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Recently, signs of housing market recovery from the price effects of distressed foreclosure for sale have been seen, such as the increase in sales of new homes in June by 11 percent for the third straight month.

But positive signs have been occurring only in the low-cost and middle-priced sectors of the housing market. While inventories of lower-priced homes were being cut down, inventories of luxury homes have not been moving.

Real estate analysts in San Diego and Las Vegas said one of the major reasons for the slow movement of higher-priced homes is the refusal of sellers to cut down their selling prices. Realtors have warned sellers that agents are not going to accept their listings if they do not reduce their prices significantly because listing their unsalable high-end homes would add costs to their operations.

Pat Lashinsky, head of a real estate brokerage in California, said it is now taking up to 40 months to sell a luxury home.

According to data from the National Association of Realtors, the current inventory of houses priced higher than $750,000 will take nearly 17 months to sell, an increase from the 14.5 months needed last year. The pace is also almost double the 9.4 months worth of supply of all types of homes for sale.

The slow movement of high-end inventory has been pushing down prices in the higher-end of the market, according to real estate sellers. In Greenwich, Connecticut, the median sales price for high-end homes has gone down to $1.5 million, a substantial drop of 24 percent from the sales price as high-end sales in the area decreased by more than 50 percent.

Based on surveys, the three major reasons for the small number of buyers in the high-end sector are the lack of loans readily available for homes priced over $417,000, the ineligibility of buyers earning over $75,000 for the federal tax credit incentive for first time home buyers and the rising preference of Americans for smaller homes.

Housing analysts explained that while the federal tax credit significantly helped in cutting down inventories of lower-priced homes, there is no comparable program helping cut down inventories of higher-priced homes.

A NAR survey also found that 73 percent of homeowners in May moved down instead of moving up because of lack of credit. Demand for luxury homes has especially declined in Miami, Las Vegas and San Diego where there is an oversupply of homes priced above $1 million.

According to JPMorgan Chase analysts, the higher end of the residential market will recover much later than the other price segments of the housing market.

After Fannie Mae and Freddie Mac were saved by the federal government from collapse last year, the Obama administration has been employing these two large government-sponsored enterprises mainly to help contain the problem of distressed foreclosed house for sale inventories.

Now, the administration is starting formal talks to shape the future of the two GSEs. A meeting of the White House National Economic Council this week will tackle the issue.

Lawrence Summers, director of the council, had long planned to revamp Fannie and Freddie. When he was head of the Treasury in 1999, he warned Congress that Fannie Mae and Freddie Mac have grown so big that if they would collapse, the national economy could collapse with them.

One of the overhaul proposals being seriously considered is the plan to transfer all bad debts owned by the two GSEs to newly created government financial entities that would collect the unpaid loans.

Without bad debts, the two companies would be able to start with new and stronger structures that will support the residential mortgage market.

Fannie Mae was founded in 1938 to respond to problems in the housing sector during the Great Depression. In 1968, it was chartered by Congress as a GSE to buy and securitize mortgages to ensure that home loans are always available to home buyers.

Two years after, in 1970, Freddie Mac was founded to expand the secondary market for mortgage loans and to further increase the amount of money available for lending to potential home buyers.

When the housing market collapsed, the two GSEs had to be saved by the federal government to prevent a financial collapse that would down the national economy, as Summers had predicted in 1999. Since their bailout last September, the federal government has infused a total of $85 billion in funding into the two GSEs to keep them alive as they help stabilize the mortgage market.

Treasury Secretary Timothy Geithner said that the federal government has so far been successful in stabilizing the companies, but still has to study what their final function and structure would be.

Fannie Mae and Freddie Mac have run for years as hybrid entities, created by the government to support the housing market but owned by private-sector shareholders. Since their federal bailout last year, the two GSEs have been majority-owned by the federal government.

Currently, as their future roles are being shaped, the two GSEs are helping the government carry out the Making Home Affordable Program.

Two mansions in Western New York will be sold in a foreclosed homes auction by John A. Russo, heir to the Sorrento Cheese Co. fortune, after the buyer failed to pay the first scheduled $1 million payment due last May 1.

The mansions, which are located along Boston State Road in Hamburg, will be auctioned off separately on September 1 at the foreclosure alcove of the Erie County Courthouse.

Michael Wilson, a young Cleveland-based hedge fund manager and financier who manages New Frontier Trust, purchased the two mansions last October through a firm named Phantom One Holdings LLC. He paid $3.3 million for 6553 Boston State Road and $3 million for 6523 Boston State Road.

Real estate professionals who came to know of the purchases were stunned because the prices were the highest price levels ever paid for mansions in the Western New York area.

To pay for the mansions, Wilson and his firm Phantom One Holdings LLC gave Russo $2 million in cash and then signed to pay $4.3 million over a period of time to cover the balance.

Russo provided two home loans to Wilson, one for $1.8 million and the other for $2 million. Wilson was scheduled to pay $1 million on May 1 and make the other payments every 6 months.

But Wilson failed to make his first payment, so Russo and his firm Greenacres filed a foreclosure case last June 16 to get back the mansions.

There are also mechanics liens against the two mansions from Nest Interiors Commercial Residential LLC which provided interior design services for both houses. The filings indicated unpaid costs of materials and labor costs.

In one of the mansions, Nest Interiors Commercial provided materials and labor that cost $206,805.42. Work included furniture planning and buying, lighting selection, home theater design and installation, indoor pool slide design, pool bar design, pool grotto design and installation and project management.

In the other mansion, Nest Interiors provided services that cost $42,350.39. Work included planning and selection of furniture, design of a racquetball and squash court, the design of a loft, selection of materials and products for the entire mansion, design of a training room and a gym and project management.

Both interior design projects were completed on March 20, but Wilson was able to pay only $125,748.69 for the first job and $28,579.79 for the second job, making him indebted for more than $81,000 and $13,000 respectively.

Families of foreclose houses who are in danger of homelessness may find help with Community Storehouse, a nonprofit organization based in Keller, Texas. The nonprofit organization is set to receive about $1 million from the federal stimulus program.

Unemployment is the major driver of the growing foreclosure lists in Anne Arundel County, Maryland. This is the conclusion made by industry experts who pointed out that the coming wave of foreclosures in the area is linked on unemployment than bad mortgage products.

Officials in Livonia, Michigan are considering whether to sell the foreclosure properties that the city purchased to Livonia Public Schools. Livonia Career Technical Center students will renovate or foreclosed properties remodel the foreclosed homes for sale.