let down unemployed Americans when they failed to extend to unemployment eligibility period to advance to the next tiers of federal unemployment benefits by February 28. Although many elected officials claim our economy is recovering,