Allegheny County (the county surrounding and including Pittsburgh for those not familiar with the area) has joined the growing list of communities that are struggling with a solution to the foreclosure problem. Pittsburgh adds a bit of a different perspective to the nation’s housing problems, as many areas of Pittsburgh did not undergo the rapid price appreciation that took place in other cities. In many areas, declining prices have produced incentives for homeowners who are underwater in their mortgage to essentially return the keys to the lender through the foreclosure process. Foreclosures grew in other cities as adjustable rate mortgages reset to unsustainable levels for families. While there are no doubt foreclosures in Allegheny County based on these problems, I suspect that much of Pittsburgh’s foreclosure problems resulted from lax underwriting standards and the dismal economic conditions for those most susceptible to the economic downturn.
In order to attempt to stem the tide of foreclosures before it reaches record proportions, the court system is implementing a new residential mortgage foreclosure program. Starting Monday, January 12, homeowners who contact the “Save Your Home Hotline” at (800) 298-8020 in the first 20 days after their first official notice of a foreclosure judgment will receive a 90 day delay in the foreclosure proceedings so that the homeowner may work with a free housing counselor to create a payment plan, renegotiate their mortgage, file bankruptcy, or otherwise avoid foreclosure.
While the effort to keep people in their homes is worthwhile, and the program could be considered a success if it helps even one family keep their home, the numbers that I have seen so far from other cities adopting moratoriums on foreclosures have not been encouraging. And the default rate on renegotiated mortgages does not give me cause to be optimistic.
Instead, the ultimate resolution to the foreclosure problem may have to wait for the national housing debate to take form. Nationwide, the problem is staggering: At one point last year, one in 10 American homeowners with a mortgage were at least a month behind on payments or in foreclosure. And it has been predicted that more than 8 million foreclosures will occur over the next four years.
President-elect Barack Obama told CNBC that he expects to announce a plan to prevent foreclosures within two months, but while that type of decisive action is needed, the number of different players and proposals might derail those plans. Hopefully, the Allegheny County foreclosure delay will give the federal government the time it needs to implement a solution to the foreclosure crisis before homeowner’s availing themselves of the delay are placed back into the lineup for a sheriff’s sale.