Home foreclosures continue to mount, presenting challenge to Obama and GOP

Home foreclosures increased 31.2 percent in the third quarter of 2010, illustrating the severe housing problem that continues to plague the economy.

The number of new foreclosures increased to more than 382,000 between July and September, a figure 3.7 percent higher than the previous year.

Another 1.2 million homes are in the process of foreclosing, according to a report released Wednesday by government regulators.

The jump in foreclosures shows housing will remain a serious issue in 2010 for President Obama and a new divided Congress with Republicans controlling the House.

GOP leaders have repeatedly blamed government-backed home-loan companies Fannie Mae and Freddie Mac for their role in a financial crisis that swept in the worst recession in decades. Republicans have vowed to privatize the two entities now in conservatorship, calling on the government to cut its ties.

But Fannie and Freddie control more than 90 percent of the country’s home loans, and a report Wednesday in The Wall Street Journal suggested Republicans taking over the House were having second thoughts about quickly cutting Fannie and Freddie loose.

“We recognize that some things can be done overnight and other things can’t be,” Rep. Scott Garrett (R-N.J.), the incoming chairman of the subpanel that oversees Fannie and Freddie, told the Journal. “You have to recognize what the impact would be on the fragile housing market as it stands right now.”

Government regulators said Wednesday’s jump in foreclosures came because thousands of home owners had exhausted programs set up to help them stay in their houses.

The foreclosures reflected “the large number of seriously delinquent borrowers moving through the foreclosure process after servicers exhausted home retention programs,” the Office of the Comptroller of the Currency and Office of Thrift Supervision said in a statement.

The report did find that when home mortgages were modified to reduce borrowers' monthly payments, it improved the ability of owners to stay in their homes.

The government instituted the Home Affordable Modification Program to address the housing crisis by changing mortgage loans for home owners. It was hoped that the program would help millions of people stay in their homes by modifying loans, but so far the program has only permanently modified a little more than 500,000 mortgages.