The Obama administration’s $75 billion foreclosure prevention effort is unlikely to succeed because mortgage lenders cannot turn a profit on modified loans, concludes a new report by the Federal Reserve Bank of Boston.

Analyzing 665,410 loans originated between 2005 and 2007 that subsequently became seriously delinquent, the Boston Fed found that only 3 percent of borrowers had their loans modified to lower monthly payments, and about 5.5 percent received workouts that did not result in lower payments.

Also, up to 45 percent of approximately 150,000 borrowers who received some kind of aid ended up in arrears again, but about 30 percent of delinquent borrowers were able to fix their problems without help from their lenders.

Lenders avoid redoing loans, Fed concludes [Boston Globe]

There have been rumors circulating for months that banks are holding on to thousands of foreclosed properties so that they don’t flood the market to further depress prices.  Over the last few weeks however, those rumors have started to surface from credible sources, including The Washington Post, where Renae Merle takes a closer look at a family that wants to foreclose, but can’t due to the bank back-log.  Some would argue that we have not yet seen the bottom of the housing slump and if investors are looking for opportunities to purchase foreclosed property, all they have to do is sit tight and wait for more distressed property to hit the market.

The backlog of seriously delinquent mortgages, which so far affects about 1 million borrowers, is a shadow over hopes for a rebound in the nation’s housing markets. It masks the full extent of the foreclosure crisis and threatens to depress prices even further just as some parts of the country are hinting at recovery. For lenders, it could portend even more financial losses tied to the mortgage meltdown.

Not Paying the Mortgage, Yet Stuck With the Keys [The Washington Post]

To stimulate the housing economy, the federal government tried motivating first time home buyers by issuing an $8,000 credit to the buyer if they met certain criteria.  When it comes to purchasing a first home, every little bit counts, so this credit is a welcome one, but since lending practices have changed so drastically this year, it should be noted that the $8,000 credit cannot be used towards a down-payment of a loan.  Since a down-payment is now a required variable to obtaining a loan (years ago, practically all you needed was a pulse and social security number), here are a couple of tips to help you come up with a down-payment.

1. Get a gift from a relative
2. Use your 401(k)
3. Sell something
4. Change your withholding rate
5. Obtain seller credits
6. Create a stringent savings plan

Click here to see the above tips in more detail.  The above tips are just that, tips, so you should speak with your tax adviser and mortgage broker before you make any financial decision.

First Time Homebuyers get $8,000 Tax Credit After Closing–How To Come Up With the Cash for Down Payment Now [Illinois Mortgage Rates and News]