Five Reasons Why Home Foreclosures Continue to Rise

In early 2009, the Obama administration announced a foreclosure prevention plan to help homeowners with the housing crisis. Nevertheless, reported foreclosure filings have continued to rise since Obama's foreclosure - relief plan was introduced. According to RealtyTrac, 2.8 million homeowners received at least one foreclosure otice in 2009. Another 4.5 million homes are projected to go into foreclosure this eaHere are five reasons why:

1. Drop in home values: Home prices continue to decline. Falling home values cause homeowners to go "underwater", resulting in homeowners owing more on their mortgage loans than the actual value of the property.
2. Unemployment: As of February 2010, the unemployment rate in the US is 10.4%. Due to homeowners losing their jobs (or take pay cuts or furloughs) and thus causing adecline in their month income, paying monthly mortgagepayments becomes increasingly difficult.
3. Decreased Credit: Banks have severely restricted their lending standards due to the economic crisis. Homeowners are unable to borrow more money from lenders to cover their deficit.
4. End of moratoriums: Foreclosure moratoriums had suspended foreclosures for a time period. However, at the end of the moratorium period, lenders aservicers resume foreclosure proceedings on properties.
5. Obama's Plan: Obama's foreclosure relief plan is only an effort to modify troubled mortgage loans. This plan only works for borrowers who "qualify" for the program. Due to the large number of distressed borrowers, lenders have a difficult time processing all the requests in a timely manner.

Although there are signs of improvement, there is an expectation that foreclosure rates will continue to rise for the next year or so until the unemployment rate peaks. It is important to understand that all the reasons are inter - related with one another and correlate directly with the economy. Once the economy recovers, home values will increase, people will find jobs, and credit by banks will be more readily vailable. There are already hopeful signs and expectations that the economy is on a the road to recovery.

Until the economy fully recovers, there is a need to see the government's mortgage rescue program succeed in order to accelerate the housing recovery. More pproval of loan modification will prevent foreclosures, which will help prevent ahome values to fall much more.

Obama's foreclosure prevention plan is working, and there is mounting political pressure from Washington for service lenders to work with homeowners to seek alternatives other than foreclosure. However, it will be some time before an actual reduction in the reported number of foreclosure filings occurs.