An analysis released Aug. 4 by Deutsche Bank AG suggests that 48% of U.S. homeowners will owe more than their homes are worth by 2011, Bloomberg News reported Aug. 5. The prediction would mean that the current rate of underwater homeowners, 26%, would nearly double in the next 18 months, for a total of 25 million homes affected. Housing markets that saw particularly big bubbles during the housing boom would be worst hit, the report said, with underwater rates at 90% in markets including Modesto, Merced, Las Vegas, Fort Lauderdale, Fl. and Miami.
The analysis also predicted that the downward trend in home prices is far from over, with nationwide values predicted to hit bottom in the first quarter of 2011. That's a problem for everyone, a related LA Times blog post pointed out, because it will depress the housing market, consumer spending and thus the economy generally. Foreclosures would rise among people with catastrophic financial problems like unemployment, of course -- but another worry is that severe negative equity would encourage rational homeowners to simply stop making payments on their inflated mortgages. In response, the Times blogger predicted, lawmakers are likely to push for more government measures, especially a return to the mortgage cramdown proposal that would allow bankruptcy judges to reduce the principal owed on a primary home loan for borrowers in a Chapter 13 bankruptcy.
As Highland loan modification lawyers, we hope this report is wrong -- but we know there are good reasons to be pessimistic. Foreclosures have slowed in 2009, but experts believe that's at least in part because of government foreclosure moratoria, the difficulty of selling foreclosed properties and banks gambling that the economy will improve. Our Chino loan modification attorneys hope it does too -- but if the government decides to step in, we believe legislation allowing bankruptcy cramdowns would be a good solution. While homeowners must file for bankruptcy to get a cramdown -- a drastic step that's not appropriate for everybody -- we believe the mere existence of cramdowns as an option would help inspire some banks to pursue meaningful, sustainable loan workouts with at-risk borrowers.
Howard Law LLP has an active practice negotiating loan modifications on behalf of homeowners facing default and foreclosure. Even without the threat of a cramdown during a later Chapter 13 bankruptcy, our Dana Point loan modification attorneys have a strong record of good results pursing loan modifications, even when banks have proven difficult to work with. Because we are attorneys, we can and will sue banks if we have evidence that they have violated our clients' rights -- and banks know it. As a result, we have been able to negotiate changes to many homeowners' loans, including changes to the structures of subprime loans; changes to interest rates; and modifications to the life of the loan. In every case, our goal is to get the homeowners a change that lowers the monthly mortgage payment to a reachable amount and allows them to keep their home for good.
If you're facing foreclosure and your lender is delaying or denying meaningful help, you should call Howard Law instead. For a free, confidential consultation, please contact us through our Web site or call toll-free at 1-800-872-5925 today.