With home foreclosures breaking records every quarter, the Obama administration’s program to attack the housing crisis has been a disappointment mortgage lenders report that they continue to struggle getting the required paperwork, while homeowners and housing counselors say processing the mortgage bottleneck appears to be impossible. The $75 billion program has performed so poorly that some housing advocates say the Obama administration needs to reconsider their entire approach on mortgage relief and loan modifications. Mortgage refinance opportunities continue to narrow so loan workouts may be the last hope to prevent foreclosures for these distressed homeowners.

According to DataQuick. the worst may be over for California’s hard-hit housing markets, The state’s most affordable markets, which represent 25% of the state’s housing stock, accounted for 34.9% of all home foreclosure activity in the fourth quarter, down from 52% a year earlier.  Nevertheless, mortgage loans were still more likely to go into default in inland areas such as Merced, Stanislaus and Riverside counties, which were ravaged by foreclosures during the downturn. The coastal counties of San Francisco, Marin and San Mateo had the least probability of default.  California loan modification agreements continue to flood the loss mitigation departments of banks across the country.

While many of the loans that went into default were originated in early 2007, the median origination month for last quarter’s defaulted home loans was July 2006, the same month as during the prior three quarters. According to DataQuick, the median origination month a year before was June 2006, so the foreclosure process has moved forward through one month of bad loans during the last 12 months.  “Mid-2006 was clearly the worst of the ‘loans gone wild’ period and it’s taking a long time to work through them,” Walsh said. “We’re also watching foreclosure activity start to move into more established mid-level neighborhoods. Homeowners were able to make their payments longer than homeowners in entry-level neighborhoods, but because of the recession and job losses, that’s changing.”  The mortgage lenders that originated the most loans that went into default last quarter were Countrywide with 5,588, Wells Fargo with 3,482 and Washington Mutual with 3,460. Along with Bank of America (1,760 loans) and World Savings (1,869), they were also the most active lenders in the second half of 2006. Last quarter’s default rate on loans originated in the second half of 2006 ranged from 1.5% for Bank of America to 13.1% for World Savings, according to DataQuick.

On mortgage loans from primary residences, California homeowners were a median five months behind on their mortgage payments when lenders filed notice. The borrowers owed a median $13,510 on a median $325,818 mortgage.  On home equity loans and lines of credit in default, borrowers owed a median $3,939 on a median $62,965 credit line. The amount of the credit line that was actually in use can’t be determined from public records.