Collateral Foreclosure Damage for Condo Owners

Barbara Sanz has never missed a mortgage payment, but the plunge in real estate is punishing condominium owners like her anyway.

Four years ago, she bought her first condo in a glassy new Miami tower when the building was filling up. Now nearly one in six residents in the 43-story building is battling foreclosure and their contributions to the building association are shrinking. Each of the remaining owners has had to chip in an extra $1,000 assessment and $50 more a month for cable and Internet. That is on top of Ms. Sanz’s $450 monthly maintenance fee.

Even though she pays more, her building has broken washers and dryers and unusable exercise equipment, and her hallway is spotted with mold.

“It’s not fair,” said Ms. Sanz, a 32-year-old event planner. “The first two years, I enjoyed all of the benefits of living in a condo. I’m disappointed now. I hate the way the building looks.”

When people buy condos, they expect their monthly fees will cover many of the responsibilities that they would otherwise have as owners of single-family homes, like cutting the grass and paying the water bills. Now many find themselves nagging each other in the hallways to pay their assessments and adding special fees while haggling over chores. In Miami, Chicago and San Diego, condo owners are adjusting to the economic woes, sometimes by mowing themselves and working shifts for building security — all while lamenting their lost community.

“What motivated people to go into the condo market in a way that led to overbuilding was the expectation that it would be easier than owning a home on a maintenance basis,” said Sam Chandan, chief economist at the real estate research firm Reis. “The downside is that your fate is tied to 50 or 100 other people who may stop making their condo payments.”

Many of the numbers compiled on home sales specifically exclude condos, which account for one out of eight homes in the nation, and that missing data may be masking just how weak the housing market really is. Sales of existing condo units were down 26 percent in March from a year earlier, compared with an 18 percent decline for single-family homes, according to the National Association of Realtors.

The pain in the condo market, mostly in urban areas, may not only be deeper than in the rest of the housing market during this downturn but more prolonged. Bargain hunters say they are reluctant to buy into a building even when the upfront cost seems low because they might have to pay unexpected fees as distressed neighbors default on their mortgages or just stop paying the association fees that cover everything from taxes to pool maintenance to air-conditioning repair.

Marcus & Millichap Real Estate Investment Services, which is based in Encino, Calif., estimates that nearly 202,000 condo units will be added this year to the pool of 574,000 added nationally in the last five years. Next year will bring 94,166 more units onto the market.

“We have not even approached the bottom and will not approach the bottom until 2009,” said Hessam Nadji, managing director of research services at Marcus & Millichap.

The shabby condition of some condos means potential buyers insist on especially steep discounts on foreclosed units. Alessandro Comoglio, a 34-year-old investor from Italy, recently visited six apartments in Ms. Sanz’s Miami building with a real estate broker. Mr. Comoglio was surprised to find worn-out hallway carpeting and orange foreclosure stickers partly scratched off the doors in such a new building.

His willingness to spend stopped short of $200,000 for the condo units, which once sold as high as $700,000, according to the broker, Peter Zalewski. Mr. Comoglio also wants a written guarantee that he would not have to pay more fees.

“Nobody knows if the worst is yet to come,” he said. “Nobody knows how much prices will continue to drop.”

Rosa Rodriguez, a resident and property manager at Parkview Point Condos in Miami Beach, says her former neighbors have left her with so many problems that she would never buy a condo again. The 38 foreclosures in her 244-unit building and the unpaid dues nearly cost the residents running water because the building could not pay its bills. The building abruptly stopped repairing its ceiling lobby and left its wiring and ducts exposed when the board ran out of money. She avoids answering questions from visitors about ceiling repairs.

“We’re not going to tell them we don’t have any money,” she said. “That’s embarrassing.”

Buildings with few units can suffer even if it just one owner falls into trouble. Doris Wilson, who owns a one-bedroom apartment in a building in the Bronzeville neighborhood of Chicago, struggled to get a lender to pay $2,500 in association fees after it foreclosed on one of the seven units in her building. The bank eventually paid the money, and the association has since been able to paint its wrought-iron fence and clean the sewer system.

Still, Ms. Wilson worries that the expected sale of the foreclosed unit at about $94,000 will hurt neighbors who paid or refinanced their units for three times that price. In the short term, she dislikes asking her neighbors to pay an extra assessment of nearly $220. She dreads going to monthly condo board meetings, and she avoids some neighbors who are struggling to pay the additional fees.

“It’s personal,” she said. “Here they are going through a hard time and you have to ask them to pay.”

Marki Lemons, a Chicago real estate broker, says that investors are hesitant to buy properties with many foreclosures because of the possible problems. Some buildings with four to eight units have had so many foreclosures that their condo associations have disbanded and windows have been boarded up. In these cases, she does not even want to represent sellers, because buyers cannot get financing and will have to pay all cash. Sellers will be disappointed by those buyers’ offers. “They’ll probably give 20 cents on the dollar,” she said.

So far, the Manhattan market has been largely spared, in part because of foreign owners who never sought a quick profit. By the end of the year, about 15,000 units will have been added during the five-year condo boom in Manhattan, according to Miller Samuel, a real estate research firm.

Jonathan Miller, the company’s chief executive, said that foreigners, who have bought up to a third of these new condos, typically put in more cash and plan to hold for some time.

“They’re in it for the long-term equity play,” he said. “They’re looking for a 10-year hold.”

Those who fear a downturn remember that Manhattan co-op prices suffered so much during the housing downturn of 1989 to 1993 that buildings had a hard time luring buyers. This financial instability hurt New Yorkers at all economic levels. Some recall neighbors handing over their Fifth Avenue apartments for $1 because they could not afford the maintenance fees.

Condo owners across the country are trying to ride out the slowdown. Since 2004, when Mark Mills bought his two-bedroom apartment for $622,000 in the 210-unit GasLamp City Square condo in downtown San Diego, 10 of his neighbors have succumbed to foreclosure. The building now has a $115,000 shortfall in its budget because residents failed to pay their condo dues.

He resents neighbors who have rented units they cannot sell to 20-somethings, who leave beer bottles in the lobby and hold late-night parties. He is tired of the constant beeping of a smoke alarm in a vacant unit, indicating a battery needs to be replaced. Still, Mr. Mills is staying because he expects he could get only about $550,000 for his home.

“We couldn’t sell it for what we bought it for,” he said. “I’m in it for the long haul.”

April foreclosures rise 65 percent on year: RealtyTrac

NEW YORK (Reuters) - U.S. home foreclosure filings in April edged up from March and were a whopping 65 percent higher than a year earlier, real estate data firm RealtyTrac said on Wednesday.

Home foreclosure filings in April totaled 243,353, up 4 percent from March, RealtyTrac, an online market of foreclosure properties, said in its U.S. Foreclosure Market Report. The figure is a total of default notices, auction sale notices and bank repossessions.

"The total number of U.S. properties with foreclosure activity in April was the highest monthly total we've seen since we began issuing the report in January 2005," James J. Saccacio, chief executive officer of RealtyTrac, said in a statement.

In March, home foreclosure filings had risen 5 percent from February.

The surge in foreclosures indicates an increasing number of homeowners are struggling to make mortgage payments amid the worst U.S. housing market downturn since the Great Depression.

RealtyTrac, based in Irvine, California, said the national foreclosure rate in April was one foreclosure filing for every 519 U.S. households.

"These properties contribute to already bloated inventories of homes for sale, and put downward pressure on home values," Saccacio said, adding that the nationwide foreclosure rate could reach 2 percent by the end of the year.

"Areas of California, Florida, Nevada and Arizona continue to be particularly hard-hit," he said.

Nevada, despite a 5 percent month-over-month decrease in foreclosure activity in April, had the highest foreclosure rate in the country, with one filing for every 146 households, followed by California and Arizona.

All three states had been among the hottest U.S. housing markets during the boom years from 2000 to 2005.

Default rates and foreclosures have jumped over the past year as the housing market deteriorated. As interest rates on adjustable rate mortgages reset higher, many homeowners who have been unable to sell their homes or refinance existing home loans amid a drop in home prices have been forced into foreclosure.

Nevada had 7,276 foreclosure filings in April, up 95 percent from April 2007.

California's foreclosure activity was down less than 1 percent from the previous month, but it still ranked second highest in the nation with one filing for every 204 households.

California, the most populous U.S. state, reported 64,683 foreclosure filings, the most of any state and up 112 percent from April 2007.

Saccacio noted that this also meant an erosion of property tax bases, which was putting municipal budgets in peril.

"For example, the city council in Vallejo, California - part of a metropolitan area with a foreclosure rate that ranked sixth highest in the nation in April - last week voted to have the city file for bankruptcy," he said.

The city council of Vallejo, California voted last week to approve a petition for a bankruptcy filing for their former Navy town, which has seen revenues decline amid the housing slump while its employee costs have ballooned.

The vote positions Vallejo, a town of more than 100,000 residents along a main highway between San Francisco and the state capital of Sacramento, to become the first sizeable city in California to file for bankruptcy.

Arizona ranked third highest in the nation with one foreclosure filing for every 224 households in April, with 11,620 filings, up 26 percent from March and 181 percent higher than a year earlier, RealtyTrac said.

Florida ranked fourth highest in the nation with one foreclosure filing for every 242 households in April, with 35,264 filings, up nearly 17 percent from March and 146 percent higher than a year earlier, RealtyTrac said.

Losing a Home, Then Losing All Out of Storage

ELK GROVE VILLAGE, Ill. — The foreclosure crisis is hitting yet another American locale: the self-storage center.

As they lose their homes, people are turning to these humble cinderblock and sheet-metal boxes to store their stuff. But some people cannot keep up with their storage bills any better than they could handle their mortgage payments, and storage companies are auctioning off their property for a pittance.

A cottage industry has developed to profit from these lost and abandoned items. The other day in this Chicago suburb, Stephanie Donahou and her son Marcus had only a moment to decide whether to bid on a unit in default. They could see a couch, a sewing machine, a fish tank, a washer and dryer, lots of Christmas wrapping paper, a television and other trappings of daily life.

“This is someone’s house,” Mrs. Donahou said. Her bid, for $160, was the highest. Mr. Donahou was not impressed. “Ma, you bought a junker,” he said, rooting through the material. They began to fill their U-Haul. Good material they would auction on eBay; middling stuff would go to yard sales.

The auctioneer, Blair Auction & Appraisal, has been conducting sales at self-storage facilities in the Midwest for more than a decade. “If a site used to have 10 auctions, these days it has 15 or 20,” said Wayne Blair, the owner. At one site in Detroit, he auctioned off the contents of 45 units.

Subprime mortgage loans had low “teaser” rates to lure borrowers. Many storage facilities offer the first month for free.

“You tell yourself, ‘I’m only going to put my things in for a short time,’ ” Mr. Blair said. “Before you know it, you’re behind. Then you have to pay penalties and interest. You owe $400 to $500. If you lost your job, you can’t come up with that, not if you want to feed your family.”

Nearly non-existent 35 years ago, self-storage has become ubiquitous, with 51,000 facilities nationwide. Even as the larger economy falters, the industry is flourishing. Executives say the mortgage crisis is one reason.

Dean Jernigan, chief executive of the U-Store-It chain, says people generally rely on storage when they are dealing with major milestones: marriage or divorce, a relative’s death, a job transfer or, in boom times, remodeling or building new homes.

Now he’s adding foreclosure to the list. “People are moving back down the property ladder,” Mr. Jernigan said.

Bill Martin, a 50-year-old former manager in the technology industry, lost his house in the Southern California community of Lake Forest last August. His local self-storage company sent a truck and driver to pick up his things, a service it offers all new customers.

“Storage has my hopes in it,” said Mr. Martin, who sleeps on a foldout bed in his mother’s guest room. “I don’t tell anyone this, but at least once a week I go over and look at my couch, my refrigerator, my TV stand, my mattress and realize I did have a life, and maybe there’s a way to go back to it.”

Investors agree that hard times for homeowners like Mr. Martin will yield good times for storage firms. U-Store-It’s stock is up 33 percent this year. Extra Space is up 18 percent. Public Storage is up 18 percent.

“People might lose their home but they’re not going to lose their things,” said Charles Ray Wilson of Self Storage Data Services, a research firm.

Yet some evidence suggests that is exactly what is happening. It is impossible to put precise numbers on the phenomenon, partly because the industry is highly fragmented — the majority of facilities are locally owned — and also because the topic is not one the industry cares to dwell on. But auctioneers who dispose of units in default, as well as the bidders who try to buy their contents, say they see increasing signs of strain. They note that more auctions involve people who appear to have had their homes foreclosed.

Fred Reger, an auctioneer in Washington and its suburbs, is seeing two trends, which he calls “matching luggage” and “residential units.”

The first means that he often sees a bunch of over-stuffed plastic bags when he opens a unit. “People used to put their belongings in boxes,” Mr. Reger said. “But Hefties are a lot cheaper. These people came in under stress, which explains why they defaulted a few months later.”

A “residential unit” is one where the renter tries to illegally live in the unit. “We used to see one or two residential units a month,” Mr. Reger said. “Now I’m seeing 6 or 8 or 10. At one facility in D.C. the other day, we had three residentials.”

Not every area is seeing an increase in auctions. Neal Grossman, who runs auctions at storage facilities in Ohio, said a higher percentage of storage customers are rescuing their possessions at the last minute.

When renters default on their monthly payments, facilities replace the lock with one of their own. That way, the renter cannot come around at the last minute and empty out his unit.

Mr. Grossman cut locks on 87 units in March but, as many people paid at the last minute, ended up auctioning only 21 of them in April. Both numbers were down from a year ago, he said, suggesting “the worst is behind us.”

In Chicago, on the other hand, the ranks of the dispossessed seem to be swelling. Storage facilities in Illinois that intend to auction off units in default must publish a legal notice alerting the owners. The suburban Daily Herald ran notices for 62 auctions in the Chicago metro area on a recent Monday, some of them involving more than 10 units.

Brook Snyder runs the Chicago operation for Blair Auction. A good-humored 34-year-old with a penchant for bright shirts and three-day stubble, Mr. Snyder has made a career of delivering bad news: He has been an assistant to court officers doing evictions as well as a process server delivering legal papers to people being sued.

“I try to treat everyone with respect,” Mr. Snyder said. “Anyone can have hard times.”

On auction days he drives from site to site, trailing a caravan of hopeful bidders. When everyone is assembled in front of a defaulted unit, he takes off the lock. Forbidden to enter or touch, bidders make offers based on a glimpse and well-honed instinct. The entire process is over in a moment.

In three brisk days, Mr. Snyder held auctions at 23 U-Store-It facilities. At the first site, in Gurnee north of the city, he raised the door on an indoor unit, revealing what was essentially a one-room apartment: bed raised high, recumbent bicycle in the corner, file cabinet, vacuum cleaner and, for power, many extension cords. The contents sold for $675.

The next warehouse, in Waukegan, brought a unit full of — depending on how you look at it — cherished household possessions or somebody’s trash. Most of the bidders took the latter view, disdaining an offer. Tonya Boyd bought the bulging plastic bags for all of $6. “It looks like someone had some troubles,” said Ms. Boyd, an employment specialist. There were piles of clothes, brand-new women’s shoes, old chairs, a dirty fan, kitchenware.

For some units, $6 is too much. “A dollar bill, first dollar bill takes it,” Mr. Snyder implored in front of one unit. “Come on, this is everything they own!” To no avail.

This is the eternal mystery of self-storage. If the material was worth money, it was foolish to let it go to default. If it was not worth much, why spend at least $50 a month to store it?

Mr. Jernigan, the U-Store-It executive, says budgets are stretched tight. “People pay their cellphone, rent, credit card before they get down to their storage unit,” he said.

Self-storage site managers describe an irrational tendency in some clients. One said she had seen customers who lost their possessions at auction come back and rent another unit. Mr. Snyder said he had removed a lock from the same delinquent unit six times in one year. Five times the renter had paid up at the last minute; the sixth time, a few weeks ago, it was auctioned.

“His luck ran out,” Mr. Snyder said.

Mortgage Holders Find It Hard to Walk Away From Their Homes

As American homeowners fall behind on their mortgages in growing numbers, bankers and policy makers worry that while many of these people cannot pay, some simply will not.

Millions of Americans are “upside down” on their mortgages — they owe more on their homes than their homes are worth. So far, however, there is little evidence that people who have the means to pay are walking away from their homes as values sink.

The blogosphere is full of tales of homeowners who supposedly are choosing to mail the house keys to their lenders rather than keep their depreciating homes. And yet “jingle mail,” the term for those tinkling packages of keys, appears to be far rarer than many seem to think.

Freddie Mac, the big government-sponsored mortgage company, estimates that just 0.14 percent of the defaulted mortgages in its portfolio involved properties that were abandoned by borrowers. Fannie Mae, another mortgage company, puts the figure in the single digits. Both companies deal in relatively conservative loans, so the total rate may be somewhat higher. Industry officials say they have no way of knowing for sure.

Even so, the idea that some people are simply refusing to pay their mortgages has gripped the popular imagination. The notion picked up momentum in the last few weeks after “Inside Edition,” the celebrity-focused TV news program, reported that Jose Canseco, the former American League most valuable player who made millions during his baseball career, abandoned his $2.5 million mansion outside Los Angeles to move into a smaller property.

“You look at the Jose Canseco issue and say that it’s a walkaway, but he is probably the only person on his block that did that,” said Robert Padgett, director of loss mitigation for Freddie Mac. “Those types of stories garner a lot of attention,” he added, but they are “isolated occurrences.”

Many economists agree. The low numbers from Freddie Mac and Fannie Mae are consistent with past housing busts, like the ones that occurred in Texas in the 1980s and in the Northeast and California in the early 1990s. Homeowners typically do not walk away from homes they live in unless they are unable to pay the mortgage, usually because of job loss, a death in the family, divorce or a big jump in their monthly payments. Real estate speculators, of course, do abandon properties when prices fall.

In fact, researchers say the rich are no more or less likely to walk away — “ruthlessly default” is the economic term for it — than those of more modest means. A person’s credit history is usually a better indication of how he will behave than his income. How much money a person put down on the house when he bought it also makes a difference.

Investors “are going to default right away because they have negative equity,” said Robert Van Order, an adjunct professor of finance at the University of Michigan. “But that’s different from people who moved into the house.”

Owners who live in their homes do tend to default more when home prices fall. That is because being under water leaves borrowers fewer options if they run into financial trouble. When prices are rising, borrowers can usually sell their houses for more than they paid or refinance their mortgages.

Most homeowners default when there is “an intersection of two events: they don’t have equity in their houses and they run into trouble,” said Mr. Van Order, a former chief economist at Freddie Mac.

An estimated 9 million American households, or 10.3 percent of all single-family homes, owe more than their home is worth, according to Moody’s Economy.com. By comparison, 4.8 percent of home loans were in foreclosure or delinquent by 60 days or more at the end of last year, according to the Mortgage Bankers Association.

For a variety of reasons, most homeowners find walking away difficult and expensive.

A foreclosure can make it hard for borrowers to get other loans and sometimes even an apartment. Economists refer to these as “transaction costs” that offset the benefit borrowers might get from defaulting on an underwater home loan.

Lenders can also pursue deficiency judgments against borrowers to recoup the difference between what is owed on the debt and what the property is sold for after foreclosure. Such claims are time-consuming and expensive to win, so most lenders do not pursue them. In the past, some lenders have sought judgments against a few borrowers to deter others from walking away, said Grant S. Nelson, an emeritus law professor at the University of California, Los Angeles.

In an attempt to reduce the incentive to default, Fannie Mae recently increased to five years, from four years, the time borrowers have to wait after a foreclosure to get another Fannie Mae loan. The company will make exceptions under extenuating circumstances.

The Bush administration has said that the only people who deserve housing relief are those who cannot pay, not those who will not pay.

“Let me also emphasize that any homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator,” Treasury Secretary Henry M. Paulson Jr. said in late March. “Washington cannot create any new mortgage program to induce these speculators to continue to own these homes, unless someone else foots the bill.”

Nonetheless, some real estate professionals, particularly those in markets where home prices are falling fast, say borrowers who can pay may be tempted to walk away.

Brett Barry, a real estate agent in the Phoenix area, said some of his clients owe $100,000 more than their houses are worth. Single-family home prices have fallen 24 percent from their peak in the summer of 2006 in the region, according to the Standard & Poor’s Case-Shiller home price index, and the decline shows no sign of abating.

While some of Mr. Barry’s clients are having a hard time making payments, others who can afford to keep paying are also thinking about leaving because they worry their homes will be under water for many years to come.

“These markets are driven by psychology,” Mr. Barry said. “If people see that the market will continue to decline and they are already in the hole by 50 to 100 grand” they will leave.

One of his clients, a woman named Vivian, recently mailed the keys to her second home to the bank and walked away.

She and her husband bought the house outside Phoenix in 2004 in hopes of retiring there near one of their daughters. They put 20 percent down on the $240,000 house and at first made their payments without struggle.

But her husband, who was the primary income earner in the family, died suddenly last year from a staph infection. Vivian said she could no longer afford to keep paying the mortgage on two homes, because her only source of income now was a monthly Social Security check.

“I can’t sell it, I can’t pay for it,” said Vivian, 64, who spoke on the condition her surname not be used.

Though no two stories are exactly the same, such cases are not uncommon, housing specialists say.

The boom of recent years left many Americans financially vulnerable because they had borrowed too much against their homes, thinking prices would not go down. Others speculated by buying multiple homes. The housing and mortgage industries championed the notion that home prices had never declined nationally and that buying a home, even in a frenzied market, was always a good investment.

Jon Madux, a founder of the site YouWalkAway.com, which helps borrowers leave their homes, said a majority of the site’s clients default because of financial hardships. But in the Southwest and Florida, more of its customers are investors who bought multiple condos or houses and are now not able to find renters or sell for more than they owe.

The Mortgage Bankers Association estimated that the owners of 18 percent of the homes in foreclosure as of September 2007 did not live in those properties. Many used riskier loans, which are defaulting faster than more conventional mortgages.

Peter Chinloy, a real estate and finance professor at American University in Washington who has studied how borrowers behave when home prices fall, said policy makers should recognize that the problems are most severe in a few states in the Southwest, the Midwest and in Florida, and should aim relief in those places. It is also most severe for loans made between 2005 to 2007, when credit was at its easiest.

“One of the thing that has not gotten much attention,” he said, “is how localized the problem is.”

BofA to expand efforts to help Countrywide borrowers

LOS ANGELES (AP) -- Bank of America Corp. will expand efforts to help Countrywide Financial Corp. borrowers avoid foreclosure on trouble mortgages, a top bank executive said Monday.

The announcement came as members of the Federal Reserve Board convened two days of public hearings on Bank of America's proposed $4.1 billion stock deal for Calabasas, Calif.-based Countrywide.

Liam McGee, president of Bank of America's global consumer and small business banking operation, said the bank will modify at least $40 billion in problem loans from at least 265,000 borrowers over the next two years. That figure includes borrowers from both lenders, although the majority of the at-risk loans are held by Countrywide borrowers, McGee said after he delivered his testimony.

To accomplish this, the company will offer borrowers several options, including loan modifications and payment forbearance. It will not charge borrowers in foreclosure new late charges, and, in some cases, will waive prepayment penalties, McGee said.

"Bank of America will continue to offer home loan products to those who can afford them," McGee said during the hearing. "We also recognize that some consumers who are experiencing financial challenges but who ultimately have the ability to pay their loans need our help to pay their loans, and we are ready to help them."

The acquisition, which is expected to close in the third quarter, would make Charlotte, N.C.-based Bank of America the nation's largest mortgage lender in addition to the nation's largest consumer bank.

The Fed is required to consider whether the deal would harm consumers. It held its initial public hearing last week in Chicago.

Consumer advocates nervous about the takeover urged the Fed to require Bank of America to give more specifics on how it will work with borrowers to keep them from losing their homes and improve customer service for borrowers seeking assistance.

"We believe the proposed merger should not be approved without substantial conditions," testified Kevin Stein, associate director of the California Reinvestment Coalition, an umbrella organization for consumer advocacy groups.

In a reference to Bank of America's $40 billion plan to help at-risk borrowers, Stein said "To put a dollar figure and say this is what we're going to do is not necessarily a solution to the problem, especially in California."

Consumer advocates claim Countrywide has not been responsive enough to homeowners having trouble making their mortgage payments. They have also sought assurances from Bank of America that it won't slash Countrywide's work force, something they said would slow efforts to help borrowers.

McGee said that the combined companies would have at least 3,900 employees engaged in customer support for at least a year, and vowed "We will not have telephones not answered."

When its buyout of Countrywide is complete, Bank of America's mortgage operations will be headquartered in Calabasas, Calif., where Countrywide is based, McGee said.

More than 120 consumer and business groups and others were scheduled to testify before the four-member Fed panel. Countrywide did not have anyone scheduled to testify.

In his remarks, McGee stressed repeatedly that Bank of America's "values and business practices" would govern the combined mortgage companies.

The bank, clearly looking to reassure lawmakers, consumer advocates and others who have criticized Countrywide's lending and loan-servicing record, also announced initiatives to boost charitable lending and community investment.

It plans to double its community development lending goal to $1.5 trillion over 10 years and boost charitable lending by 33 percent to $2 billion, McGee said.

Bank of America shares rose 14 cents to $38.44 during afternoon trading on Monday. Shares of Countrywide added 9 cents, or about 1.7 percent, to $5.93.

Foreclosures spike 112% - no end in sight

More than 155,000 families have lost their homes to foreclosure this year; one out of every 194 U.S. households received a foreclosure filing.

NEW YORK (CNNMoney.com) -- Foreclosure filings in the first three months of 2008 rose more than 112% over last year, according to a study released Tuesday.

Real estate information firm RealtyTrac reported that nearly 650,000 foreclosure filings - which include notices of default, auction sales and bank repossessions - were issued in the first quarter. That represents 1 of every 194 households and marks a 23% increase from the last quarter of 2007.

So far this year 156,463 families have lost their homes to repossessions.

"Foreclosure activity hasn't slowed down yet," said Rick Sharga, spokesman for RealtyTrac. "But I was a little surprised that foreclosure filings more than doubled since last year."

Foreclosures increased in 46 states and in 90 of the nation's 100 largest metro areas. Some regions that had been only marginally hurt by the mortgage meltdown recorded large increases in filings. In Connecticut, for instance, filings tripled compared with the first three months of 2007. Massachusetts recorded a 260% increase.

Nevada: Hardest hit

The worst hit states are still clustered in the Southwest; Nevada, California and Arizona lead the nation in foreclosure filings. Prices ran up rapidly in these areas during the bubble years as speculators snapped up single-family homes and condos as investments.

In the first quarter, 1 of every 54 homes in Nevada received some type of foreclosure filing - more than any other state. Its largest city, Las Vegas, had 1 out of every 44 homes go into foreclosure.

Stockton, Calif., had the highest foreclosure rate out of any U.S. metro area, with 1 out of every 30 homes receiving a notice - nearly seven times higher than the national average. The Riverside/San Bernardino region had the second highest rate in the quarter, with one of every 38 homes in default.

Only two metro areas in the ranks of the 20 hardest hit were outside the Sunbelt - Detroit, which ranked sixth in the nation with 1 in every 68 households in default, and Cleveland which saw 1 in every 105 homes go into foreclosure.

The news comes despite increased foreclosure prevention efforts by lenders and community organizations. Hope Now, the coalition of mortgage lenders, servicers investors and community groups, announced Monday that it helped over a half a million home owners avoid foreclosure during the first three months of the year.

And some local governments have stepped up their programs to help borrowers, according to RealtyTrac CEO James Saccacio.

"For example, in late March Philadelphia issued a temporary moratorium on all foreclosure auctions for April," he said. "The city has since adopted a program that will delay foreclosure proceedings on owner-occupied properties until the owners have met face-to-face with lenders to attempt to create a loan workout plan that would prevent foreclosure."

More trouble ahead

Additionally, lawmakers in Washington, D.C. are at work on several plans that would deliver foreclosure relief to distressed borrowers.

All of these foreclosure prevention efforts may not be able to stand up to the tsunami of foreclosures on the way. Sharga says that a record number of hybrid adjustable rate mortgages (ARMs) - worth $362 billion - will reset in 2008.

These so-called "exploding ARMs" usually have low introductory interest rates that reset much higher after two or three years, and then re-adjust as often as every six months after that. Unless these loans can be reworked, many will fail.

"We expect to see another foreclosure peak in the late third or fourth quarter of the year," said Sharga, "because of the record number of resets coming."

Pain of Foreclosures Spreads to the Affluent

GREENWICH, Conn. — This wooded town of roughly 60,000 on Long Island Sound — home to dozens of hedge funds, many millionaires and more than a few billionaires — is one of the wealthiest enclaves in the country. But even Greenwich is not immune to the wave of home foreclosures sweeping the nation.
On Stanwich Road, for example, a house worth $2.6 million is close to going on the block. On Hettiefred Road, the owner of a 2,720-square-foot, four-bedroom colonial featuring a luxury kitchen, swimming pool and tennis court, has been threatened with foreclosure for months. Several dozen other owners in Greenwich have received foreclosure notices this year.

But there is a difference from most other communities. Auctioning off such homes is a far greater challenge here than elsewhere, as affluent but cash-squeezed owners often find ways to delay losing their homes, sometimes by coming up with just enough to make last-minute payments avoiding a final sale — for a while, anyway.

Just ask John Thygerson, who parked his Jeep sport utility vehicle in front of the empty house on Hettiefred Road on the flawless spring day last Saturday.

As a foreclosure auctioneer, he was scheduled — for the third time since January — to sell the house. But the owner, a construction business owner who has fallen on hard times, made a last-minute mortgage payment and the foreclosure was postponed yet again.

So Mr. Thygerson was there to shoo prospective buyers off the property, nod at inquisitive neighbors and stake out a new spot for a fourth set of foreclosure signs after the first three had been mysteriously torn down.

“We never had a case that had gone through three separate sales attempts,” he said, still dazed that the auction failed to take place. “Greenwich being Greenwich, foreclosures are a rare occurrence.”

Rare, perhaps, but not unheard-of, as the housing industry collapse starts to claim victims among the affluent. Personal traumas like business reversal, illness and divorce play a role. There’s no real pattern, with people as diverse as builders, restaurateurs and poker players at risk of losing their homes.

The town, which typically has about half a dozen foreclosure notices each month, recorded 34 filings in January, according to RealtyTrac.

But even the most financially stressed of Greenwich homeowners have generally been able to ward off actually losing their homes.

RealtyTrac data shows that owners of seven homes received notices of default last month, and another home is about to be auctioned in this town where the average single family home that sold this year went for $3.1 million. The owners of all of them had received notices of pending litigation but were still hoping to rescue their positions. In the last 30 days, none of the three Greenwich properties listed for auction were actually sold.

As millions across the nation face the threat of losing their homes, the few Greenwich owners in trouble are tapping into other resources that most people cannot call upon to help prevent the ultimate indignity.

In Greenwich, foreclosure filings were made against 100 homes last year, according to RealtyTrac. That translates into less than half of 1 percent of Greenwich’s 24,511 households, compared with a rate higher than 1 percent nationwide.

Already one of the richest cities in the country in 2000, when the Census Bureau recorded a median household income of $99,086 — more than double the national average — the town has become far wealthier in recent years, with the exponential growth of many of the hedge funds that have set up business here. A new generation of wealthy Wall Street executives has moved in as well. By 2007, the Connecticut Economic Resources Center reported, the median household income had risen to $122,849, with many homeowners earning far more.

The tearing down of existing homes to make room for new ones has continued despite the mortgage crisis that began last summer. And while prices and sales volume are dropping, Greenwich is not suffering as badly as nearby towns.

Through April 23 this year, 160 co-ops, condos and single-family homes sold for $290,000 to $30 million. That compares with 240 sales, from $385,000 to $12 million, for the period in 2007, according to the Greenwich Multiple Listing Service.

But with the financial system straining under extreme pressure, some Greenwich residents may be facing tougher times in the near future. The New York Independent Budget Office predicts that Wall Street will lose more than 20,000 jobs by the end of 2009. Some start-up hedge funds are having trouble raising capital.

Still, lawyers working on Greenwich’s early foreclosure cases predict that most will never reach the auction stage because their homeowners almost always have other options.

Burt Hoffman, a lawyer in Stamford, Conn., is helping one such Greenwich homeowner sell his property as a “short sale,” in which the price is expected to fall short of the value of the mortgage securing the home. He is also trying to buy three troubled Greenwich homes before they are sold at auction and fielding calls from clients hoping to pick up a bargain.

Similarly, Eileen Pate, a Greenwich lawyer, recently helped one client avoid foreclosure by arranging a short sale with his bank, which agreed to accept payment over time for the difference between the outstanding mortgage and the price the house fetched.

As for the four-bedroom colonial that just avoided going on the block, Zbigniew Skwarek, the 41-year-old owner, came up with his own money to postpone the auction. Court records show he stopped paying on his mortgage on Feb. 1, 2007. But three days before the scheduled auction, he said, he gave his lender a check for $50,000.

Mr. Skwarek may not live in one of Greenwich’s most coveted neighborhoods. But like many residents here, he owns other properties, including an apartment in Greenwich and a home in Florida, and he can tap into that equity.

“I don’t want to lose this house,” Mr. Skwarek said in a telephone interview.

Mr. Skwarek rented out the house after he divorced his wife, Renata, in 2004, because, he said, it felt too big to live in alone. But last year, he said, his renters, John and Arline Josephberg, stopped paying their monthly rent of $10,000.

While living there, Mr. Josephberg — who previously ran the financial firm Josephberg Grosz & Company — was put on trial, accused of not paying his taxes for 29 years. He was sentenced to 50 months in prison. By the time the couple moved out in January, they owed Mr. Skwarek $90,000. Calls made to Mrs. Josephberg and to the couple’s daughter were not returned.

But public records show that Mr. Skwarek had trouble paying his bills even before he rented out his home. Court documents show that he also owes construction and supply companies more than $200,000 for unpaid bills on his home.

In the past four years, he has been in court several times over unpaid bills. He has a felony conviction for not paying wages to his workers and a misdemeanor for issuing a bad check. He was sued in small claims court for not paying his divorce lawyer. His former wife said that his money troubles contributed to the end of their marriage.

“I was sick about how he took care of the bills,” Ms. Skwarek said. “He didn’t change.”

A few of Mr. Skwarek’s neighbors can relate to his financial troubles. Two other homes on the same road have appeared in preforeclosure filings in the past year.

Vincent Scorese, who owns a house next door and also faces the risk of foreclosure, moved out and rented out his home after he went through a divorce. He said that as a builder he became overextended and found it difficult to make his mortgage payments on the five properties he owns in the area. So he has put them all up for sale.

“I feel bad for him,” Mr. Scorese said. “So many guys are in trouble, even guys you wouldn’t expect.”

Mr. Skwarek says he is eager to hold onto his home, especially because it represents the culmination of his longstanding immigrant dream. Mr. Skwarek said he grew up outside of Warsaw and studied construction in Germany, France and Britain.

He arrived in New York in 1993 and soon started his firm, Bishek Construction. In 1998, he bought his Greenwich house for $495,000. He added a second floor and a luxury kitchen to the 53-year old home.

Arline Schmaling, who lives across the street, said that she hoped that Mr. Skwarek figures out a way to return to his home. As she sat on her front porch, she talked about how Mr. Skwarek plowed her driveway and helped install handicap bars for her husband in the bathroom before he died from cancer.

Ms. Schmaling said she missed Mr. Skwarek’s two daughters and son. She liked to bake cupcakes with the girls, who are now teenagers, and play Boggle with them.

“They were like second grandkids,” she said. “It was so fun to have kids in the neighborhood.”

Mr. Skwarek has still not figured out how he will hold on to his home. He will try to rent it again, he said. If that doesn’t work, he plans to move in and rent out his apartment. He remains optimistic that foreclosure will never happen and that his lender will help him find a way to escape his financial trap.

“They want to work with people like me,” he said.

Mr. Thygerson, the auctioneer, agrees that he may never get a chance to do his job.

“You look at this place,” he said, “and foreclosure does not come to mind.”

No help for 70% of subprime borrowers

State regulators say efforts to help at-risk borrowers are barely keeping pace with rising delinquencies. Many borrowers are left out.

NEW YORK (CNNMoney.com) -- Seven out of 10 seriously delinquent subprime mortgage borrowers are still not getting the help they need to keep their homes, according to a report released Tuesday by state officials working to stem the foreclosure crisis.

"We're still way behind," said Iowa Attorney General Tom Miller, who helped form the State Foreclosure Prevention Working Group, a coalition formed last year by 11 state attorneys general and bank regulators.

The coalition is working with lenders and companies that service mortgages to try to keep people from losing their homes. It drew its statistics from 13 of the 20 major servicer companies, which handle about 58% of all subprime loans.

More than 1 million of those loans, or nearly 25% of the total, were delinquent as of Jan. 31. And foreclosure proceedings have begun on 300,000 of them - an 8% increase since October.

Mortgage servicing companies, which manage accounts and process payments, play a key role in efforts to help delinquent borrowers work out affordable mortgages. Workouts can take the form of simple repayment plans or more comprehensive loan modifications that involve reductions in balances or interest rates.

Many subprime loans are adjustable rate mortgages, meaning their interest rates jump after an introductory period. Borrowers who had not fallen behind on their payments before their rates reset can benefit from a simple freeze of their rates. Many subprime borrowers took out loans they could not really afford - making workouts more complicated.

The report showed that 28.5% of subprime adjustable rate mortgages that won't reset until spring 2009 are already delinquent. About 21% of these same loans were delinquent in October.

One step forward, two steps backward

The state officials said Tuesday that workouts have not kept pace with the rising tide of foreclosures.

"Our collaborative efforts to date have failed to prevent a large number of unnecessary foreclosures," said Mark Pearce, North Carolina deputy commissioner of banks. "We need to find solutions that fit the size of the problem we are facing."

The report, which surveyed efforts by lenders and servicers and programs like Hope Now, found that the number of borrowers getting help each month has increased to nearly 261,000 in January from about 210,000 in October. But because the ranks of troubled borrowers is growing so quickly - to over 1 million at the start of the year from 820,000 last fall - the proportion of mortgage rescues has remained essentially unchanged.

Mortgage industry leaders are looking at the data with more of a glass-half-full perspepctive.

"We've helped more than 1.2 million people through the process. That is a significant accomplishment," said Paul Richman, the vice president for government affairs with the Mortgage Bankers Association. "But we still have a big problem reaching out to borrowers."

Many at-risk borrowers still do not respond to the efforts of mortgage servicers to contact them, according to Richman. When they finally do ask for help, they may have fallen way behind in payments, complicating any rescue plan.

Currently, the preferred remedy for lenders is to allow borrowers time to make up missed payments. For seriously delinquent borrowers, loan modifications are the only viable answer. Only 27% of the workouts completed in January, little more than 24,000 borrowers, involved modifications.

But of the loans that were still being worked out as of January, 53% were headed for a comprehensive modifications rather than less effective repayment plans.

Too many loans to work out

One reason why mortgage servicers have fallen behind in workouts is that they are overwhelmed, unable to cope with the sheer numbers of delinquent loans, according to the report. About two-thirds of all mortgage modification efforts take more than six weeks to complete.

"We're finding the servicing system can't manage and re-underwrite millions of loans," Pearce said. "The case-by-case approach [they're using now] was not designed to handle the numbers of loans they're dealing with."

The report said that delinquent loans are "clogging up" the system, slowing the pace of modification efforts and possibly adding to the number of vacant homes in many communities.

The Working Group made two recommendations to improve the rate of mortgage modifications: Slow down the foreclosure process to give servicers more time to find solutions for individual borrowers, and take a more systematic approach to modifying loans. That would eliminate some of the intensive counseling that is now the rule for nearly every borrower.

Many seriously delinquent borrowers are in the same boat, more or less, and servicers should be able to take a uniform approach to their workouts, according to Richard Neiman, the New York superintendent of banks. Applying a streamlined workout model toward a large percentage of the borrowers would free up staff to address the borrowers facing thornier issues.

It's not only staffing problems that have slowed mortgage modifications; there's also reluctance on the parts of some servicers to act.

"Some servicers fear that if they modify loans down, they run the risk of litigation somewhere down the road if the borrower eventually defaults," said Neiman

Americans say jobs key to keeping home: survey

NEW YORK (Reuters) - Americans are cash-strapped and many say if they lost their jobs, they would lose their homes, according to a survey published on Tuesday by AOL Real Estate and Zogby International.

Many Americans are using a large portion of their budget for housing, and 43 percent of those surveyed in mid-February said they spend more than the generally recommended 30 percent of household income for housing.

The survey found that 22 percent of respondents would lose their house or apartment with an unexpected short-term job loss, and 30 percent are working paycheck to paycheck to cover housing costs.

"There is definitely a lot of pressure and stress on American households right now," said Alan Steel, general manager of AOL Real Estate.

Thirty percent of respondents said they know someone who has gone through or is being forced to sell their home due to a foreclosure.

"In this environment too many people are passive and maybe deny things, but with all the headlines these days everyone should get really smart about their own situation and figure out what they can do," Steel said.

Despite the headlines about housing troubles, 31 percent of respondents believe their homes are worth more than they were a year ago and 56 percent do not think their home will be worth less in five years.

This optimism continues, with 69 percent of Americans seeing real estate as a viable investment. If forced to sell their home today, half would buy another home rather than rent.

They also would also prefer to use their computers when house shopping, with 67 percent turning to the Internet first when looking for a home.

For those not interested in selling or purchasing a home this year, 16 percent said they were planning a major home remodeling project.

Interviews for the AOL Real Estate-Zogby International survey were conducted among a national sample of 6,678 adults ages 18 and older, conducted February 15-18.

Members of the online Internet panel were recruited by Zogby. The margin of error is plus or minus 1.2 percentage points.

Florida Luxury Home Market Shows Signs Of Wear

MIAMI (Reuters) - The surprisingly healthy market for oceanfront mansions and palatial condos in Florida, one of the most toxic states in America's housing meltdown, may finally be showing some cracks.

While many luxury properties are selling briskly thanks to Europeans and Canadians pouring their strong currencies into Florida, billionaire Donald Trump recently dropped the price on a Palm Beach mansion by 20 percent, and some market watchers say the U.S. housing woes have finally touched the wealthy.

At a recent luxury property auction in Fort Lauderdale, the auctioneer took home after home off the block within moments after opening the bidding when nobody made an offer.

On one high-rise condo in the Miami enclave of Williams Island, a 3,100 square foot penthouse previously listed at $5.6 million, he opened bidding at $5 million, lowered his price to $3.5 million, $3 million, $2.5 million, and then closed the auction, all within a minute.

"There's just not that much enthusiasm or activity in the luxury market," said Jack Winston, a real estate analyst with Goodkin Consulting in Miami.

After the local real estate market peaked two years ago, local brokers said high-end real estate was the only thing propping up the condo market in Miami, one of the most overbuilt and overpriced in the United States.

Sales figures from the Florida Association of Realtors supported that notion.

The median price of Miami condos gained 6 percent last year while price declines of 25 percent or more were seen elsewhere in the state amid the U.S. mortgage crisis, soaring property taxes and hurricane insurance woes.

Miami's vast Atlantic Ocean and Biscayne Bay shoreline offers thousands of water-view properties that have held their value better than cheaper houses and condos inland, where the foreclosure crisis has battered homeowners.

The Miami condo market finally had a bad month in December, when the median price fell 10 percent.

Auctioneers sold "north of 20" of the 50-plus properties on sale at the Fort Lauderdale auction, said SKY Sotheby's president, Chad Roffers. The event offered up an estimated $300 million in properties ranging from a $2.45 million, one-bedroom on ritzy Fisher Island, to mansions in the $15 million range.

"The high end is resilient," Roffers said. "Certainly the market has corrected since the peak of 2005. What we are seeing is that quality waterfront inventory is holding value."

But many properties were quickly pulled from the auction when no one bid. And bargain hunters had an open field.

One man, in short order, snapped up two bayfront houses in Miami Beach's pricey Venetian Islands, one for $500,000 and the other for $1 million. The homes sold for $2.75 million and $2 million respectively in mid-2005, according to county records.

Guido Teichner, a would-be buyer who said he attended the auction looking to make a killing, put in a $500,000 bid on a two-story, 4,000 square foot (370 square meter) penthouse condo in downtown Fort Lauderdale that had previously been listed at $3 million.

"At that price I'd be thrilled. That would be a killing," he said of the bid, which was accepted at auction but still awaited seller approval because it was below the minimum bid.

"Fifty cents on the dollar is not good enough in this market," he said. "I don't think we've hit bottom yet so you've got to get a real steal to allow for a little remaining downside."

There were signs of both strength and weakness in Florida's luxury market.

In Palm Beach, one of the priciest postal codes in the United States, the average price of a single-family home climbed to $5.11 million in 2007, up $618,000, according to The Evans Report, a closely watched monitor of the town's market.

An oceanfront estate owned by philanthropist Sidney Kimmel sold this month for $81.5 million, the full asking price, broker Dana Koch of Corcoran Group said. He would not reveal the buyer, but a local newspaper identified him as John Thornton, former president of Goldman Sachs.

"We had a lot of people through the house. Sports team owners, athletes, captains of industry, a Saudi prince," Koch said. "It might be the highest sale of a single-family home on the east coast.

Trump's Palm Beach mansion could top that, if he gets his price for the 6 acre (2.4 hectare) property, which includes 82,000 square feet of buildings and 475 feet of Atlantic Ocean front.

He dropped the asking price by $25 million after two years on the market, but still wants $100 million for a home he bought for $43.3 million four years ago.

Another property, Canyon Ranch Miami Beach, a massive oceanfront condo-hotel, is doing well, just a few months before completion, but its developer, Eric Sheppard, said he would not start another big Miami project in current market conditions.

Sixty-five of 100 units closed in the first six weeks they were on offer, Sheppard, chief executive of WSG Development, said.

"We're thrilled. There's only about 3 percent that just don't have the funds to close, and we've already resold most of those units," he said.

But analyst Winston warns a "disaster" is coming soon, when thousands of new apartments in Miami receive their certificates of occupancy.

"The disaster is really going to start to show its ugly head in the middle to end of this year," he said. "As higher priced units come to closing, we think you will start to see 30 to 40 percent defaults."

Foreclosures Push States to Try a Mix of Solutions

As the federal government debates responses to the foreclosure crisis, states are experimenting with a broad range of solutions, including emergency loans and agreements to limit high interest rates. The result is a rapidly changing patchwork of local approaches, some far-reaching, others modest, according to a survey issued Tuesday by the Pew Charitable Trusts.

Among other measures, 20 states have created intervention programs, 13 have set up counseling hot lines, 14 have assembled task forces and 9 have established funds for emergency loans or refinance loans, totaling $450 million.

“States have had to step into the void because the federal government has not moved,” said Tobi Walker, a senior program officer at Pew. “The nature of the problem changes quickly; that’s why it’s important to look to states, which can be far more innovative. They can adapt solutions to local circumstances.”

It is too soon to say how effective any of the programs will be.

The states face an uphill battle, in part because of resistance from the lending industry to new regulation. Only nine states require mortgage brokers to consider the best interests of borrowers when making loans, and only seven require lenders to assess borrowers’ ability to repay. At the same time, state governments are hamstrung by declining revenues as a result of the housing meltdown.

Ohio, which has been hit particularly hard, with 85,000 properties going into foreclosure last year, announced last week a nonbinding agreement with nine large loan servicers to modify troubled loans and report their progress to state officials. In addition, the state’s chief justice recruited more than 1,000 lawyers to represent borrowers free of charge, and the state set up a hot line to direct borrowers to the lawyers.

“We need more help from the federal government,” said Gov. Ted Strickland of Ohio, a Democrat. “The states are in trouble. States do not have resources or mechanisms to deal with this issue.”

But even so, Bill Faith, executive director of the Coalition on Homelessness and Housing in Ohio, said the results were visible on the ground. “Up through the end of 2007, counselors and homeowners said, ‘We call these companies and we get the runaround, we can’t get through the maze,’ ” said Mr. Faith, referring to loan servicers. “We weren’t seeing any significant modifications. That’s beginning to change. When I talk to the nonprofits, they say they’ve had as many loan modifications in the first quarter of 2008 as in all of 2007.”

Gov. Tim Pawlenty of Minnesota, a Republican, this week asked loan servicers in the state to sign a similar agreement, and he announced a program to pay for mediators when counselors and lenders come to an impasse in modifying loan terms. The state’s Commerce Department also set up a hot line for housing counselors to call when they cannot get responses from lenders.

Using public and private money, the state provided grants to increase the number of housing counselors to 37 from 18. But even so, foreclosures are expected to rise this year.

“States have an important role in the foreclosure crisis, and Minnesota is taking among the most aggressive actions to help homeowners,” said Brian McClung, a spokesman for the governor. “But at a broader level we’re hopeful the federal government will provide some overarching structure.”

In all, about 20 states formed partnerships with the nonprofit Homeownership Preservation Foundation, which provides homeownership and foreclosure counseling, sometimes over the telephone.

In Colorado, the state housing division raised $750,000 in private donations to hire a nonprofit agency to run a hot line that refers callers for counseling in person. The program grew out of a consortium of lenders, servicers, nonprofit groups and state and federal agencies. “It needs to be a public-private partnership,” said Kathi Williams, the division’s director.

Mrs. Williams said that the hot line received 30,000 calls last year, and that four of five callers who received counseling had so far stayed out of foreclosure. But foreclosure remains a tenacious problem, up 10 percent over last year, compared with a 30 percent jump in 2007.
Other states have called for delays in the foreclosure process, emergency loans and legislation to prevent foreclosure rescue fraud. Maryland passed a ban on prepayment penalities, which make it onerous or impossible for many borrowers to refinance high-cost loans.

While several states — including Colorado, Maine, Massachusetts, Minnesota, North Carolina and Ohio — have passed legislation requiring tighter underwriting standards for lenders, such legislation may be more effective at the national level, said Ms. Walker of Pew, because of the concerted resistance by the lending industry.

Not all state programs have been effective, said Allen Fishbein, director of housing and credit policy at the nonprofit Consumer Federation of America. An emergency loan program in Maryland failed because its eligibility requirements disqualified the people who needed it most.

“Trying to find loan products is a process of trial and error,” said Thomas E. Perez, the state secretary of labor, licensing and regulation. “We now have new products that allow people with blemishes on their credit record to qualify. We’re learning from our mistakes.”

While states are working ahead of federal policy, many say the problem is too big for states to handle on their own.

“It’s tinkering around the edges,” said Mr. Faith of the Ohio homeless organization. “We’re saving a few thousand homeowners when we have 85,000 foreclosure filings a year. We’ve been trying to see what we can do in the absence of action on the federal level. But we don’t have the resources or the regulatory authority or the leverage with the industry. Much more serious progress is only going to be achieved if the feds take appropriate action.”

Consumer prices muted as housing starts reach 17-year low

WASHINGTON (Reuters) - The number of housing projects started last month fell to the lowest in 17 years, while consumer prices moved up a bit less than expected, leaving the Federal Reserve some room to lower interest rates to ward off a housing-led slowdown.

While the slide in the housing sector continued, industrial production unexpectedly rebounded as utilities raised output due to colder weather, making up for weak manufacturing growth.

The Commerce Department said on Wednesday that housing starts dropped 11.9 percent in March to an annual rate of 947,000 units, the slowest pace since March 1991 and well below the 1.02 million expected by economists.

"These housing starts suggest that the pace of decline is intensifying, which is the last thing the U.S. economy needs right now," said Stephen Malyon, senior currency strategist at Scotia Capital in Toronto.

Separately, the Labor Department said consumer prices rose 0.3 percent last month, slightly less than expected, after a flat reading in February. Stripping out food and energy, core prices, which also held steady in February, moved up an even milder 0.2 percent, restrained by a big drop in the cost of clothing.

U.S. stock prices shot higher at the open and U.S. government bond prices moved lower as investors saw the price data as leaving more room for the U.S. central bank to keep cutting interest rates to try to spur a slowing economy. The dollar lost ground on the prospect of more rate cuts, with the euro reaching a record high.

The Fed has lowered benchmark borrowing costs by 3 percentage points since mid-September, trying to ward off spreading weakness from the deep housing downturn and a related drying up of credit.

The housing data pointed to a continuing deterioration in the housing sector as building permits fell 5.8 percent to their lowest since April 1991, when the economy was in recession.

ENERGY PRICE PRESSURES

The report on consumer prices showed rising energy prices continuing to exert upward pressure on overall inflation.

Energy prices shot up 1.9 percent in March. The cost of gasoline, which hit record highs last month, rose 1.3 percent.

While financial markets initially greeted the consumer price data as providing greater scope for the Fed to lower interest rates, not everyone agreed. Over the past year, consumer prices have risen a sharp 4 percent on the back of surging energy costs.

"In spite of a benign core reading, the overall increase will persuade the Fed to be less aggressive in easing rates," said Richard DeKaser, chief economist at National City Corp in Cleveland.

Apparel prices slid 1.3 percent, helping restrain both overall and core inflation. Car prices slipped 0.1 percent.

But a range of other costs moved higher. The Labor Department's housing-cost gauge moved up 0.4 percent, reflecting a sharp gain in utility costs. A measure of owner-occupied housing costs not affected by energy rose 0.2 percent.

FACTORY ACTIVITY SLUGGISH

Separately, the Fed said output at the nation's mines, factories and utilities rose 0.3 percent in March after a downwardly revised drop of 0.7 percent in February. Wall Street economists had forecast a 0.1 percent decline after February's previously reported 0.5 percent fall.

Utility output climbed 1.9 percent after a 3.6 percent drop in February, while manufacturing production rose 0.1 percent after a 0.5 percent fall.

"Factory output was held down by a large decline in the output of motor vehicles and parts. A shortage of motor vehicle parts that resulted from a strike at a parts manufacturer idled a number of motor vehicle assembly plants," the Fed said in the report, referring to the seven-week-old walkout at American Axle & Manufacturing Holdings (AXL.N: Quote, Profile, Research).

The strike, which has partly or completely idled some 30 U.S. auto plants, lay behind a 5.4 percent fall in motor vehicle output. Excluding motor vehicles, factory production rose 0.4 percent.

The capacity utilization rate, a gauge of how busy the nation's industry was, edged higher to 80.5 percent from 80.3 percent, still well below levels that would be considered inflationary.

Foreclosures jump 57 percent in last 12 months

NEW YORK (Reuters) - Home foreclosure filings surged 57 percent in the 12 month-period ended in March and bank repossessions soared 129 percent from a year ago, as homeowners struggled to make mortgage payments, real estate data firm RealtyTrac said on Tuesday.

For the month of March, foreclosure filings, default notices, auction sale notices and bank repossessions rose 5 percent, led by Nevada, California and Florida, RealtyTrac said.

The rise in March to filings on a total of 234,685 properties followed a 4 percent decline in February, RealtyTrac reported.

RealtyTrac said the peak has yet to be reached.

"What we're really looking at is ongoing fallout from people overextending themselves to buy homes they couldn't afford and using highly toxic loan products to get into the houses in the first place," Rick Sharga, vice president of marketing at RealtyTrac, based in Irvine, California, said in an interview.

"We're going to see quite possibly a record amount of foreclosure activity in the third or fourth quarter," reflecting sharp payment increases on adjustable-rate subprime mortgages in May and June, Sharga said.

One in every 538 U.S. households living in single-family dwellings received a foreclosure filing in March. The single-family dwellings can include condominiums.

There are three phases of the foreclosure process in most states -- an initial default notice, notice of a scheduled auction, and an "REO" filing if the property is not sold at auction but instead repossessed by the bank, Sharga said.

REO refers to real estate-owned property.

All of the households in the report received at least one of these filings last month.

AUCTION NOTICES UP 32 PERCENT

While default notices and repossessions soared in March, auction notices rose a relatively small 32 percent, James J. Saccacio, chief executive officer of RealtyTrac, said in a statement.

That suggests "more defaulting homeowners are simply walking away and deeding their properties back to the foreclosing lender," he said. "This deed-in-lieu-of-foreclosure process allows the lender to take possession of a property without putting it up for public foreclosure auction."

The states with the highest foreclosure filing rates -- Nevada, California and Florida -- also are among those that had the biggest price appreciation in the five-year boom before the housing meltdown that began in 2006.

These states tend to also be plagued by defaults on unoccupied homes bought by speculative investors. In many cases, home prices have now fallen below the size of the mortgages and some owners are walking away.

In Nevada, one in every 139 households received a foreclosure filing in March, keeping the state at the top of the ranks for the 15th straight month.

The 7,659 Nevada properties receiving foreclosure filings last month represented a 24 percent jump from February and a nearly 62 percent spike from March 2007.

California had the second highest rate of foreclosure filings, one for every 204 households, followed by Florida with one of every 282 households.

Arizona's filings fell about 5 percent, but it retained its standing as with the fourth highest pace of foreclosure activity for the third month straight.

Foreclosure activity in Colorado dropped 8 percent in March from February and 1 percent from a year ago, but it ranked No. 5, with one filing for each 339 households.

Georgia, Ohio, Michigan, Massachusetts and Maryland were the other states with the highest foreclosure rates in March.

The states with highest total number of foreclosure filings were California, Florida and Ohio.

Foreclosure filings were reported on 64,711 California properties in March, the most of any state for the 15th consecutive month, up nearly 21 percent from February and up almost 106 percent from March 2007.

Florida posted the second highest total, with foreclosure filings reported on 30,254 properties in March. While down about 7 percent from February, filings were about 112 percent higher than last March.

Georgia, Texas, Michigan, Arizona, Illinois, Nevada and Colorado were the other states with the highest foreclosure totals in March.

AP Poll: More Avoid Buying Homes

WASHINGTON (AP) -- A growing majority say they won't buy a home anytime soon, the latest sign of increasing pessimism about the nation's housing crisis, a poll showed Monday.

In a vivid sketch of how the sputtering real estate market is causing distress throughout the country, the Associated Press-AOL Money & Finance poll found that more than a quarter of homeowners worry their home will lose value over the next two years. Fully one in seven mortgage holders fear they won't be able to make their monthly payments on time over the next six months.

''This is a great time to buy, but not necessarily to sell,'' said Robert Jackson, who lives in a two-bedroom house in Ferguson, Mo., with his wife and four young children. He said he would love to purchase a larger home, but can't because even if he found a buyer, he would probably lose thousands on his house, which he bought less than two years ago.

''We're just going to have to slap a Band-Aid on it and stay here until the market gets a little bit better,'' Jackson, 30, said in a follow-up interview.

Jackson is not alone. Sixty percent said they definitely won't buy a home in the next two years, up from 53 percent who said so in an AP-AOL poll in September 2006. At the same time, just 11 percent are certain or very likely to buy soon, down from 15 percent two years ago.

The growing reluctance to dip into the housing market seems to stem partly from worry that housing prices will continue falling -- good if you're buying a house but bad if you have to sell one.

The number envisioning falling prices in their area has grown to one in four, while four in 10 think prices will rise, a decrease from two years ago. Expectations for rising prices are highest in the South, with Westerners likeliest to predict they will drop.

Underscoring the public's unsettled feelings, the number saying local housing prices are about right has fallen to 35 percent. Half say homes are overpriced -- especially in the Northeast -- while those saying housing is underpriced have doubled to one in 10, particularly Midwesterners.

Some pockets buck regional trends. Laurie Jensen, a single mother of three, struggles to make payments on her home in Whitehall, Mont., by working as a seasonal road construction flagger and at times collecting unemployment. She said she'd like to move outside of town, but the area is popular and prices have surged.

''Things are pretty crazy,'' she said. ''Places I don't consider that great are really expensive.''

One in 10 have adjustable rate mortgages, half of the number who said so two years ago. These mortgages generally start at a low interest rate and are later adjusted to market conditions -- which has often meant steep, unaffordable boosts that have forced many to refinance or even lose their homes.

Daniel Gallego, a warehouse worker in Stockton, Calif., said he may have to sell his home at a big loss. He said rising gasoline and other costs have made his adjustable rate mortgage unaffordable. Because he doesn't expect his home's value to recover soon, he said he may be better off moving now, before his rates rise.

''We may have to move in with my wife's parents or my parents,'' said Gallego, 30, who has two young children. ''I could pay off some debt, then we could rent, and maybe buy another house in a few years.''

The public anxiety is in reaction to an economy that is veering toward recession and losing jobs even as the housing market sputters badly. Foreclosures have soared to record highs, mortgage rates have increased, sales of existing and new homes have fallen and home values have dropped.

Gus Faucher, director of macroeconomics for Moody's Economy.com, a consulting firm, estimated that 9 million homeowners owe more on their home than it's worth. He said his company believes home sales are at or near bottom and home values will continue to fall until early next year.

Even so, he said, many people bought their homes before the run-up in values that started around 2001 and remain in good shape.

''So the value of your house goes down temporarily,'' he said. Unless the homeowner must sell now or can't afford the payments, ''that doesn't have that much of an impact.''

The poll also found:

--The biggest worriers are those expecting to buy soon. Of that group 43 percent frets that their home's value will drop in the next two years, compared with 25 percent of those not expecting to buy shortly.

--Fifty-nine percent think now is a good time to buy.

--Half think this is a very tough time for first-time buyers, an increase from two years ago. Nearly two-thirds think it's harder for first-home buyers than it was five years ago.

The AP-AOL Money & Finance poll was conducted from March 24-April 3 by Abt SRBI Inc. It involved telephone interviews with 1,002 adults nationwide, for whom the margin of sampling error is plus or minus 3.1 percentage points.

Included were interviews with 769 homeowners, for whom the sampling margin of error is plus or minus 3.5 points. The margin of sampling error for other subgroups was larger.

Troubled Homeowners Fall Prey to "Rescue" Scams

EASTPOINTE, Michigan (Reuters) - Among the byproducts of the U.S. housing crisis is a surge in scams that cheat people out of their money, their homes, or both, under the guise of offering to rescue them from foreclosure.

"There is a lot of money to be made if you are good at committing fraud," said Debra Zimmerman, an attorney at Los Angeles-based Bet Tzedek Legal Services, which provides free legal assistance to stricken home owners. "Foreclosure rescue scams are big business right now."

Groups like Zimmerman's say that as soon as borrowers end up in foreclosure -- a matter of public record in the United States - they are bombarded with calls, leaflets and knocks on the door from people armed with fraudulent offers of help.

Huston Julian, 54, of Eastpointe, Michigan, nearly fell for such a scam. Julian bought a home in this working class suburb of Detroit in October 2006, but fell behind with his $1,084 monthly payment when his disability benefits were cut off. He ended up in foreclosure in December.

"I got calls all day from people saying they could save my home," said Julian, 54, seated at a small table in his kitchen.

One group promised help if he gave them $3,800. He borrowed money from family and was all ready to pay, until his suspicions were aroused by the frequency of their calls.

"I said to myself 'something just ain't right here," Julian remembered. On the advice of his younger sister, he got in touch with local non-profit counseling agency the Michigan Neighborhood Partnership (MNP).

"I was able to convince Huston not to send the money and explained to him this was a rescue scam," said Juanita Bryant, a loss mitigation specialist at MNP who is negotiating with Julian's lender on a mortgage repayment schedule based on his restored disability benefits.

While such scams are on the rise, law enforcement agencies are overwhelmed.

"Almost every foreclosure rescue program you see out there is fraud," said Todd Lackner, a San Diego-based mortgage fraud investigator. "Sadly, the law enforcement community lacks the funds to investigate or prosecute all the cases."

Nonprofit groups say they, too, are vastly outgunned.

"The challenge we face is we lack the resources to compete with groups going door-to-door targeting home owners," said Josh Zinner, co-director of New York-based nonprofit NEDAP.

SMOOTH OPERATORS

As well as extorting money with promises of help that never materialize, other rescue scams include tricking borrowers into signing over part or all of their property. Often, the owners think they are signing a refinancing when they are actually signing a deed of transfer.

"In many cases people sign blank documents that are then doctored by adding text and a notary stamp to make them look like genuine contracts," said Pegah Kamrava of Bet Tzedek.

Kamrava is representing Teresa Martinez, 60, who said she was tricked out of her home by four men when she fell behind on her mortgage.

"They seemed like such decent young men so I trusted them," she said. "Now I feel stupid because they stole my home."

Martinez said she did not knowingly sign a transfer document, and paid $2,000 a month to the men, thinking she was still making her mortgage payments.

Randy Cornejo, listed as the owner of the home in court papers, said he bought the home from Martinez a year ago and rented it back to her. "I am the owner, and because she stopped paying rent we want to evict her," he told Reuters by telephone.

Bet Tzedek's Zimmerman said rescue scams prey on borrowers' fear and desperation when they end up in foreclosure.

"Property ownership is an integral part of the American dream," she said. "When home owners face losing that dream and someone says they can help, they jump at the chance."

The U.S. Department of Housing and Urban Development (HUD) has a list of certified counseling groups on its Web site (http://www.hud.gov) and experts say homeowners should accept help only from certified groups.

"If a group is not HUD certified, home owners should avoid it," said Ozell Brooklin of Acorn Housing in Atlanta. "The cash people hand over to crooks is money that could help them get a loan modification from their lender and save their home."

Rescue scam statistics are scarce. The U.S. Federal Bureau of Investigation includes rescue scams in overall fraud data. This year, the FBI says it expects 60,000 Suspicious Activity Reports related to mortgage fraud, up from 47,000 in 2007 and just 7,000 in 2003. The agency periodically announces it has filed charges in high-profile rescue fraud cases involving millions of dollars and hundreds of homes.

"We've had reports of rescue scams from almost every field office," said FBI spokesman Stephen Kodak. "This shows the ingenuity of criminals who can adapt to any economic environment."

The FBI has 150 agents devoted to mortgage fraud and has formed task forces with local law enforcement agencies in 32 U.S. states to help track rescue scams, he said.

But some officials argue more funding and public support are needed.

"Law enforcement agencies were already overworked and overwhelmed before this problem arose," said David Fleck, deputy district attorney for Los Angeles county. "The public at large sees violent crime as a greater threat than white collar crime, so rescue scams receive less attention."

"But fraud is just theft," Fleck said, "only instead of a gun you use a lie."

IMF Sees US Falling Into Recession

WASHINGTON (AP) -- The United States is headed for a recession, dragging world economic growth down along with it, the International Monetary Fund concluded in a sobering new forecast Wednesday that underscored the damage inflicted from the housing and credit debacles.

The IMF's World Economic Outlook served as a reminder of just how swiftly economic and financial fortunes in the United States and beyond can unravel, affecting people, investors and businesses around the globe. The fund slashed growth projections for the United States -- the epicenter of the woes -- and for the world economy. The fragile state of affairs greatly raises the odds that the global economy could fall into a slump, the IMF said.

Financial problems that erupted in August 2007 ''spread quickly and unpredictably'' and caused ''extensive damage,'' the IMF said. It described the financial shock as the biggest ''since the Great Depression.''

Economic growth in the United States is expected to slow to a crawl of just 0.5 percent this year, which would mark the worst pace in 17 years, when the country had suffered through a recession. The United States won't fare much better next year; the IMF projected the U.S. economy will grow by a feeble 0.6 percent in 2009, when measured by an annual average.

''The U.S. economy will tip into a mild recession in 2008 as the result of mutually reinforcing cycles in the housing and financial markets,'' the IMF said.

David McCormick, the Treasury Department's point person on international affairs, called the IMF's projections ''unduly pessimistic.''

Many private economists and members of the U.S. public believe the country has already fallen into its first recession since 2001. For the first time, Federal Reserve Chairman Ben Bernanke acknowledged last week that a recession was possible.

An increasing number of analysts think the U.S. economy, which grew by 2.2 percent in 2007, started shrinking in the first three months of this year and is still contracting. Under one rough rule, if the economy contracts for six straight months it is considered to be in a recession. A panel of experts at the National Bureau of Economic Research that determines when U.S. recessions begin and end, however, uses a broader definition, taking into account income, employment and other barometers.

McCormick resisted using the word ''recession'' to describe the U.S. economy. ''I don't think it matters what you call it right now ... It's clear, the U.S. is suffering through a significant downturn in its growth,'' he said.

When the IMF projected U.S. economic growth using another measure -- comparing activity in the fourth quarter of one year with the previous year -- the country's economy would actually shrink 0.7 percent this year, said the IMF's chief economist Simon Johnson. By that measure, the economy would grow by a still lackluster 1.6 percent in 2009, he added.

Given the problems of the United States -- the world's largest economy-- the performance of the global economy also will be strained.

The IMF now expects the world economy, which grew by a robust 4.9 percent last year, to slow sharply. The fund is projecting the global economy to grow by 3.7 percent this year and 3.8 percent next year.

There's a risk that things could turn worse, it cautioned.

''The IMF now sees a 25 percent chance that global growth will drop to 3 percent or less in 2008 and 2009 -- equivalent to a global recession,'' the fund said. ''The greatest risk comes from the still-unfolding events in financial markets, particularly the potential for deep losses'' on complex investments linked to the U.S. subprime mortgage market, the IMF said.

The sober IMF forecast comes days before the United States and other top economic powers are slated to meet Friday to discuss the problems and ways to deal with them. Talks will carry over into the weekend meetings of the IMF and the World Bank.

McCormick said finance officials on Friday will consider a plan, put forward by Bank of Italy Governor Mario Draghi, head of the Financial Stability Forum, to head off future financial crises.

The plan would focus on ways to bolster risk management practices, improve transparency and the accounting of complex investments and strengthen supervision. It also would take a closer look at credit-rating agencies, which have been criticized for not sufficiently assigning risk to certain mortgage-backed investments that eventually swooned in value.

''These efforts are a critical example of cooperation'' among the Group of Seven countries, McCormick said. That group is made up of the United States, Japan, Germany, France, Britain, Italy and Canada. He was hopeful the plan would be rapidly implemented.

Asked whether there would be a coordinated action by the G-7 to use public money to provide relief, McCormick said, ''we are not at all certain that would make sense.''

To limit the damage in the United States, the Federal Reserve has been slashing interest rates since last September and has taken a number of extraordinary measures to avert a financial meltdown, which would have dire consequences for the U.S. economy. The government, meanwhile, has enacted a $168 billion stimulus package of tax rebates for people and tax breaks for businesses.

Although the IMF said all these moves were appropriate, Johnson, nonetheless, predicted ''significant strains in housing and credit markets are likely to be protracted.''

House prices in the United States will continue to drop, with declines this year in the range of 14 to 20 percent, Johnson said. ''The housing correction will continue for some time,'' he added.

Problems started in the United States with risky ''subprime'' mortgages made to people with blemished credit and quickly spread into other areas, hitting more creditworthy borrowers. Foreclosures in the U.S. hit record highs and financial companies racked up multibillion-dollar losses as mortgage-backed investments soured with the collapse of the U.S. housing market.

The fallout gripped investors on Wall Street and in other countries, creating a panicky atmosphere that threatened to paralyze financial markets in the United States and beyond. ''The financial market crisis that erupted in August 2007,'' the IMF declared, ''has developed into the largest financial shock since the Great Depression.''

Greenspan Says Unfairly Blamed, Has No Regrets: Report

Former Federal Reserve Chairman Alan Greenspan has lashed out again at his critics, saying he was being blamed unfairly for the credit crisis and that he had no regrets about decisions he took while at the helm.

In an interview in Tuesday's Wall Street Journal, Greenspan, who left the Fed in early 2006, says critics are ignoring evidence in his favor and failing to give credit to the thinking behind the Fed's decision to lower rates when he was in charge.

Critics say Greenspan, under whom U.S. rates went from 6.5 percent in late 2000 to 1 percent in mid-2003, eased policy too much and then took too long to tighten again. That, they say, spurred excessive mortgage borrowing and stoked the housing bubble that is now the root cause of the credit crisis.

But Greenspan said the Fed cut rates to spur growth and prevent deflation and, at that time, dissenting votes on the policy committee were from those who wanted rates even lower.

Analysts also blame Greenspan for failing to press for stricter rules for bank lending to consumers with weaker credit records, and for not anticipating the subprime mortgage meltdown.

"I was praised for things I didn't do," Greenspan told the newspaper. "I am now being blamed for things that I didn't do."

In the interview, Greenspan admits he was wrong about the improbability of a housing bubble.

But WSJ reporter Greg Ip says Greenspan does not share some foreign central bankers' belief that their job is to defend against excessive asset-price inflation. No sensible policy, he maintains, could have prevented the housing bubble.

"I am reasonably certain that I am right here," Greenspan is quoted as saying. If proved wrong, he says, "I will change. I do not have a vested interest in holding wrong ideas."

Greenspan said rock-bottom interest rates actually went against his "19th century" aversion to easy money. "My inner soul didn't feel comfortable," he is quoted as saying.

But he also denies intimidating others into falling in line.

"What I find amusing is that history is being rewritten with me being portrayed as a force that overwhelms and persuades all these highly educated, very intelligent people to do my bidding," he says in the interview.

"That's just silliness. It's a terrible rewrite of history."

Homebuilders Get Breaks From Congress

Homebuilders and the mortgage industry are emerging as big victors in a bipartisan agreement reached by Senate leaders on legislation designed to limit the housing crisis.

The $15 billion Foreclosure Prevention Act of 2008, expected to be debated Thursday afternoon on the Senate floor, is drawing fire from critics who say it would do little to actually prevent foreclosures. The bill contains a $6 billion emergency tax break that would let companies use losses from 2008 and 2009 to offset profits earned over the previous four years, instead of the usual two-year timeframe.

That's good news for big homebuilders such as KB Home and Pulte Homes Inc., which have been saddled with massive losses over the past year.

Jerry Howard, chief executive of the National Association of Home Builders, said in an interview that the tax break is ''very important to the building community.'' It will keep many small homebuilders out of bankruptcy, he said, and will prevent large builders from having to liquidate assets.

Other big beneficiaries would be Wall Street banks such as Citigroup Inc., Merrill Lynch & Co. and Morgan Stanley. In fact, any company now struggling after years of healthy profits that pumped up their tax bills could benefit.

While Democrats and Republicans called the bill a productive bipartisan compromise, Dean Baker, co-director of the liberal Center for Economic and Policy Research in Washington, questioned whether the trade off was worthwhile for Democrats. ''This is first and foremost helping the big villains in the story,'' he said.

It would be the second time in recent history that the government has amended this accounting tool, known as a ''tax loss carryback,'' to stimulate the economy in the face of a recession.

Earlier this year, the National Association of Home Builders was so dissatisfied by lawmakers' actions -- notably not including the tax provision in the economic stimulus bill-- that it snapped shut its political purse. NAHB said it would stop making contributions to congressional candidates ''until further notice.''

Since 1990, the trade group has given nearly $20 million to federal candidates, with 35 percent going to Democrats and 65 percent to Republicans, according to the Center for Responsive Politics. A trade group spokesman could not be reached to comment on whether it plans to open its coffers again if Congress passes the housing bill.

The bill also contains $4 billion in grants to local governments to buy and refurbish foreclosed homes, new authority for states to issue bonds to be used to refinance subprime mortgages -- those made to borrowers with poor credit -- and a $7,000 tax credit for people buying properties in foreclosure.

It includes an additional $100 million -- half of what Democrats proposed -- for credit counseling to help homeowners avoid foreclosure. And the agreement permanently raises the limit for loans backed by the Federal Housing Administration to $550,000. That amount had been temporarily raised to nearly $730,000 as part of the economic stimulus bill signed by President Bush in February.

''This is a focused, modest package that will get tremendous bang for the buck in terms of improving the housing crisis,'' Sen. Charles Schumer, D-N.Y. said in a statement Wednesday. ''For sure, there is more to be done. But given the constraints of reaching a bipartisan agreement, this is a worthwhile step.''

Schumer and Sen. Patty Murray, D-Wash. will attempt to amend the bill to lift the mortgage counseling allocation back to $200 million.

Homeowners facing bankruptcy, however, won't find relief in the proposal.

The mortgage industry fought fiercely to spike a provision to let bankruptcy judges rewrite the terms of distressed mortgages. It won that battle; the provision was left out.

The Mortgage Bankers Association said it would have hurt more borrowers in the long run by requiring higher interest rates and larger down payments to offset the risk of bankruptcy court intervention.

Steve O'Connor, senior vice president of government affairs at the trade group, praised the deal. ''If bankruptcy reform were included, it would destroy the nature of the compromise,'' O'Connor said.

The absence of bankruptcy intervention was criticized by 15 civil rights, labor and consumer groups -- including the Center for Responsible Lending and the Consumer Federation of America. In a joint statement, they called lawmakers' actions ''a win for the financial services industry that brought us this mess.''

Sen. Richard Durbin, D-Ill. was expected Thursday to try to get the bankruptcy provision back into the bill.