Home-values news dampens hopes for stemming foreclosures

A report that home values plummeted in January in several metropolitan areas threatened to push more homeowners into distress, even as efforts continued to dismantle both successful and poorly performing programs aimed at reducing record U.S. foreclosure rates.

Standard & Poor's Case-Shiller Home Price Indices on Tuesday reported declines in 19 of 20 metro areas in January from December, with 11 markets hitting cyclical lows, which S&P's considers a "double dip" in home prices.

Among the 20 metro areas, year-over-year prices rose in only Washington (3.6 percent) and San Diego (a mere 0.1 percent), the indexes showed. The Philadelphia region is not tracked by Case-Shiller's monthly indexes.

Anthony Sanders, a professor of real estate finance at George Mason University, said there was "definitely a chance" that a double dip could occur in housing, given recent data showing little support for it.

"If interest rates begin to climb, that could be the tipping point for the double dip," Sanders said.

Noted Joel L. Naroff, of Naroff Economic Advisors in Holland, Bucks County: "If you were hoping to rebuild your home equity quickly, forget it. Foreclosures will continue to pressure the market for a long time."

Although the news was daunting, Patrick Newport, a housing economist at IHS Global Insight, said that "the indices in most cities appear to be coasting toward a bottom. He added that prices are recovering in a few places, including San Francisco, Washington, and San Diego, after hitting a cyclical low.

After days of reports showing sales of previously owned and new homes fell to record lows in February, with prices following suit, the Case-Shiller data were less than encouraging for a recovery.

Continued weak demand and a glut of homes for sale "should translate into at least another 5 percent" decline in prices, Newport said.

A Federal Deposit Insurance Corp. proposal Tuesday that banks keep some risk on mortgage-backed securities might make home loans harder to obtain by increasing the size of down payments, further weakening demand.

Housing and Urban Development Secretary Shaun Donovan defended the rule, saying options of 10 percent and 20 percent down would be available. But the National Association of Home Builders and others countered that the rule "would disrupt the housing market and undermine an already-fragile recovery."

Foreclosures continue to make recovery difficult, but programs to stem the flow of them are in as much trouble as the housing market itself.

A Tuesday morning conference at the Federal Reserve Bank of Philadelphia was designed to showcase new developments in foreclosure-prevention efforts. But participants, mainly housing counselors and experts, instead found themselves in what Citi community-development director Donald L. Haskin called "a situation where the news outpaces these efforts."

The U.S. House is set to vote in two weeks on the future of the Home Affordable Modification Program, the administration's signature foreclosure deterrent, which Treasury Secretary Timothy Geithner told a Senate committee would not make its original goal of redoing four million to seven million mortgages by 2012.

That left Erin Sagansky, of the Treasury Department's Homeownership Preservation Office, with the task of trying to defend HAMP, as well as discussing ways the process has been improved in recent months.

"It doesn't really matter that the program has completed 600,000 permanent modifications," Sagansky said. "So many homeowners are telling stories of languishing in mortgage-modification trials for months and months" that troubled borrowers aren't even bothering to seek help.

"We need to tell stories of hope," she urged the housing counselors, who work for HUD-approved agencies facing more work and funding shortages.

"We have clients who apply for modifications and are told by the servicers that they don't meet the qualifications and are told to reapply," said Nikki Holcroft, of Genesis Housing Corp. in Norristown. "Why doesn't someone just say the person doesn't fit?"

"We get talked down to and deal with all kinds of nonsense from the servicers," said Adelia Gates, of Adelex Angels of Harrisburg. "You're left on the telephone with the homeowner sitting right there."

Sagansky said HAMP was "never intended to help every home in foreclosure," especially as "stewards of the taxpayer dollar."

"We are trying to improve the homeowner experience with this program," she said, adding that there "is no easy way to repair the damage caused by the housing crisis."