The foreclosure crisis will be over sooner as a result of Chilean earthquake!

Scientists say the recent magnitude 8.8 earthquake in Chile may have shortened the length of each Earth day. So, whatever we’re going through, well, it won’t last as long!

From the NASA website:

JPL research scientist Richard Gross computed how Earth’s rotation should have changed as a result of the Feb. 27 quake. Using a complex model, he and fellow scientists came up with a preliminary calculation that the quake should have shortened the length of an Earth day by about 1.26 microseconds (a microsecond is one millionth of a second).

Perhaps more impressive is how much the quake shifted Earth’s axis. Gross calculates the quake should have moved Earth’s figure axis (the axis about which Earth’s mass is balanced) by 2.7 milliarcseconds (about 8 centimeters, or 3 inches). Earth’s figure axis is not the same as its north-south axis; they are offset by about 10 meters (about 33 feet).

By comparison, Gross said the same model estimated the 2004 magnitude 9.1 Sumatran earthquake should have shortened the length of day by 6.8 microseconds and shifted Earth’s axis by 2.32 milliarcseconds (about 7 centimeters, or 2.76 inches).

Gross said that even though the Chilean earthquake is much smaller than the Sumatran quake, it is predicted to have changed the position of the figure axis by a bit more for two reasons. First, unlike the 2004 Sumatran earthquake, which was located near the equator, the 2010 Chilean earthquake was located in Earth’s mid-latitudes, which makes it more effective in shifting Earth’s figure axis.

Second, the fault responsible for the 2010 Chiliean earthquake dips into Earth at a slightly steeper angle than does the fault responsible for the 2004 Sumatran earthquake. This makes the Chile fault more effective in moving Earth’s mass vertically and hence more effective in shifting Earth’s figure axis.

Gross said the Chile predictions will likely change as data on the quake are further refined.

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The numbers on February foreclosures are out this week from RealtyTrac, which reported that foreclosure filings fell 2% from January and, overall, that February filings had the lowest year-over-year increase since January of 2006.

James Saccacio, RealtyTrac CEO, said that the severe winter weather in the first two weeks of February “appears to have temporarily slowed the processing of foreclosure records in some Northeastern and Mid-Atlantic states.”

According to the Wall Street Journal report on the February foreclosure numbers:

RealtyTrac Chief Executive James J. Saccacio added the leveling of the foreclosure trend isn’t necessarily evidence that fewer homeowners are in distress and at risk for foreclosure, but rather that foreclosure-prevention programs, legislation and other processing delays are capping monthly foreclosure activity.

The market researcher reported foreclosure filings on 308,524 U.S. properties in February, up 2% from January. Default notices, meanwhile, were up 3% from the prior month but down 3% from a year earlier. Scheduled foreclosure auctions and bank repossessions were both down from January, but grew from a year earlier.

Nevada posted the top foreclosure-filing rate for the 38th consecutive month despite a 30% year-over-year decrease. One in every 102 Nevada homes received a filing, more than four times the national rate. Even with a 9% decline in February from the prior month, Las Vegas was the worst metropolitan area, with one filing for every 90 homes.

Arizona and Florida followed with nearly identical foreclosure rates, with one in every 163 homes receiving a filing in both states. Despite a nearly 21% decrease in foreclosure activity from January, Arizona’s rate was fractionally higher than Florida’s.

California, meanwhile, posted a 15% year-over-year decline in February. Six California and Arizona metro areas were in the top 10 nationally, while Florida again had two.

In absolute terms, six states—California, Florida, Michigan, Illinois, Arizona and Texas—accounted for 61% of the national total in February. But the total of foreclosure filings in those states fell 5% from January and 15% from a year earlier.

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The predicted wave (tsunami, really) of new foreclosures is detailed last Friday in a report by the Washington Post:

About 5 million to 7 million properties are potentially eligible for foreclosure but have not yet been repossessed and put up for sale. Some economists project it could take nearly three years before all these homes have been put on the market and purchased by new owners. And the number of pending foreclosures could grow much bigger over the coming year as more distressed borrowers become delinquent and then, if they can’t obtain mortgage relief, wade through the foreclosure process, which often takes more than a year to complete.

As these foreclosed properties add to the supply of homes for sale, they could undercut housing prices, which have increased modestly through December, according to the most recent figures in the S&P/Case-Shiller home prices index. That rise partly reflected a slowdown in the flow of foreclosed homes onto the market…

“Some of the positive housing data may not be signaling a true turning point, as many servicers are holding back on foreclosures and the related houses are not yet being offered for sale,” said Diane Westerback, a managing director at Standard & Poor’s. Westerback said it could take 33 months to clear the backlog.

Data released Thursday by RealtyTrac illustrate the dynamic. While banks repossessed fewer homes in February than a month earlier, borrowers continued to fall behind on their payments, adding to the inventory of properties headed toward foreclosure that have yet to be put on the market, said Daren Blomquist, RealtyTrac’s spokesman.

“Just looking at the numbers, we would expect there to be a bigger percentage of properties” repossessed by banks by now, he said.

This “shadow market” reflects the increasing lag between defaults and foreclosures. Many lenders are struggling to keep up with the overwhelming number of borrowers who can’t make their payments, and they’re reluctant to rush repossessed homes onto the market when prices are depressed.

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According to a piece last week in the Los Angeles Times, more and more underwater mortgage holders are staying in their foreclosed homes – and lenders are letting them.

Throughout the country, people continue to default on their home loans — but lenders have backed off on forced evictions, allowing many to remain in their homes, essentially rent-free.

Several factors are driving the trend, industry experts say, including government pressure on banks to modify loans and keep people in their homes.

And with a glut of inventory in places like Southern California’s Inland Empire, Nevada and Arizona, lenders are loath to depress housing prices further by dumping more properties into a weak market.

Finally, allowing borrowers to stay in their homes helps protect the bank’s investment as it negotiates with the homeowners, said Gary Kirshner, a spokesman for Chase bank, a major lender.

“If the person’s in the property, there’s less chance for vandalism, and they’re probably maintaining the house,” he said.

Economists say the situation won’t last forever, but in the meantime the “amnesty” may allow at least some homeowners to regain their financial footing and avoid eviction.

ForeclosureRadar reports that it now takes an average of 229 days – up from 146 days in 2008 – for banks to foreclose on a home after sending a notice of default.

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California homeowners suing lenders about to foreclose on their homes has skyrocketed from 388 in 2008 to nearly 1.400 in 2009 – another sign of desperate measures homeowners are willing to take to hold on to their homes.

According to an article in last week’s Mercury News, this strategy is allowing those homeowners to, at least for now, stay in their homes by stalling the foreclosure process:

Even if a lawsuit doesn’t ultimately succeed, it can sometimes significantly delay the loss of a home. Some suits contend the lender reneged on a promise of a loan modification… Others argue lenders screwed up the foreclosure process. Among the most frequent claims: During the overheated housing boom, the bank did not properly disclose the terms of the loan, the borrower never really qualified, but got a loan anyhow.

Yet judges are quicker to dismiss cases as they get more familiar with the complex laws, banks are more reluctant to settle them, and the federal court here is the only one in the nation that requires some homeowners to put up a portion of what they borrowed before certain lawsuits can be heard.

Attorneys familiar with the 4-inch-thick set of federal rules on lending also warn that fragile homeowners are easy prey for unscrupulous or ill-informed lawyers. California enacted an emergency law in October preventing attorneys from taking advance fees for loan modifications, but the State Bar is investigating more than 500 lawyers for loan modification fraud.

Some California Democratic legislators are trying to get a law passed that probably would reduce the number of lawsuits by requiring mediation between borrowers and lenders before a foreclosure can proceed.

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Approximately 12.3% of Sacramento mortgages in January were more than 90 days late, in foreclosure or tied to a bank-owned property, according to a report out this week from mortgage industry tracking firm First American CoreLogic.

The January number is up slightly (.3%) from December 2009, but up significantly from a year ago, where troubled loans stood at 7.6% of all Sacramento mortgages.

The Home Front blog on the Sacramento Bee website noted that:

Sacramento’s 12.29 percent troubled-loan portfolio compares with 11.64 percent statewide and 8.66 percent nationally.

It’s still hard to tell what this terrible troubled loan percentage means exactly. MDA DataQuick staffers tell Home Front they still aren’t seeing a major jump in Notices of Default that would indicate a new wave of foreclosures coming. It appears that people are being allowed to stay in their homes much much longer — even while in trouble — as banks try to sort out solutions.

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An article last week by Wall Street Journal personal finance columnist Brett Arends advised homeowners that are deeply underwater on their mortgages to “do the math” and walk away, pooh-poohing any “morality” argument thusly:

Your instincts, while honorable, are leading you astray.

The economy is fundamentally amoral.

Sometimes I think middle-class Americans are the only people who haven’t worked this out yet. They’re operating with a gallant but completely out-of-date plan of attack—like an old-fashioned cavalry with plumed hats and shining swords charging against machine guns.

Do you think your lenders would be shy about squeezing you for an extra nickel if they thought they could get away with it?

They knew what they were doing when they wrote your loan. Many were guilty of malpractice, but they pocketed good money and they’ve gotten away with it. And if they thought your loan was “risk free,” how come they were charging you so much more than the interest on Treasury bonds?

If you’re only a small amount underwater on your mortgage, it’s probably the case that you’re going to be better off staying put. But if you are deeply underwater, it’s a different matter.

Whether we like it or not, walking away from debts is as American as apple pie. Companies file for bankruptcy all the time, and their lenders eat the losses. Executives and investors pocketed millions from the likes of Washington Mutual, Lehman Brothers and Bear Stearns when the going was good. They didn’t have to give back one cent of that money when the companies went into bankruptcy.

Limited liability, after all, is one of the main reasons every business from your local dry-cleaner to a major multinational gets incorporated in the first place. They’re not shy about protecting themselves if things go wrong. You shouldn’t be either.

Couldn’t have said it any better.

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Two weeks ago, the Obama administration announced that California is one of five states that will receive a portion of the new $1.5 Billion federal aid package to be distributed in hopes of slowing the tidal wave of home foreclosures.

However, some real estate experts are saying the funds will do damn little to dam the flood of foreclosures in the hard-hit states of California, Nevada, Florida, Michigan and Arizona.

From the Christian Science Monitor report on the new aid package:

“It’s just not a lot of money in the context of what we’re talking about here,” says Richard Green, director of the University of Southern California Lusk Center for Real Estate. Especially, he says, “in a place like Nevada, where an astonishing number of homeowners are underwater on their mortgages.”

The formula for allocating the funds to each state will be based on declines in home prices and unemployment rates, and will be distributed via each state’s Housing Finance Agency (HFA). CalHFA must submit a program to the U.S. Treasury that includes:

• Measures for unemployed homeowners;
• Programs to assist borrowers owing more than their home is now worth;
• Programs that help address challenges arising from second mortgages; or
• Other programs encouraging sustainable and affordable homeownership.

More information on the new program can be found here.

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A report on Bloomberg.com recently said that the Obama administration was considering a ban on all foreclosures unless they have been reviewed and rejected by the Home Affordable Modification Program (HAMP):

The proposal, reviewed by lenders last week on a White House conference call, “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed,” according to a Treasury Department document outlining the plan.

“It is one of the many ideas under consideration in the administration’s ongoing housing stabilization efforts,” Treasury spokeswoman Meg Reilly said in an e-mail. “This proposal has not been approved and there are no immediate planned announcements on the issue.”

She confirmed the authenticity of the document, which hasn’t been made public.

At present, lenders can initiate foreclosure proceedings on any loan that hasn’t been submitted for HAMP eligibility. Under current HAMP rules, foreclosure litigation can proceed while borrowers are under review for the program or even in a trial modification.

The proposed changes would prohibit lenders from initiating new foreclosure actions before loan screening by HAMP and would require lenders to halt existing proceedings for borrowers once they are in a trial repayment plan.

The article noted that the HAMP program covers 89% of outstanding residential mortgages.

The real estate community continues to be abuzz about the recent Mortgage Banker’s Association quarterly report on foreclosures for the end of the fourth quarter of 2009, which showed that fewer homeowners are falling behind on their loans.

However, it also reported that the number of homeowners who have missed at least three payments kept growing.

While there will undoubtedly be more foreclosures that will continue to have a negative impact on the market for the foreseeable future, there may indeed be a glimmer of light at the end of the tunnel.

However, we think that glimmer is the large toothy grin of savvy investors who are making a killing off distressed sellers.