It has only been a month since Steve Preston joined as the secretary of HUD. In his first important address he announced the HUD foreclosure prevention programme in Detroit. He had chosen Detroit – it being the vortex of the foreclosure crisis.

According to the plan, HUD will participate in the purchasing of bad loans from the lenders. He was speaking on 9th July at Detroit Economic Club. The programme will kick off from Detroit. Preston said usually when all the FHA steps have been exhausted then the lenders initiate foreclosure proceedings. After that they submit their claim to FHA. But under this new plan, resources will be created for lenders to be able to sell their bad mortgages before starting foreclosures, to HUD and another partner. The latter will purchase the loans at a heavy discount and then start working on them.

It is hoped that by stopping foreclosures the real estate market will get back on its rails at a critical point of time when the economy is on the brink of collapse. Experts opine that this year will witness about 2.5 million foreclosure postings. This compares badly with 1.5 million of 2007. On an average estimate 650,000 house prices have fallen around 4% to 17% across USA. Simultaneously lenders have shied away from sanctioning new loans. Their numbers are at their lowest since 2001-2002.

There are 40,000 units in the market in Oakland, Wayne, Macomb, Washtenaw and Livingston counties. There is a stock of unsold houses for 17 months – well above the national median of 9.6 months. Usually a six-month supply is considered to be the norm.

Preston underlined the shattering effect foreclosures are having on families. In many areas foreclosures were relatively more intense. In Michigan the challenge came from failing economy. Preston clarified that “sub-prime lending is not in and of itself a bad thing.” It has helped many own houses, which otherwise they would not have been able to do so. It was the erroneous application of the loan that has led to this dangerous situation.

Outstanding in the market are $1.3 trillion sub-prime loans. It calculates to 12% of the loan market. But it accounts for 50% of the foreclosures. Of the outstanding loans sub-prime represents 6% but over 40% of the foreclosures. Over one out of four of these loans are delinquent – lagging behind by more than 90 days.

Michigan Bank Foreclosures by Top Cities

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