Foreclosures rise as foreclosure counseling funding gets cut

Foreclosures are rising just as housing counselors, who prevent foreclosures by helping homeowners get loan modifications, get their funding eliminated in the federal budget. This shows how Virginia must prioritize housing investments to prevent our economy from getting worse. An article in the Daily Press yesterday reported:

Peninsula-area foreclosure filings jumped 34 percent between June and July and were up 17 percent over July 2010.

Slashing housing counseling funding in the middle of housing crisis is bad public policy. This is clearly going to make our economy worse as housing continues to be a drag on our economy. Respected economist Christine Chmura explains how housing continues to be a drag on Virginia’s economy and prevent robust economic growth:

Until the excess foreclosed properties are digested by the marketplace, housing activity will be less likely to rebound. Based on the total number of foreclosed mortgages and average distressed sales in November 2010, it will take 18 months to clear the foreclosed homes currently on the national market, according to a CoreLogic report. In Virginia, 13 months are needed to clear the current glut of foreclosed homes.

The increased supply of homes on the market and lack of demand continues to depress home prices, thus preventing a speedy recovery of the housing market. Almost two years after the recession officially ended, the increased supply of homes on the market continues to push housing prices down. At the end of 2010, home prices dropped 11 percent nationally from the mid-2007 peak.

Virginia must prioritize housing investments (housing counseling funding, statewide housing trust fund) to improve the housing market, stabilize neighborhoods and create jobs.

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