Few homeowners getting relief as foreclosure crisis escalates

WASHINGTON — Each day from July through September, more than 2,700 Americans lost their homes in foreclosure.

That number, up from 1,200 a day a year ago, is a sign that the mortgage industry and government programs have done little to help troubled homeowners.

The mortgage market's troubles have proved to be far more serious and intractable than most in government or the private sector had predicted a year ago.

"We are behind the curve. We are falling behind," Sheila Bair, head of the Federal Deposit Insurance Corp., told a Senate hearing Thursday. "There has been some progress, but it's not been enough, and we need to act. And we need to act quickly, and we need to act dramatically to have more wide-scale, systematic (loan) modifications."

More than 4 million homeowners with a mortgage were at least one month behind on their payments at the end of June, according to the latest data from the Mortgage Bankers Association, and a record 500,000 had entered the foreclosure process.

In Utah, foreclosure rates are skyrocketing. The number of Utahns facing foreclosure increased by more than 136 percent in the third quarter of this year, compared with the same period in 2007.

The state had the 10th-highest rate of foreclosure filings in the nation for the third quarter of 2008, with 4,867 people receiving at least one foreclosure-related notice from July through September, said foreclosure listing service RealtyTrac Inc.

So why is the foreclosure crisis so hard to fix?

There are five main reasons:

Crashing home prices

A massive speculative bubble in housing prices caused millions of Americans to think of their homes as an investment rather than a place to live.

Now prices are plummeting, especially in once-sizzling markets like California, Florida and Nevada. And the bleeding might not stop until the end of next year.

The median home price in the U.S. dropped 9 percent in September from a year ago to $191,600, and is down 17 percent from the peak in July 2006, the National Association of Realtors said Friday.

Already, 23 percent of homeowners with a mortgage owe more on their loans than their homes are worth, and that figure is expected to rise to 28 percent by this time next year, according to Moody's Economy.com.