A reader wanted an opinion on this quote from the latest CNN survey:

“Foreclosure sales will pick up this spring as mortgage servicers figure out who can qualify for a modification and who can’t,” said Zandi.

The bank reps on Monday’s conference call both talked about the “retention waterfall”, where they are going to try each and every step available to rescue borrowers.  First they’ll try a regular refinance, then a loan modification, then offer a short sale, then consider foreclosure. 

Foreclosure sales WON’T pick up this spring, like Zandi says.  Why?  Because the HAFA program will allow defaulters to consider short-selling their house for a few months – with only a trickle actually coming out of the retention waterfall.  Then there will probably be another government program devised to try to save the day.

How about this article? (hat tip to Rick for sending it in)

Feb. 25 (Bloomberg) — The Obama administration may expand efforts to ease the housing crisis by banning all foreclosures on home loans unless they have been screened and rejected by the government’s Home Affordable Modification Program.

The proposal, reviewed by lenders last week on a White House conference call, “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed,” according to a Treasury Department document outlining the plan.

As long as the government thinks foreclosure is a dreaded last-resort, the can will be kicked further down the road.

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