Delays to Foreclosures

The three latest government programs to cure the foreclosure crisis have at least one thing in common: none will likely be fully operational until this fall, which will push the politically potent issue beyond the midterm elections.

Most foreclosures have been put on hold while the servicers try to navigate the new options available, and the delay will allow many borrowers, including those that are unemployed, to stay in their homes months longer.

"If I push out the foreclosure point, the hope is that stability comes to the housing market, unemployment declines and maybe fewer modifications will fail," said Jim Satterwhite, an EVP and chief operating officer at Infusion Technologies Co. LLC, a Jacksonville, Fla., technology provider for short sales and real estate-owned properties.

While Satterwhite said it was "awfully coincidental" that many of the programs would not be fully executed until after the November elections, others put a finer point on it.

"It's a political campaign of hope," said Joe Mason, a finance professor at Louisiana State University. It "sounds really cynical," but "they are drawing out the foreclosure timelines to mitigate the oversupply conditions on the [housing] market."

Mike Sheridan, the president of DebtMarket, an online platform that connects buyers and sellers of loan portfolios, concedes the delays are affecting his business as banks hold off selling toxic assets and continue to wait for more government programs to fix their problems.

"This is a very, very political issue so everything has to be pushed back until after the midterm election," Sheridan pointed out. "If there's an increase in foreclosures, the government could potentially vote itself out of office."

Asked if the government is trying to delay a wave of foreclosures until after the elections, Meg Reilly, a Treasury Department spokeswoman, said "no."

"Fall is our conservative estimate," Reilly said of the changes to the Home Affordable Modification Program. The government's programs will "take time to implement," she said, but servicers and federal agencies are working "as fast as possible."

The new efforts to reduce foreclosures include giving assistance to the unemployed, encouraging servicers to offer principal reductions to underwater borrowers and allowing some underwater borrowers to refinance into Federal Housing Administration loans.

The biggest delays are likely to arise as servicers create plans to explain the programs.

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