By Mike Colpitts
Since the federal government has only tried piece-meal solutions to resolve the housing mess cities and states across the U.S. are making 
their own changes to get the foreclosure crisis under control. New laws to help consumers have been passed in nearly three dozen states.
San Bernardino County, California hard hit by the foreclosure crisis was the first to take up the possibility of using eminent domain to help underwater homeowners. Chicago is the latest government to explore using the power of eminent domain to take mortgages away from homeowners and give them to new investors to reduce the number of empty homes and improve conditions in its neighborhoods.
The Chicago City Council heard a resolution last week to consider the action. The Southern California County, San Bernardino, already in bankruptcy is also studying the proposal. The nation’s biggest banks got the U.S. into the housing mess, county elders say and they should “pay the price” to get at least hard hit cities “out of the mess.”
The financial constraints caused by the foreclosure crisis are reaching emergency levels in many of the hardest hit regions of the country. North Las Vegas, which has also been heavily impacted by the crisis has laid-off firefighters and closed fire stations. Firefighters are coming from nearby Las Vegas to battle house fires daily.
Vallejo, the first California city to file bankruptcy has fire stations closed as a result of its budgetary deficit, with fewer homeowners paying property taxes.
According to Lender Processing Services, a real estate research firm that tracks housing data, foreclosure inventories have only declined 1% since June 2011. The housing market can’t make a full recovery until the oversupply of foreclosures and short sales are cleared from the market. There are 2.06 million homes in the foreclosure pipeline, only 2% less than in May, LPS data illustrates.
Another 3.6 million homes are 30 days delinquent, with 1.6 million in serious delinquency 90 days or more and the most likely to be foreclosed. The figures all add up to 5.63 million either in foreclosure or late, which demonstrates that the crisis is far from getting better any time soon. That’s exactly why Massachusetts, following California’s lead instating “The Homeowners Bill of Rights” is taking legislative steps to limit foreclosures.
The House and the Senate in Massachusetts have passed a bill that is awaiting the governor’s signature to become law. The bill will stop homes from being added to the foreclosure pipeline if banks don’t benefit financially from a foreclosure by forcing lenders to modify home mortgages, regardless of a lender’s wishes.
The law is a bit tangled, but essentially if a homeowner qualifies for a loan modification, and if the financial advantage gained from a modification would supersede what banks would earn on a foreclosure then banks will be stopped from foreclosing.