The housing crisis and resulting drop in home prices has cost $7 trillion in household wealth, according to a statement this month by the Federal Reserve. Despite recent upticks in sales, it's only projected to get worse unless the increasing supply of foreclosed properties is removed from the market and more homeowners are prevented from going into foreclosure in the first place. There are two obstacles hampering that outcome.
Mark Zandi, chief economist at Moody's, told NPR that even though he attributes the recent pickup in sales to investors who are buying up properties with cash, there's a light at the end of the tunnel. "The six-year-long housing crash is coming to an end," Zandi said on NPR. "It's not quite over. I think we've got a bit more to go with respect to house price declines. But for the first time since late 2005 to 2006, I think the trend lines look actually quite good for housing."
Others aren't quite as optimistic, pointing to the oversupply of foreclosed properties that could take years to sort out, along with weak results of foreclosure prevention efforts to help homeowners keep their homes. President Barack Obama's Home Affordable Modification Program, designed to make monthly loan payments more affordable for 3 million to 4 million homeowners, has helped fewer than a million.
Existing properties in foreclosure are blocked from being sold due to disputes over who owns them, with many analysts contending that this is an overwhelming problem, potentially requiring years of litigation to sort out. Mortgage Electronic Registration System, or MERS, the program instituted by big banks back in the 1990s to track mortgage securities as they are traded, is at the center of the mess. As homeowners bought, sold and refinanced, MERS became the lender of record and claims to hold title to approximately half the mortgages in the U.S., about 60 million of them, according to the New York Times. Although MERS streamlined the transaction process, foreclosure filings on properties it claims to own have been halted by the courts in several states.
All of this boils down to the fact that until ownership is determined, foreclosed properties will languish, even as more flood the market. That keeps downward pressure on home prices overall and lengthens the delays in restoring the market to pre-crash levels.
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