The Obama administration’s attempts to help citizens facing foreclosures have turned into a damp squib. More than one third borrowers numbering 1.25 million who joined the Program for Mortgage Modification costing $75 billion have abandoned the program. This figure is more than the number of home owners who successfully retained their homes by modifying their loans under the Obama Plan.

Lat month, the figures of those who signed out of the program was 155,000 which changed the numbers as 436,000 as those who have left the program since March 2009.On the bright side, 340,000 home owners have attained permanent loan modification and continue to make timely payments.

The supporters of the program say that the market for housing is much better off than when Obama started office. According to them those who got rejected by this program will get support in other programs. Experts are however cynical and say that majority will end up in foreclosures and this could slow down the nation’s economic recovery.

The main reason why many have opted out of the scheme is because the Obama administration originally insisted banks to give loans to borrowers even lacking proof of income. But later, as banks tried to collect information, many home owners dropped out or were disqualified leading to foreclosure properties. Many home owners claim that banks lost their documents and banks claim that borrowers did not complete the paper work required.

The clause of home owners needing to supply documentation of their income has repelled people from joining in this program. This May, around 30,000 home owners enrolled for the loan modification program, a far cry from 2009 summer when 100,000 borrowers enrolled every month. So far around 6400 borrowers dropped out after achieving permanent loan modification. Many among these may have defaulted on their modified loans.

Obama administration contends that those who failed to qualify, received help from other quarters. Data revealed that about half of those who opted out of the Program got another loan modification from the banks. Around 7% were subject to foreclosures. They have another option also – that of short sales. Short Sales are less damaging on the credit scores of the borrowers. Obama administration is also giving $3000 in the guise of moving expenses to those who engage in short sales.

Despites the mass exit of borrowers from the Loan Modification Program, according to Obama’s officials, there is no doubt that the housing market today is in much better shape than what was predicted 18 months ago. They claim that the Foreclosures crisis is easing.

US’s battle with the problem of foreclosures is still on, as the foreclosures activity in the Pitkin County is nearly double of what it was in the previous year. Pitkin County has reported almost double the foreclosures as compared to the year 2009. This means that the foreclosure scenario is getting worse in the area, with more and more houses being initiated for foreclosure than the previous year. But even this worse scenario can be profitable for those who are looking to buy foreclosed properties.

According to statistics, last year around the same time, in the month of June, the foreclosures filings were reported to be 37 as compared to the proceedings in this year for the month of June, which are 76 as of now. Even by the end of 2009 the County reported a very high rate of foreclosures – 105, which has set a record of being the highest in the last twenty four years. So, the statistics speak of the situation themselves.

Earlier also in this month, a real estate firm reported that the coming year would witness a new series of foreclosures which indicates that the story of foreclosures problem is far from getting over. Almost three and a half million houses are expected to go into foreclosures in this year as compared to 2.8 million houses in the last year. In the month of May, almost 3 hundred thousand houses got a notice related to foreclosure, which makes May the 15th month in a row to get such a huge number of foreclosure notices.

Even the mortgage program launched by the government has failed to bring US economy back to a normal condition. More and more people are opting out of the program as it doesn’t seem to help them at all. Almost one third of the total people who had opted for the program have now opted out from it. This fall out would eventually lead to faultier mortgage payments and would ultimately lead to more foreclosures. But the situation is a blessing in disguise for all those who are planning to buy a foreclosed property as this is the time when you are likely to get the best deals and maximum discounts. Since such huge numbers of properties are foreclosed, you have a wide variety to choose from. You can opt for the type of house you want and the kind of locality you prefer.

Last week, the US senate, by a vote of 60-37 approved a plan giving home buyers an additional three months to make use of federal tax incentives intended to help increase sale of homes in this spring season. Proposed by Senate majority leader Harry Reid, the plan seeks to extend the deadline up to September 30 to enable buyers to finish their purchases while qualifying for tax credits up to $8000 while purchasing foreclosures.

Before this plan was passed, buyers had to finish purchases by April 30 and close deal by June 30. Now, there will be a vote in the house on this subject before June 30 before it becomes a law. This plan will be included in an emergency spending bill that has other clauses like unemployment benefits, more Medicare payments to doctors etc.

The extra time could benefit home buyers like Craig Hudson. Recently married he was motivated to look for a new house under the initial tax credit program of the government. In late winter, he found a home which he could finance with the help of the $8000 tax credit of the government. But paper work and other delays saw the extension of closing date as July 12, 2010- too late under the original government plan. But the New plan is god sent and he can now afford to buy that home, after all.

According to officials of the National Association of Realtors, as many as 75,000 prospective buyers of foreclosure properties met the original deadline for contract but could not close by June 30. At stake were the $8000 tax credits for first time home buyers and up to $6500 for second time buyers.

Most housing deals take 30 to 60 days to close and most deals signed by April have been finalized. Though realtors say that paperwork can be delayed by disagreements and haggling over closing costs of foreclosures. NAR spokesman Lucio Salvant says that majority of loans that do not meet the 40-60 day closing period are involved in short sales. Short sales occur when banks agree to a price that is lower than the mortgage owed on the property. There are other causes of delays as well. Lenders are taking more time to scrutinize borrower’s applications which takes time. For example self employed workers must collect together different histories of their part time jobs to establish their credit worthiness.

Though many may think of it as a relief that the rate of foreclosures in California has slowed down in the last month, but the ground reality is something different. Even though the foreclosure properties reported a decrease in rate, but still it doesn’t help the situation because according to reports, the home owners are failing to pay their mortgage installments. The failure to pay on the part of home owners nullifies the drop in foreclosures rate.

How is the situation still in favor of foreclosures? Unemployment and home values lesser than what people owe to lending institutions are factors which is leading to mortgage payment failure and increasing foreclosure chances. As long as the mortgage payments are not made, even a decrease in foreclosures rate doesn’t hold a promise to improve the situation. If mortgage installments are not paid on time, then it would ultimately lead to foreclosures. Thus, even a dip in the rate of foreclosures for a month does not help because defaulters are increasing.

Lenders are in a fix: The lenders are in a fix as to how to deal with the situation. They still need to deal with the faulty payers of mortgage. In the end it leaves them only with one option that is, to foreclose the property. Even the time taken to foreclose a property by the lenders has increased than the previous year.

Great opportunity for those who are looking forward to buy foreclosed property: The non-payment of mortgage installments on the part of the home owners clearly indicates that it is still a very good time to invest in foreclosed properties. Also, California is a great place to live in, with some of the best neighborhoods and best education universities. So you can buy a foreclosed property in California to settle in it. Foreclosed properties are usually sold at very cheap rates as the lenders want to recover their money and get off with the property as soon as possible. You can use this to your advantage and buy a foreclosed house at a very less price than its original price. Thus, this is a very right time to purchase a foreclosed property.

In the past, the prospect of foreclosures was a remote possibility- a nightmare for those who had taken out mortgages to pay for their property. But a two year old recession has changed the situation and has caused the burgeoning of foreclosure properties in the nation at a record level. In the case of many families whose homes are worth much less than that which they owe, they are forced by financial and emotional pressure to walk away from their homes.

Mostly in regions affected by falling real estate values like San Joaquin Valley, most people who cannot afford their mortgage are walking away from their homes and allowing banks to repossess their homes. This point is called as “Strategic Default”. It stems from desperation because of plunging home values since the buyers invested in these properties during the real estate boom and banks are reluctant to offer loan modification schemes that can help to avoid foreclosures.

For example there is a home owner who has a mortgage of $400,000 and the homes around him are selling for $120,000. The only sound option for him is to walk away and let his home be foreclosed. A property broker points out that walking away is the best solution when you find that your neighbor is renting for $1500 per month and your mortgage is worth $3000. There are few findings on what caused foreclosures- choice or crisis. But a University of Chicago survey pointed out that ‘strategic’ defaults occur in one third of mortgage defaults in the US.

Foreclosure is no longer an F word, there is less stigma attached to it now. Mortgage delinquency rates and Foreclosures are among the highest in San Joaquin Valley. There is also great confusion about the recovery of the Real estate market. As such experts believe that strategic defaults in this area are bound to increase.

According to Walter Dees, Los Angeles based real estate counselor, people are walking away from their homes in every county in California. This is because they don’t see a point to hold onto a home that is worth lesser than that they owe and which will take ten or more years to recover its value. According to Dee many people caught in this situation are not getting help from their lenders. People try to modify their loans and if they do not succeed, they eventually walk away from their homes.

Experts calculate that over 25% of US mortgage payers are ‘under water’, in which they owe more on their loan than what their home is worth. Foreclosures are thus no longer a bad word but a viable option for those under strategic default.