Buyers of units at the CityPlace South Tower condominium in West Palm Beach, Florida failed to stop the property from being placed on bank foreclosure listing.

Lawyers representing the buyers said that the failure to stop the distressed property sale would make it difficult for buyers to recover the deposits they paid to condominium developer, Related Group.

In the first place, lawyers added, buyers have a very slim chance of recovering the deposits even if they have been successful in their effort to prevent the foreclosure sale. Buyers were trying to collect from Related Group the down payments they made on units at CityPlace South Tower that the developer turned over to lenders.

The Bank of Nova Scotia was the sole bidder, taking 370 unsold condominium units at the $120 million foreclosed, 420-unit building. The bank offered a minimum bid of $100.

Lawyers representing the buyers, Jonathan Kline, Joseph Altschul and Robert Cooper have tried to prevent the foreclosure on the 20-story condominium building. They requested Palm Beach Circuit Court Judge Meenu Sasser to delay his foreclosure judgment on the property until such time that buyers have resolved their issue with the developer.

Lawyers are still hopeful about their case despite its rejection by Sasser. They plan to make an appeal before the 4th District Court of Appeal. They also plan to ask for an emergency stay to prevent the auction of the property.

According to industry experts, the condominium market in South Florida started to collapse in 2007. Since that time, a growing number of buyers have tried to cancel their pre-construction buy contracts as well as recover their down payments.

A growing number of buyers also filed lawsuits against various condominium developments but a bulk of these projects went into foreclosures. Experts said that with lenders taking ownership of the condominium development projects, buyers will even have a hard time recovering their down payments.

According to Altschul, the developer and lender are in a hurry to complete the foreclosure process because they both want to eliminate liens by condo buyers who are demanding for the return of their down payments.

He pointed out that delaying the foreclosure until such time that Related Group and buyers resolve their disputes would not hamper the operations or sales of the property.

Approximately 40 percent of homeowners who obtained loan modifications under the Obama administration’s foreclosed home prevention program have been redefaulting, according to Sheila C. Bair, chairman of the Federal Deposit Insurance Corporation.

She further explained that this is one of the reasons why lenders have not been stepping up their efforts in modifying distressed loans despite pressure from federal agencies, state governments, lawmakers and housing advocates.

She said that banks are concerned about additional losses if they hire staff and improve systems to modify loans only to have these same loans go back to default and foreclosure.

However, the biggest obstacle to loan modification for banks, according to Bair, is the refusal of investors who bought the home loans to approve loan modification applications. Bair affirmed that investors would gain more from the loans if the banks foreclose on them rather than modify them to lower monthly payments.

The mortgage securities investors most hesitant to support loan modifications are the ones who bought the AAA-rated portions of the mortgage securities. These AAA contracts were structured in such a way that investors receive payments even if some loans in the securities package become delinquent.

Bair also affirmed the role of the high unemployment rate in the continued rise in foreclosures. She added that while foreclosures in the past year and in the early months of this year can largely be blamed on highly risky loans structured by banks, most foreclosures now are caused by the employment situation, which cannot be controlled by banks or financial regulators.

The FDIC chair said there should be a way by which homeowners who lost their jobs can keep their homes while they are looking for their next jobs. A protocol that would enable them to keep making their monthly payments at a temporarily reduced rate would be helpful.

Additionally, Bair commented on the foreclosure prevention fraud problem that has not gone away despite federal and state campaigns against fraud. There are still a lot of homeowners who pay around $4,000 to $5,000 to have their home loans modified only to discover that their loans are not qualified under any modification scheme.

Unfortunately, Bair explained, there are home loans that cannot be modified. Banks have to accept only loan modification applications that can realistically be restored to current status and that can be realistically be repaid by homeowners who have steady jobs and sources of income.

CitiMortgage, the mortgage unit of Citigroup Inc., has significantly increased its loan modification offers responding to Obama Administration’s call to intensify and speed up the process to help more troubled homeowners avoid foreclosures.

According to the mortgage servicer, it was able to help 108,000 troubled borrowers avoid the foreclosure process in the second quarter, an increase of about 30 percent from the previous quarter.

The increase is part of the company’s efforts to boost its participation in the federal government’s Home Affordable Modification Program (HAMP) which aims to ease mortgage terms for as many as 4 million mortgage borrowers.

Early this month, the U.S. Treasury said that it would increase pressure on mortgage servicers to speed up the process of modifying troubled loans for eligible homeowners. The federal government hopes that the loan modification program would help stop the drastic drop in home prices and values and lead the way to the recovery of the housing market.

According to CitiMortgage, it has so far placed 27,571 troubled loans on trial mortgage modifications under the HAMP, or 15 percent of the identified eligible loans. These figures are behind the 20 percentage point achieved by JPMorgan Chase and Co. but higher than the 4 percent posted by the Bank of America Corp.

CitiMortgage chief executive officer Sanjiv Das is confident that the company is doing better in its loan modification efforts based on trends indicated this month.

The mortgage servicer was able to boost its loan modification numbers by hiring additional loss mitigation employees. Since the start of this year, the company added 45 percent to its loss mitigation staff for a total of 4,500.

But industry experts said that despite efforts of the federal government and lenders to contain foreclosure, the numbers continue to rise. The disappointment over the lukewarm response of lenders to the HAMP led the Treasury to target of 500,000 loan modifications by the end of November. As of July, the total modifications under the said program reached 200,000.

Meanwhile, 29 percent of homeowners re-defaulted after receiving loan modifications from CitiMortgage, a decline from the number of repeat delinquents the previous year.

Modifications made under the HAMP include reductions in interest rates and extended periods for repayment.

First-time homebuyers are playing a major role on the federal government’s efforts to reduce the number of foreclosure properties across the country and prevent them from becoming blights to neighborhoods.

In Missouri, the Housing Development Commission is administering the Neighborhood Stabilization Program (NSP) which is designed to help residents with moderate income purchase foreclosed homes for sale.

The program helps by subsidizing about 20 percent of the foreclosed home’s sale price or about $14,999, whichever is the higher.

Nationwide, the increase in home sales in some areas is attributed to the growing number of first-time buyers who take advantage of the federal funds to purchase their own homes.

In Missouri, prospective buyers are required to undergo training, which includes home buying and home ownership classes from developing a household budget and financial plan to dealing with lenders. Completing the training is mandatory for all prospective buyers if they want to qualify for the incentive program.

In Cape Girardeau, the home buying and home ownership training is provided by 4-Sight Counseling, a housing resource agency approved by the U.S. Department of Housing and Urban Development (HUD), twice a month.

Housing counselor Audrey Franklin explains that the Home Ownership Workshop also addresses homeowners’ short-term goals such as how to handle and overcome their debts which may lead towards the fulfillment of their long-term goal which is to purchase a home.

Industry experts clarify that NSP federal funds are not a loan. But the program creates a responsibility for buyers because they have to live in the properties that they have purchased for at least five years before their debt is forgiven. In the event that buyers sell or move out of the house, they are required to repay the prorated amount of the loan.

Experts said that encouraging people to purchase foreclosure houses can boost property values by having someone occupy vacant properties. Additionally, the federal initiative also supports families by providing them an opportunity to purchase and live in affordable houses.

They said that combining the federal tax credit of $8,000 and NSP funds allows first-time buyers to receive as much as $23,000 for the purchase of a foreclose house.

The home buying program is available to families and individuals earning less than 120 percent of the area’s median household income. The annual income limit in Cape Girardeau County is $54,314, based on the estimated median income of $45,262 in 2007.

North Carolina was able to help nearly 1,000 homeowners avoid REO properties for sale under the State Home Foreclosure Prevention Project. The program started seven months ago as an emergency response to over 6,000 homeowners in North Carolina who took out subprime loans and are facing the threat of losing their homes to foreclosure.

One of the components of the program is a loan modification which temporarily lowers the monthly payment of a distressed homeowner.

The REO properties for sale prevention program is a component of a North Carolina law, which was passed in 2008, that required lending institutions and banks to give a 45-day advance notice to borrowers of subprime loans.

The North Carolina Commissioner of Banks provides homeowners who are struggling to make their monthly payments access to housing counseling agencies that can help them apply and become eligible for loan modifications.

Since the REO properties for sale prevention program started, the commission was able to send about 50,000 letters to troubled homeowners. However, only 6 percent or about 3,000 have responded and are currently receiving assistance.

Chief deputy commissioner Mark Pearce remains optimistic that the 1,000 loans successfully modified and the 2,000 pending cases are signs that the program is working as intended.

He said that since the inception of the program, it has generated savings for the state of about $86 million by way of helping prevent the slide of home values and thus, stabilizing property taxes.

According to data, the number of foreclosure filings in North Carolina was reduced by almost 50 percent in November a year ago, a month after the project started. However, industry experts noted that last month, foreclosure filings in the state reached almost 5,000, prompting them to suggest that the program only works by temporarily delaying foreclosure.

Meanwhile, federal and state governments are encouraging lenders to modify loans of distressed homeowners to prevent foreclosures. Pearce pointed out that the loan modification process can be scary to some homeowners and some do not have the time to negotiate or are intimated by the thought of negotiating with mortgage companies.

But he believes that the project would be able to modify as many as 2,000 loans before the end of this year.

Distressed homeowners trying to save their properties from being placed on a foreclosed home list is faced again with yet another obstacle in achieving financial recovery and security. Unscrupulous people and companies offering bogus foreclosure prevention services are growing in numbers every day.

To help troubled homeowners, the U.S. Internal Revenue Service (IRS) has issued guidelines on how to avoid fraudulent foreclosure prevention services while they are working to save their houses from foreclosure and restore their credit status.

In its guidelines, the IRS emphasized the importance for troubled homeowners to work only with housing counselors approved by the Department of Housing and Urban Development (HUD). The agency has a searchable online list of counseling agencies it approved to help homeowners find ways to prevent foreclosures.

The IRS reminded distressed homeowners that housing counselors certified by the HUD offer their services at no cost and do not ask for upfront fees. The agency reiterated that troubled homeowners should avoid dealing with housing counselors who collect fees before providing foreclosure prevention services or who ask for payments in wire transfer and cashier’s check.

In hindsight, any homeowner should not pay cash to anyone unless he knows what services he will be going to receive.

Furthermore, a legitimate housing counselor would not make any guarantee or promise that he would prevent a property from falling into a foreclosed home list. The reality is, certified housing counselors are there to increase the chances of a homeowner to remain in his home.

The IRS also reminded homeowners not to allow anyone to pressure them into signing paperwork without reading and understanding the fine print. The agency suggested for troubled homeowners to consult a lawyer before signing anything that will entail transferring the titles of their properties to another party.

The agency also advises homeowners to follow their instincts. If they feel that they are being targeted for a foreclosure fraud, homeowners should seek help immediately, the IRS said.

With the alarming rate of foreclosures in the country, some government agencies are intensifying their efforts to inform distressed homeowners of their rights and how to avoid fraudulent foreclosed home list prevention schemes. The Federal Trade Commission has a section on its Web site devoted to fraudulent foreclosure rescue services.

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President Franklin Roosevelt’s solution to the mortgage crisis in the 1930s is a good model for a scheme to solve the current problem of endless foreclosure listings. Although there are marked differences between the Great Depression and the current crisis, there are also similarities that support the study of what Roosevelt did to contain mortgage defaults during his time.

In the 1930s, house prices dropped as drastically and as fast as how prices dropped today. House construction then declined by 90 percent from their peak to its lowest level. Unemployment rates though were much higher during Roosevelt’s time.

To head off further mortgage defaults and long foreclosure listings, Roosevelt launched the Federal Housing Administration under the National Housing Act of 1934 to insure mortgage loans and stabilize the housing market. He also launched the Home Owners’ Loan Corp. (HOLC) to acquire delinquent mortgages and then sell them to homebuyers at more affordable payment terms.

Under the HOLC program, the short loan terms of three to five years originally offered by the banks were extended to 20 years and large periodic payments were converted to affordable monthly amortizations. The HOLC program worked. HOLC ran its buy-and-sell operations from 1933 to 1936 and closed in 1951 when all the mortgages it acquired were retired. The program was successful because it lowered the default rate by an overwhelming 90 percent, averting further defaults and foreclosure listings. The federal government even earned profits for the taxpayers because it bought the mortgages below their market values from bankers who were too willing to sell them to the government because there were no other buyers.

Other precedents that could be studied for developing solutions to foreclosure listings are the mortgage defaults in the 1980s in Texas and in the 1990s in California. These default models show that homeowners will try their best to avoid foreclosure if they have larger equities in the properties they are occupying.

One key factor that will enable Obama’s $75 billion program to reduce foreclosure listings is consumer confidence. If the program lifts the consumer spending index to higher levels, the country can begin to recover. If foreclosure listings are shortened, the inventory of bargain properties will thin out and then home prices will rise. When home prices rise, the housing market stabilizes, lifting the confidence of Americans to spend and help rejuvenate the declining economy.

While some governors applauded President Barack Obama’s foreclosure plan, other governors who are mostly Republicans criticized the plan as unfair.

Jon Corzine, the Democratic governor of New Jersey, supports Obama’s plan. He said his own mortgage renegotiation plan for the state’s troubled homeowners can use funds from Obama’s program. New Jersey has created a foreclosure prevention program in which the court orders both lender and borrower to enter into a mortgage renegotiation process.

Another Democratic governor, Bev Perdue of North Carolina, said her state’s foreclosure program can mesh well with Obama’s program. So it is with Washington State Governor Chris Gregoire. She said Obama’s plan would add funding to what she has developed as a mediation program for homeowners and lenders.

President Obama’s $275-billion plan would enable homeowners at risk of foreclosure to negotiate with their lenders for lower monthly payments. The plan would also infuse funds to Fannie Mae and Freddie Mac to enable them to refinance mortgage loans and reduce monthly payments to about 31 percent of borrowers’ monthly income.

But while Democrats see something helpful in the Obama plan, Republican governors such as South Carolina Governor Mark Sanford are doubtful about Obama’s program.

Sanford says that most homeowners across the country have been paying their mortgages. He says he is concerned about equity for homebuyers who have been faithfully paying their monthly amortizations without help while seeing their irresponsible neighbors being rescued with tax money.

Sanford also criticizes court-ordered loan modifications and the significant involvement of Fannie Mae and Freddie Mac in the foreclosure plan. He says that the modification of mortgage contracts by judges is not in line with American laws and that Fannie Mae and Freddie Mac are two of the largest institutions that are to blame for the housing crisis.

President Obama’s foreclosure plan is multi-pronged. It has provisions for borrowers who are not yet delinquent and for homeowners whose properties have been foreclosed but still have sources of income for monthly payments. It also has provisions for mortgage lenders and for various federal agencies. It also has incentives for both borrowers and lenders for sustaining their efforts to avoid further foreclosures.

Borrowers are given up to $1,000 per year that can be applied for balance reduction if they can sustain their monthly payments. Mortgage lenders are also given a cash incentive of $1,000 for every loan modification according to Obama’s modification eligibility guidelines and additional cash incentives if the borrower stays current with payments.

The Senate is scheduled to take on the economic stimulus program which includes the foreclosure prevention and the confirmation of Timothy Geithner as secretary of the Department of Treasury.

Geithner, who is President Barack Obama’s nominee, was not confirmed immediately because he failed to pay his federal taxes. He settled his tax dues shortly before he was nominated by Obama. If confirmed, Geithner will manage the bailout program for the financial industry. A portion of program is expected to focus on reducing the number of foreclosed homes in the country.

Meanwhile, members of the House are expected to decide on its own version of the estimated $825 billion economic recovery program. The program proposals include tax cuts for businesses and individuals, aid for state governments, poor and unemployed, especially those who lost their homes to foreclosure, and the federal government’s direct spending.

The goal of the program is to inject money into the economy to help the country emerge from recession and create as much as 4 million jobs and to abate the flood of foreclosures.

On the other hand, the Congress has authorized Obama to spend the remaining $350 billion bailout fund, which is expected to help owners of distressed properties.

House Speaker Nancy Pelosi said that she is receptive to the possibility of additional government rescue funds for financial institutions and banks. However, she added that taxpayers should get ownership share in return.

It is Geithner who will recommend if additional funds are needed, according to Vice President Joe Biden. He claimed that there are many government-spending proposals in the program that will not work.

Meanwhile, the Democrats attempted to lessen expectations for an immediate economic recovery despite the government intervention to boost the economy, save financial institutions and help owners of repossessed homes.

The Obama Administration has committed to spend more than half of the proposed fund one year and 6 months after it has been released. The spending is expected to include foreclosure prevention.

Steve Preston had humble beginnings. The native from Janesville, Wisonsin, who is now tasked the humungous job to help stop foreclosures spent his childhood shuttling between small apartments and houses. It is from this experience that he now partly draws on as secretary of Department of Housing and Urban Development, an agency which has gotten mixed reviews in its efforts to stop foreclosures.

The federal agency secretary, who has been in service for only 176 days, already has his share of critics however. According to Austin King, financial justice director for the community advocacy group Acorn, Preston has not proposed a more aggressive plan to stop foreclosure.

This year, 700, 000 homes nationwide have been seized by lenders because of foreclosure, with more than 6, 000 homes in Wisconsin lost to foreclosure. Numbers are expected to increase for the next year.

However, there are those who say that to stop foreclosure fast is a hard task, and that Preston has done all he can considering that he inherited the problem from Alphonso Jackson who was accused of cronyism and had to step down.

Mortgage Bankers Association Chief Operating Officer John Courson says that Preston is decisive and competent. He cites that the HUD Secretary made the Bush administration’s Hope for Homeowners foreclosure program workable, as he was tasked to do. According to Courson, making the program mandatory, as critics wanted, was beyond Preston’s turf.

Past HUD secretary John Kemp also gave Preston the thumbs up and says that he has done a great job of preparing for Obama’s administration.

Preston also says that his agency has provided government help to stop foreclosure through the Hope for Homeowners program which has been able to refinance the loans of 400, 000 people. Speaking before the National Press Club just last week, Preston emphasized that even the government had limits in addressing the foreclosure problem.

Hopefully, the next administration will be able to come up with more viable programs to help stop foreclosure.