The Federal Government is working on $40 billion plan
to help homeowners refinance their mortgage and avoid foreclosure.
Sheila Bair, chairman of the Federal Deposit Insurance
Corp., told the Senate Banking Committee that the government can do
more to help homeowners to avoid foreclosure.
"Specifically, the government could establish
standards for loan modifications and provide guarantees for loans
meeting those standards," Bair said. The FDIC is working "closely
and creatively" with the Treasury Department on such a plan, she
said.
First bailout package of $250 billion allows
government buy preferred shares directly from banks in return for
injected capital. Nine of the largest U.S banks were signed
into $125 billion capital infusion.
Monthly report by Realty Track suggests that
foreclosures are up by 21 percent from a year earlier.
Foreclosure filings, default notices, auction sale notices and bank
repossessions-fell by 12 percent from August to 265,968 in
September.
Many state laws have changed which
helped slow down foreclosure fillings. California requires lenders
to contact a borrower 30 days prior of filling a Notice of Default
(NOD). However, California accounted for more than 27 percent of the
nation's foreclosure activity, with 210,845 properties receiving a
foreclosure filing during the quarter.
Massachusetts law requires homeowners to give 90
days to become current before filling for foreclosure.
Arizona, Georgia, Michigan, Ohio, New Jersey, Indiana
and Colorado were among the top ten states with the highest
foreclosure rate in September.
With increased foreclosures U.S home prices fell 0.6
percent in August versus July as huge supply of unsold homes,
foreclosures and tighter lending standards have pushed down home
prices.
For the 12 months ending in August, U.S. home prices
fell 5.9 percent, and the cumulative decline since the April 2007
peak is 6.5 percent, according to the Federal Housing Finance
Agency's House Price Index.
On a Capitol Hill Former Federal Reserve Chairman Alan
Greenspan told Congress on Thursday he is "shocked" at the breakdown
in U.S. credit markets.
While Greenspan has been known as one of the most
accomplished central bankers in U.S history, the low interest rates
during his last years as Fed. Chairman have been blamed for fueling
the housing bubble and eventually led to financial crises.
"At the heart of the breakdown of credit markets was
the securitization system that stimulated appetite for loans made to
borrowers with spotty credit histories", Greenspan said.
Former Treasury Secretary John Snow added that risks
in mortgage markets were added by accounting irregularities at
Fannie Mae and Freddie Mac.
Greenspan called the $700 billion rescue package
passed by Congress on Oct. 10 "adequate to serve the need" and said
that its impact was already being felt in markets.
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