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.

Unsold Homes Tie Down Would-Be Transplants

Dr. Michele Morgan migrated last fall from Detroit to Phoenix, taking a job as a psychiatrist. She expected her husband, Sam Kirkland, to soon join her, since he was accepting an early retirement package from his employer, General Motors. But he cannot move, he says, because he has not been able to sell the four-bedroom family home.

“As things now stand,” said Mr. Kirkland, who is 51 and intends to seek work in Phoenix, if he ever gets there, “my wife might decide to give up her job in Phoenix and come back to Detroit for a while, until we can sell the house.”

The rapid decline in housing prices is distorting the normal workings of the American labor market. Mobility opens up job opportunities, allowing workers to go where they are most needed. When housing is not an obstacle, more than five million men and women, nearly 4 percent of the nation’s work force, move annually from one place to another — to a new job after a layoff, or to higher-paying work, or to the next rung in a career, often the goal of a corporate transfer. Or people seek, as in Dr. Morgan’s case, an escape from harsh northern winters.

Now that mobility is increasingly restricted. Unable to sell their homes easily and move on, tens of thousands of people like Mr. Kirkland and Dr. Morgan are making the labor force less flexible just as a weakening economy puts pressure on workers to move to wherever companies are still hiring.

Signaling an incipient recession, nearly 85,000 jobs disappeared in the United States from December through February, and the Bureau of Labor Statistics is expected to announce on Friday that March failed to produce a turnaround in hiring.

“You hear a lot about foreclosure and the thousands of families who are being forced out,” said Joseph S. Tracy, director of research at the Federal Reserve Bank of New York. “But that is swamped by the number of people who want to sell their homes and can’t.”

No government agency counts those who move for a job, either across state lines or just from one town to another in the same state. The Census Bureau, however, calculates how many people move across state lines for all reasons, and that number fell by a startling 27 percent last year, after climbing by almost that percentage for each of the previous three years.

With homes changing hands easily in a booming market, interstate migration reached 2.2 million people in 2006, excluding the effects of Hurricane Katrina. As the economy and home prices began to unravel in 2007, however, interstate migration plunged to 1.6 million people.

“That is still a historically high number,” said Mark Zandi, chief economist at Moody’s Economy.com. “It reflects the relatively strong economy until midyear. But given what’s happening now, I would be surprised if domestic migration isn’t at a record low in 2008.”

Worker mobility — or rather immobility — is making a big contribution to this decline, Mr. Zandi and other economists say. Retirees are similarly stuck in their homes. In normal times, they frequently sell so they can move to condos in Florida or assisted-living facilities or smaller quarters near adult children.

“These older people spent all of their lives earning the money to buy their homes,” said Robert J. Shiller, a Yale economist who is an expert on housing, “and now they resist selling for less than they believe their homes are worth.”

Corporate transfers contribute significantly to worker mobility, and employers often cover at least some of the cost of selling a home in the old location and buying one in the new. That practice can backfire, says Richard Shaw, a vice president of Applied Industrial Technologies, which sells gears, motors, bearings and other industrial parts from 337 centers around the country.

Out of 3,500 employees in the United States, Applied normally transfers 25 to 30 each year from one center to another, or to the headquarters in Cleveland. Almost all are career people rising in the ranks. Despite the opportunity, transfers have fallen by half, Mr. Shaw said. That is mainly because transferred employees too often find themselves owning two homes — one in the old location and one in the new — and paying two mortgages.

Applied tries to minimize the problem by paying one of the two mortgages for up to six months, the expectation being that the old home will sell by then. Increasingly, that does not happen, not with inventories of homes across the country at an 18-year high, according to the National Association of Realtors. That makes employees reluctant to move, even for a raise and a promotion, Mr. Shaw said.

He tells of one transferred executive “who ended up owning two homes for more than six months and, finding himself paying two mortgages, opted to move back to his original city, surrendering his new house to the bank.”

Mr. Kirkland is determined to sell before he moves. But that might take months, he acknowledges. A house that he thought would bring $200,000 — its appraised price three years ago — in fact might bring only $90,000 if he were to sell it today. That was the selling price for a similar 2,500-square-foot home on the next block, and Mr. Kirkland wants more than the $125,000 in debt that he and his wife still have on their house.

“When I stop working at G.M., I am going to devote myself to the house, making it look as pristine as possible,” Mr. Kirkland said.

He is also trying to make a major career transition. After 30 years as a G.M. employee — most recently at a parts warehouse in Pontiac, Mich., serving as a full-time union official of his United Automobile Workers local — he accepted one of the early retirement packages that the company is offering to shrink its work force. Taking courses by mail, he is studying for a master’s degree in organization and development. His goal is to get work in that field in Phoenix, perhaps with a community organization. His wife, who is 47, relocated in October, in time to escape the Michigan winter, and his two daughters are away at college.

But getting to Phoenix is now problematic. He will not leave the house, afraid that if it sits empty, it will be a target for vandals. “I might have to spend so much time living at the house and working on it,” Mr. Kirkland said, “that my wife will say, ‘I can always have a job as a psychiatrist here in Phoenix, but I might have to go back to Detroit for a while.’ ”

Gayle Newton, in a somewhat similar fashion, delayed her departure from Taylorsville, N.C., for two years while she tried to sell her two-bedroom home, on a large parcel of land, for $89,000. She finally gave up, rented the house last September and moved in with her daughter and son-in-law in Baltimore, quickly landing a job there for $15 an hour in the accounts payable department of a granite quarry. Until she left Taylorsville, Ms. Newton, who is 53, did similar work for a furniture company at $9 an hour.

She had put her home on the market in 2006, not long after her husband died and she found herself alone in Taylorsville in a job that did not pay enough to keep her there. She decided to live near her daughter, to find higher-paying work and to apply the proceeds from selling her home toward another one in Baltimore.

“That seemed like a good year, 2006,” Ms. Newton said, “but the downturn in housing had already started in our area. I didn’t realize it. I never imagined that a house on seven acres would not sell. I thought at $89,000 it would be a steal and I could move on to Baltimore much sooner than I did. My daughter finally came and insisted. She could not stand my whining any longer.”

The house in Taylorsville is still unsold.

Home loan demand plunges; refinancing drops

NEW YORK (Reuters) - Mortgage applications plunged last week, largely reflecting a drop in demand for home refinancing loans, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended March 28 fell 28.7 percent to 688.3.

The index, however, gained 48.1 percent the previous week.

Overall mortgage applications last week were 6.0 percent above their year-ago level. The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was up 0.11 percent to 744.5.

The U.S. housing market is currently suffering one of the worst downturns in its history. Last week's drop in demand may indicate what is in store for the hard-hit sector this spring, which is the peak home-buying season.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.75 percent, up 0.01 percentage point from the previous week.

Interest rates were below year-ago levels of 6.13 percent.

Fixed 15-year mortgage rates averaged 5.27 percent, up from 5.23 percent the previous week. Rates on one-year adjustable-rate mortgages (ARMs) decreased to 7.00 percent from 7.02 percent.
The MBA's seasonally adjusted purchase index, widely considered a timely gauge of new home sales, dropped 11.8 percent to 356.0. The index came in below its year-earlier level of 402.9, a drop of 11.6 percent.

The group's seasonally adjusted index of refinancing applications plummeted 38.1 percent to 2,636.0. The index surged 82.2 percent the previous week.

The index, however, was up 25.6 percent from its year-ago level of 2,098.3.

Consumers seeking to refinance their existing home loans tend to be highly sensitive to shifts in interest rates.

The refinance share of applications decreased to 53,4 percent from 62.0 percent the previous week. The ARM share of activity increased to 5.4 percent, up from 3.8 percent the previous week.

While the battered U.S. housing market has not bottomed out yet, data last week suggested it may be nudging closer to recovery, particularly a better-than-expected existing home sales report for February from the National Association of Realtors.

An unwieldy supply of homes for sale remains one of the biggest obstacles facing the hard-hit sector