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It’s taken three years to process $1 trillion in foreclosed homes. At that rate, it will take more than five years for the amount of each individual’s mortgage debt, relative to their income, to get back to levels that were the norm in this country before the housing bubble, according to a report from TrimTabs Investment Research.

“For the debt-to-income ratio to return to 65 percent, mortgage debt needs to fall from its current level of $8.9 trillion to $6.4 trillion to $7.4 trillion,” Madeline Schnapp, TrimTabs director of economic research lays out very clearly in a report to clients today. “At the current pace, it could take four to six more years to work through the current and expected backlog of delinquencies.”

One problem with this math could be that Schnapp assumes there will be very little income growth because of high unemployment so the only way to get back to normal is to lower the debt side of the equation through foreclosures. However, she’s also assuming 60 to 65 percent is the “sustainable” amount of debt to income an average homeowner can handle and many believe that will still have to come down even further. Either way, you’re left with at least a five-year slog, according to many economists and investors.

“It may take longer than 4-6 years in my opinion to work through the delinquencies,” said Simon Baker, CEO of Baker Avenue Asset Management. He cited the stall in the foreclosure process taking place in the court system as banks are forced to prove they actually own mortgages that changed so many hands during Wall Street’s securitization process.

Earlier this month Massachusetts highest court called seizures of two homes by U.S. Bancorp [USB 26.80 -0.16 (-0.59%) ] and Wells Fargo [WFC 31.84 -0.66 (-2.03%) ] invalid because the banks didn’t have the proper documentation at the time of the of the foreclosure.

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“Sloppy paperwork and government policies that slow foreclosures and allow banks to postpone losses are only delaying the necessary adjustment in the housing market,” wrote Schnapp in her report. “The faster home prices reach a market clearing level, the faster the housing market will boost the economy.”

Several banks halted foreclosures temporarily last year over the so-called robo-signing scandal where delinquency records were not properly analyzed but instead processed in mass quantities by computer. Bank of America [BAC 13.60 -0.07 (-0.51%) ] said this week that it had not only halted foreclosures back in October, but also notices of default (the first part of the foreclosure process) as well. This means that the foreclosure process is even more backed up than previously feared.

“The era of deleveraging is still in first half,” said Steve Cortes of Veracruz Research. “For this reason, the Fed’s efforts to inflate the economy are not working. The effects of rising commodity prices are more than offset by the deflationary forces of deleveraging, especially in property arena, where a double dip is already a reality in many cities, and soon will be nationally.”

The latest Standard & Poor’s/Case-Shiller data showed that housing prices fell again across most of the major cities, with eight markets such as Las Vegas and Miami setting new lows since the housing crisis. Data released today showed a much higher than expected jump in weekly jobless claims, dampening hopes of an increase in wages anytime soon.

“We do not expect a true turn in home sales to occur until it becomes clear that the unemployment rate has peaked and is on a steady downtrend,” said Michelle Meyer, an economist for Bank of America Merrill Lynch, in a report to clients. “In addition, the turn in new home sales should be slower than that of existing homes given the lure of deeply discounted foreclosures.”

By: John Melloy

John Melloy is the Executive Producer of Fast Money. Before joining CNBC, he was an editor for Bloomberg News, overseeing the U.S. Stock Market coverage team.

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Existing home sales soared 12.3 percent to an annual rate of 5.28 million units, the National Association of Realtors said on Thursday, far surpassing forecasts for a rise to 4.85 million

Sales were down 2.9 percent compared to a year earlier.

A jump in mortgage rates may have forced some buyers into the market by raising concern of even further increases, said Lawrence Yun, chief economist at the NAR.

Yun said he expects 2011 sales to total around 5.2 million units, with prices remaining stable.

Sales peaked above 7 million units in September 2005, as the housing bubble reached fever pitch.

They hit a 15-year low below 4 million units in mid-2010 after the market collapsed, triggering a widespread financial crisis.

Median home prices fell to $168,800, down from $170,200 in November and the lowest since February 2010.

That was in part because properties considered “distressed” accounted for 36 percent of sales, up from 33 percent in November.

The U.S. economy has been growing for over a year, having emerged from its deepest recession in generations in the summer of 2009.

Gross domestic product expanded 2.6 percent in the third quarter, not enough to put a significant dent on the nation’s elevated 9.4 percent jobless rate.

A weak job market could thwart housing activity further by denting consumer confidence

Source Tim Harris From Harris Real Estate University

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Lenders granted more time to revamp systems

By Inman News, Thursday, August 12, 2010.

Inman News

The Federal Housing Administration is pushing back the implementation date for new premium structures on FHA mortgage insurance to Oct. 4, after lenders complained that they need more than five weeks to update loan disclosures and computer systems.

FHA Commissioner David Stevens announced last week that upfront premiums for FHA mortgage insurance would be rolled back from 2.25 percent to 1 percent on Sept. 7, while annual premiums would nearly double.

FHA had raised upfront premiums from 1.75 percent to 2.25 percent in April, to cope with rising losses on FHA-guaranteed loans. The Obama administration promised to reduce upfront premiums if Congress gave it the authority to raise annual premiums beyond their statutory limit of 0.55 percent.

Legislation raising the statutory limit on annual premiums to 1.55 percent was approved by lawmakers on Aug. 4 and has been presented to President Obama for his signature.

The day after the Senate’s unanimous passage of HR 5981, Stevens said FHA would roll back upfront premiums to 1 percent on Sept. 7, simultaneously increasing annual premiums to 0.85 percent for borrowers with loan-to-value ratios of up to 95 percent and to 0.9 percent for borrowers with higher LTVs.

But that timetable only gave lenders about five weeks to update loan disclosures and computer systems.

In an Aug. 10 statement, HUD Deputy Assistant Secretary Vicki Bott said the implementation date would be pushed back to Oct. 4 in response to “strong concern” from lenders about meeting the original deadline.

“Since these system changes impact regulatory disclosures, lenders expressed they must have the additional time to implement and test systems,” Bott said. “FHA took this feedback seriously and has accommodated the need for additional time.”

Under the current premium structure, a borrower taking out a $200,000 loan with FHA’s 3.5 percent minimum downpayment would need to come up with an upfront premium of about $4,500, and would then owe about $1,100 a year in annual premiums.

When the new premium structure takes effect, the same borrower would pay an upfront premium of about $2,000, plus $1,800 a year in annual premiums. The $700 increase in annual premiums equals an additional $58 a month on their mortgage payment.

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over a longer period of time with the interest rate set for the entire time of the mortgage. 30

year home loan rates are an industry standard but is it the right choice for you?

The 30 year home loan is an industry standard, but is it the right choice for you?  Because the

total payments are spread over a longer period of time and the interest rate set for the entire

time of the mortgage.  This was the first choice of most home owners.

As we mentioned, the plus side for a 30 year home loan is lower monthly payments.  This

attraction is somewhat dimmed by the fact that you pay thousands extra in interest.  But, your

interest is 100% tax deductible which does lower your after tax cost.  It offers you some

flexibility so that if your financial situation changes and you have more money you can pay it

off in less than 30 years, this while keeping the low monthly payments.  Your payments are

smaller so in reality you can purchase a larger roomier home.

To show an example of the interest difference between 30 year home loan rates and one of the

other rates.  On a 30 year, 100,000 dollar loan using 7% interest rate your monthly payment of

interest and principle would be $665.30 dollars.  Over the next 30 years you will have paid

$139,511.04 in interest alone.  Now with a 15 year home loan rate on the same amount you will

pay $871.11 per month and over the next 15 years, you would pay $56,799 in interest.  This would

save you $82,712 dollars.

If you have the will power to invest the savings from the monthly payments, it still could be a

good choice to go with the 30 year mortgage.  Especially if you can find an investment that the

long term payoff matches or exceeds what you would save in a 15 year mortgage.  Another factor

to consider is how fast you want to accrue equity in your home or to own it out right.  30 year

home loan rates take much longer to build equity.

30 year home loan rates are certainly attractive and the vast majority of home buyers get 30-

year loans because that is the longest home loan available today.  Experts agree if they could

get a 35- or 40-year loan, they probably would.  There are many other options to consider.

Probably the biggest question you have to ask yourself when considering a loan is what are your

financial goals?  What loan plan will help you the most to reach that goal?  It is clearly to

your advantage to look into other loan options for the best loan available for you and your

financial goals.  It may surprise you that because of your personal situation there may be other

plans more suitable for you.

Call me if you have any question here is my info

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