Government backed loan modification programs appear to be taking hold. In efforts to turn back the wave of foreclosures, Treasury Secretary Timothy Geithner unveiled new incentives for borrowers and lenders who successfully negotiated modifications of Freddie Mac and Ginnie Mae mortgages.
At a recent loan modification informational event sponsored by Neighborhood Assistance of America in Los Angeles, more than 50,000 attendees met to learn about mortgage-reduction opportunities. California has been especially hard hit by unemployment and tumbling real estate values.
Before the recession, Riverside, California, was a thriving business community and served as home to many growing businesses. Now the area has the look of a ghost town with “For Sale” and “For Lease” signs on almost every commercial building.
Riverside had been one of California’s foremost entry points for construction materials arriving from Asia. The housing boom was so strong that warehouses were stockpiled with inventory and jobs were plentiful. The local economy could only be described as robust. Now, all that has changed.
Real unemployment in California is estimated to exceed 18% and many employed workers have endured cutbacks in pay and hours. Nabil Boctor, a 65-year old business and property owner in Riverside, has seen his coffee shop steadily lose customers and has lost his home to foreclosure. Once contemplating retirement, Boctor has put those plans on hold.
At one time the coffee shop had three delivery persons, three waitresses and a chef. Now Boctor and his wife are struggling to keep the odors open. They are in default of their $440,000 mortgage. Unlike many homeowners, the Boctors put $100,000 down on their dream home. Despite the down payment, the home is not expected to sell for the amount of the existing loan.
Sadly, almost 43% of U.S. homeowners who negotiated loan modifications earlier in the year are already in default of their new loans. This statistic is prompting the Obama Administration to consider extending unemployment benefits.