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Property foreclosures surge in US as end of moratoriums push up forced sales

Although government-sponsored lenders Fannie Mae and Freedie Mac have increased their foreclosure prevention programmes this does not seem to be having much impact overall.

The new report from the Federal Housing Finance Agency on their behalf shows that preventative measures led to a substantial reduction in completed foreclosures in December 2008 and January 2009 but once the moratoriums ended at the end of January foreclosure sales surged to 28,897 in February, up from just 3,222 the month before.

Loan modifications accounted for 43% of all preventative actions in February. Of these 70% involved both interest rate reductions and term extensions.

Credit quality has also deteriorated, the report shows. Some 41,000 loans became 60 or more days delinquent in February, bringing the total delinquent volume among the two lenders to 1.1 million loans. One in 10 non-prime loans, which account for 16% of their combined 30.2 million loans, qualified as 60 or more days delinquent at the end of February.

The deterioration seen in the month hardly touches the massive influx of foreclosure sales completed on mortgages that became delinquent up to three months before. The two groups temporarily froze foreclosure sales on owner-occupied properties from late November 2008 to late January 2009 and then revived the moratorium for the last two weeks of February.

'The suspension led to a substantial reduction in completed foreclosure sales in December 2008 and January 2009,' said FHFA director James Lockhart.

The second freeze expired on March 6 and the organisation is now expecting another huge surge in foreclosures when the March figures are published.