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The Mortgage Bankers Association has lowered its previously announced home loan refinancing forecast despite expectations of increased refinancing under President Obama’s repo property prevention program.

MBA lowered its home mortgage lending forecast for the year 2009 by 27 percent because of expected slowdown in home loan refinancing.

The bankers said they now expect only $2.034 trillion worth of home loans approved throughout 2009 for single- to four-family houses, a big drop from their $2.780 trillion forecast announced in March. In March, when mortgage rates kept falling, expectations were high among bankers and real estate professionals that large numbers of homebuyers will obtain loans and that homeowners will refinance under the federal repo property prevention program.

In 2008, loan originations reached $1.617 trillion, a significant drop from the total of $3.812 reached in 2003, the year a steep drop in mortgage rates led to record loan refinancing numbers.

In April and May, many homeowners were enticed to refinance their loans under the federal repo property prevention program because of record low mortgage rates – less than 5 percent – during these months.

Recently however, mortgage rates increased to around 5.25 to 5.5 percent for fixed-rate 30-year traditional mortgage loans for borrowers with excellent credit records. An increase in mortgage rates lowers the number of homeowners who could gain from loan refinancing.

In the meantime, the bankers observed that the volume of loan refinancing under President Obama’s repo property prevention program has slowed down due to the uptick in mortgage rates. The loan refinancing portion of the federal program was meant to help homeowners whose home loans were guaranteed by either Fannie Mae or Freddie Mac.

The bankers contend that while more loan refinancing applicants under the federal repo property prevention program could increase in the coming months as more helpful initiatives are launched by administration officials to step up the program, they could not find other factors that would increase home loan refinancing to the level they originally envisioned.

They added that the rise in mortgage rates is expected to discourage hesitant homebuyers to pursue home purchase plans while the drop in home prices would reduce the book value of home loans.

Last week, rates for fixed-rate 30-year conventional home loans increased to an average of 5.42 percent, an increase from the average 5.38 percent the previous week. Housing analysts are concerned that the rise in rates would discourage troubled homeowners to refinance under the federal government’s repo property prevention program.

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The unemployment problem has been hindering the progress of the government foreclosures program, according to housing analysts, economists and foreclosure counselors.

The analysts said that the Obama administration’s Making Home Affordable program was crafted to address the issue of subprime lending, which was considered the main cause of the first flood of foreclosures.

But most borrowers applying to get help under the government foreclosures program are being rejected because their reduced monthly income do not qualify them for loan modification schemes.

Michael van Zalingen, head of homeownership services at the nonprofit group Neighborhood Housing Services of Chicago, said that the government foreclosures program was designed around the subprime lending model and not the unemployment model.

Van Zalingen said that while the government foreclosures program gives cash incentives to lenders to lower monthly payments to 31 percent of borrowers’ monthly income, around 45 percent of over 900 borrowers his organization had counseled in two recent events do not have adequate income to make their monthly loan payments. Even if the borrowers’ mortgage rates were reduced to 2 percent and their loans were extended to longer terms, the reduced monthly payments would still get unpaid because the borrowers do not have the income to make the payments.

Van Zalingen also said that around 27 percent of homeowners who called the Hope Now hotline from April to June were unemployed, an increase from the 9.7 percent of callers in last year’s second quarter.

Federal officials running the government foreclosures program said they are currently evaluating the program and are considering ways to address the unemployment problem.

One of the schemes being considered is a forbearance scheme that would enable homeowners to defer monthly loan payments while they find jobs.

Federal officials also said they are considering giving additional incentives to lenders to work out forbearance schemes for unemployed borrowers who have good chances of re-employment.

Other suggestions being considered are provision of short-term loans for homeowners who have been laid off, provision of funds for missed monthly payments for a limited period of time and provision of some leeway to borrowers who are getting re-employed soon.

However, despite the unemployment problem, according to Obama administration officials, the government foreclosures program has been getting positive results. They said over 200,000 mortgage loans have been modified and that 20 mortgage servicers have been increasing their efforts in working out affordable payment schemes for borrowers.

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A free workshop for distressed homeowners who want to avoid repossession houses will be sponsored by the Lafayette Neighborhood Housing Services (LNHS) in Indiana.

The LNHS has experienced a rise in visits and telephone calls from distressed homeowners who are at risk of losing their houses to foreclosures.

The housing assistance agency aims to reach a great number of distressed borrowers to help educate them about how to avoid and deal with foreclosures. According to LNHS’ Marie Morse, most troubled homeowners wait for about a week before they make contact with the housing assistance agency to ask for advice on how to save their homes from foreclosure.

Morse said that most homeowners are embarrassed about their financial situation and do not want other people to know about their predicament. She explained that the free workshop that LNHS will sponsor is not just for troubled homeowners who are on the brink of losing their properties to foreclosures but also for those who want to be prepared in case they lose their jobs.

She added that the agency wants to give people advanced knowledge and to teach how to deal and cope with life changing situations such as foreclosures and unemployment.

The workshop, entitled “Buying time if your money is running out,” will be presided by Home Ownership Matters LLC Founder and President Mildred Wilkins. According to Wilkins, almost everyone is currently feeling the impact of the economic crisis. However, she pointed out that there are some strategies that people can use to cope with the crisis.

She said that those who will participate in the workshop will learn why bankruptcy is not a way to avoid foreclosures. She plans to provide tips to participants on how to extend the family’s income, such as reducing household expenses and grocery shopping costs.

Meanwhile, Morse said that the LNHS has hired a full-time and a part-time counselor to handle requests for help over the telephone. The housing assistance agency serves nine counties in Indiana and is providing counseling to nearly 200 individuals a year.

On the other hand, Morse noted that there is so much pressure on individuals who lost their jobs, especially to homeowners who had been paying their mortgage payments for a long time. She said that five years ago, most people who came to the NHS were seeking counseling on mortgage rate adjustment. Now, most of them are seeking help to avoid repossession houses.

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Like a monster, the foreclosure crisis reared its ugly head once again in South Florida as it prepares to add the shopping center Parkland Commons on its REO property listings. The Bank of America has filed foreclosure proceedings against Broward County-based shopping center, Parkland Commons and its developers MPG Parkland and Prestige Group President Charles H. Monroe III.

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Potential homebuyers seeking low-priced foreclose homes for sale flocked to Las Vegas, Nevada where they try to have a part of the over 1 million properties in the city’s foreclosure inventory. In 2008, foreclosed properties in the city reportedly peak over 1 million and the figures are expected to reach 1.2 million in 2009.

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The U.S. Senate has passed an amendment that will protect tenants of foreclosures houses from being evicted. The amendment, Protecting Tenants at Foreclosure Act is part of the housing law, Help Families Save Their Homes Act of 2009.

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A rising number of renters across the country have been made homeless because of the sudden inclusion of their rental homes in foreclosure listings. Oftentimes, they do not know their units have been foreclosed until they are evicted from their units.

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There is a big possibility that the price of bailout for banks will be greater compared to the allotted $700 billion because banks do not have enough resources to mend their problems. Therefore support for companies in financial services spent by the government can eventually go up to the trillions. This is bad news also for those experiencing the foreclosure crisis.

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Federal Reserve Chairman Ben S. Bernanke declared that the remaining $350 billion from the much-criticized Troubled Asset Relief Program (TARP), some of which is supposed to go to alleviating foreclosures, is necessary to keep financial institutions afloat. The announcement came just as President-elect Barrack Obama lobbied for the remaining half fund to be quickly released by Congress.

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The law department of Baltimore is coordinating with eighteen other cities in the country in efforts to stop the foreclosure crisis. Through litigation, the department hopes to help homeowners with mortgage related concerns.

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