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US administration bows to pressure to help stem foreclosure surge

The US administration is bowing to calls from the industry to do something to stem the ever increasing rates of foreclosures which many experts fear will de-rail the property recovery.

The latest prediction is that property foreclosures could reach two million next year and rise to a total of 7.2 million by 2014.

Researchers at Wells Fargo say that the worst of the damage may already be done.

United States Department of the Treasury is launching a new programme to help ailing borrowers escape foreclosure.

It will be available to those who already qualify for the Home Affordable Modifaction Programme (HAMP).

It comes just as a new report reveals that it is not just lower end properties that are ending up in foreclosure.

There has been a worrying increase in the number of higher priced properties affected.

Real estate priced in the top tier accounted for nearly a third of all foreclosures in July this year, according to new data from Properties in the bottom third and middle third of values took an equal share, some 35% each.

Compared to 2006, top-tier homes now make up nearly twice the proportion of foreclosures.

At the height of the real estate bubble properties in the lower one-third of home values made up 55% of all foreclosures, while homes in the medium range accounted for 29%.

The top one-third represented only 16% of foreclosures.

The combination of heightened delinquency rates in top tier properties along with declining cure rates of borrowers improving in delinquency status means more foreclosures for borrowers outside the subprime mortgage market, according to Zillow.

Recent data from Amherst Securities showed a strong link between increased negative equity and the decreased probability of improving the delinquency status.

Zillow estimates that 23% of single-family homes were underwater on their mortgages in the second quarter of 2009. Because of this analysts expect cure rates to remain low.