Provisions in the deal offer banks incentives to aid homeowners in the first 12 months after the deal is signed. There were also incentives for banks to use the Home Affordable Modification Program (HAMP) and other government programs. Big banks that do business across many states from thousands of offices will have to process tens of thousands of mortgage applications. That is a formula for slow relief. “There were many small wrongs that were done here,” U.S. Housing and Urban Development Secretary Shaun Donovan said as the deal was announced. “This does not resolve everything. We will be aggressive about going after claims elsewhere.” But HUD hardly can control the pace at which the banks operate.

Home prices may not have reached bottom, but many economists think they will soon. The home value market may not recover for years, and in some regions it may never recover entirely. But housing experts expect a recovery to be well underway by 2014. The millions of homes with underwater mortgages may remain underwater, but as the activity of buyers increases and foreclosures drop, the ability to sell a house for more than the mortgage on it will increase. Mortgage rates that are at all-time lows should help the sales process across the nation.

Many homeowners still will need help two or three years from now. The ones in the most financial distress cannot wait that long. And many of those with the burden of homes with underwater mortgages will have some relief two or three years from today as home prices slowly rise. In both cases, the money from the government settlement will be too late.

Douglas A. McIntyre

Homeowners in at least 49 states represented in the agreement will benefit, though some states have more homes in trouble than others. California, one the hardest-hit states in the foreclosure crisis, will reportedly receive mortgage relief of up to $18 billion. Based on Corelogic’s national foreclosure report released yesterday, 24/7 Wall St. identified the states with the highest foreclosure rates.

Many of the states with the highest foreclosure rates experienced the worst of the housing crisis. However, analysis by 24/7 reveals that the primary driver of higher foreclosure rates is a lengthy foreclosure process.

Nearly all of the states with the highest rates also have the longest foreclosure periods. The average foreclosure process for the nation is 140 days. The average foreclosure process for the eleven states with the highest foreclosure rates is 220. As a result, many homes foreclosed in 2011 in these states were actually at the end of a process that began more than a year ago. New York, one of the states with the worst foreclosure rates, has an average processing period of 445 days.

The reasons why the foreclosure processing period is longer in these states is because it usually involves the court system. Judicial foreclosures are handled by the court and usual include filing motions and seeking a final judgement from a judge. Nonjudicial foreclosures, which tend to take less time to process, are governed by state law and do not require court intervention. Nine of the 11 states with the highest foreclosure rates have a judicial-only foreclosure process.

While some of the states with high foreclosure rates have had substantial improvements in their economies, others continue to be hit hard. In Nevada and Florida, two states with the highest foreclosure rates, homes lost roughly half of their value over the past five years — and prices are still falling. Foreclosures that began several years ago and that are still active cannot be the only reason nearly 12% of Florida’s homes with mortgages were in foreclosure last year. Home prices in the state fell nearly 50% over the past five years, unemployment remains extremely high, and 17.4% of people with mortgages in the state were 90 days or more late on their mortgage payments.

24/7 Wall St. reviewed housing data provided by Corelogic to rank the states that had the highest percentage of homes with mortgages that were in foreclosure in 2011. Corelogic’s report also provided the percentage of homeowners that were delinquent on their mortgages for 90 days or more last year. In order to highlight the conditions of these state economies and housing markets, we included unemployment rates from the Bureau of Labor Statistics and home price changes from Fiserv-Case Shiller.

These are the 11 states with the highest foreclosure rates.

The mystery about HAMP is why it has not worked. The Treasury’s January scorecard about the program does not say directly. The president’s new proposal indicates that he thinks one of the largest problems with the old plan was a lack of incentives for banks that hold mortgages. The FHA will guarantee new, refinanced mortgages under his latest program. That should make banks more open to resetting home loans. The risk of the process will be taken off of their books, which it was not entirely before.

The new plan lacks much detail, but its enemy likely will be bureaucracy, as is evident in HAMP’s results. Some 1,775,000 mortgages have been considered for modification, but are still “trial modifications.” That is a lot of “trials” for a program that has run for three years. Either the people with these mortgages were not creditworthy — which begs the question of how they got into the program originally — or they are caught in a process that is so slow it cannot move them quickly to permanent status.

The trouble with large national programs regulated by the federal government, and operated bank-by-bank and mortgage-by-mortgage, is the lack of an efficient way to push millions of home loans through such an unwieldy system. That may be at the core of the failure of HAMP. The lack of permanent modification in the Treasury’s January report would seem to show that is true. It requires a look through the fine print to come to that conclusion, but buried there is the reason for the program’s failure, as well as the likely reason a new program will not work.

Douglas A. McIntyre

Real estate values have begun to drop sharply in China. Some economists may argue that this will undermine the central government’s plan to stage a “soft landing” in which GDP slows to 7% or 8% from recent rates of nearly 10%. Whatever the impact may be, China’s National Statistics Bureau reports that home prices only rose during December in two of the 70 cities it measures. Prices in 52 of those markets fell. China’s real estate situation has begun to resemble the one in the U.S. in 2007.

There are no ready statistics about how much equity the Chinese can take out of their homes directly, as Americans could do with home equity loans. Suffice it to say that people with home values well in excess of mortgage values are likely to use their incomes for consumer spending, at least in contrast to people with underwater mortgages. There is not enough data from China to show whether many of the mortgages there are underwater or headed in that direction. It does not matter much. Falling home values are a threat to consumer activity as owners grow cautious about the future, at least if the U.S. is an indication.

So far, China’s home value declines may not be married with high unemployment as has been the case in the U.S. for nearly four years. That double weight undermined consumer activity enough to cause GDP contraction. China’s employment figures are not considered reliable. From outside the country, a home price and unemployment pairing cannot be measured.

What can be measured is the slowdown in China’s manufacturing activity and its GDP. China’s central government also has eased monetary policy, a sign of concern about expansion. Contractions of factory activity in a country as dependent on it as China is almost certainly means that employment prospects are not strong. The trouble is magnified by the number of people who have relocated to large cities. New data shows that, for the first time, more Chinese live in cities than in rural areas. Most large Chinese cities have been built to accommodate the country’s expanding factory base.

One half of the trouble that ruined the U.S. economy — housing — is in place in China. The other — unemployment — may have begun or will soon. What might have been a soft landing is about to get hard.

Douglas A. McIntyre

RealtyTrac reported that:

Foreclosure filings were reported on 205,024 U.S. properties in December, a decrease of 9 percent from the previous month and down 20 percent from December 2010. December’s total was the lowest monthly total since November 2007 — a 49-month low.

RealtyTrac management usually adds reasons why the trend may not continue when it releases it monthly results. This month, they did not. The numbers were pure good news.

All housing trouble is local. Since 2006, the localities have been in California, Nevada, Arizona and Florida. The trends in these markets improved last month. That says a great deal because the glut of homes in these regions has stayed high. Prices have continued to drop as well. Ironically, that may finally be a good thing. Married with low mortgage rates, a supply of homes on which owners have dropped prices or for which banks have put up for less than market value, may have caused activity to slow.

On an even more local basis, foreclosures in the 20 hardest hit markets declined in every case. Many of these cities have very high unemployment, particularly Las Vegas and the cities inland in California, which include Stockton, Riverside and Fresno. The jobless rate in these cities is still well above 10% in most cases. But housing has begun to stage a small recovery. Foreclosure rates in these places are still high, but they are not racing higher.

The RealtyTrac data, taken with modest increases in consumer activity and low mortgage rates, mean that the destruction of the U.S. housing market may be coming to an end.

Douglas A. McIntyre

And the attitude that most of the public will take today… “Dear sir, please do not let the door hit you on the rear end on the way out.”

The news is also being headlined by the WSJ and others as of now.

JON C. OGG

Excluding sales of distressed homes, that is short sales and real-estate owned properties, prices declined -0.6% year-over-year in November, compared with a decline of -1.6% in October.

Including distressed sales, the biggest price drops occurred in Nevada (-11.2%), Illinois (-9.7%), Minnesota (-7.8%), Georgia (-7.7%) and Ohio (-7.2%). Excluding distressed sales, the largest declines occurred in Nevada (-8.8%), Arizona (-4.9%), Minnesota (-4.7%), Idaho (-4.1%) and Georgia (-3.6%)

Some states are showing home price appreciation as well. Including distressed sales, home prices improved the most in Vermont (+4.3%), South Carolina (+2.8%), District of Columbia (+2.1%), Nebraska (+1.9%) and New York (+1.7%). Excluding distressed sales, the five states showing the greatest price appreciation were Maine (+4.9%), South Carolina (+4.9%), Montana (+3.8%), Indiana (+3.3%) and Louisiana (+2.4%).

Paul Ausick

Most of what Bernanke had to report is a recitation of the current trouble in the housing system. And, most of it is stock stuff: Mortgage problems are related to joblessness. People who are creditworthy often cannot get home loans. Home prices are down 33% from their 2006 peak. The federal government’s attempts to resolve the troubles have been ineffective.

Bernanke’s conclusion is that, “Looking forward, continued weakness in the housing market poses a significant barrier to a more vigorous economic recovery.” He suggests that Fannie Mae and Freddie Mac could do more to support housing, if only taxpayers were willing to shoulder the burden of more short-term losses at the agencies.

Part of the Bernanke solution is that more homes in foreclose should be converted to rental properties. And unnecessary foreclosures should be, based on new policies that might be adopted by Congress, avoided. But banks will resist a set of new foreclosure standards because they likely would cause losses. The conversion of foreclosed homes to rental would take years and incalculable sums of money.

Most of what Bernanke says about the housing problem, its effects and possible solutions is reasonable. What is not reasonable is that taxpayers might believe that if they risk more of their tax dollars now, they will benefit from a recovery of the housing market in several years. This potential process also assumes that Congress has the will to put a larger portion of the federal budget toward a set of solutions to mortgage troubles, at a time when the debate about national budget austerity consumes much of what is discussed in the House and Senate. Gridlock may contribute to the lack of a housing solution. A larger contributor is that Americans are concerned with jobs, taxes and entitlement programs much more critical to them than anything else. The agenda plate is full.

Bernanke and other people of stature can send as may letters and lists of solutions to Congress as they can write. None will make any difference. Housing is a major problem for the U.S., but it is one that will be left mostly to troubled homeowners and those with foreclosure problems. No one else cares enough.

Douglas A. McIntyre

The media regularly gives front-page treatment to data on the number of home foreclosures each month. The number is expected to reach three million for the second year in a row. However, there are more than 131 million households in the U.S. Another fact the media covers regularly is the number of home mortgages that are underwater. The number is about 20%, which still leaves 80% of mortgages with lower balances than the value of the homes they cover.

Americans understood more than two years ago that the home equity market was nearly gone. The chance to tap large reservoirs of home value for consumer spending, college education costs and retirement had mostly gone away. People had to survive and, perhaps prosper, in an economic landscape that had changed radically. Like unemployment, home value problems became a fact of life.

The consumer has begun to recover. Holiday spending rose between 3% and 4%, based on most measures. Unemployment has begun to fall. Tax cuts probably will be extended into next year. Long-term unemployment insurance probably will, too.

The fact of the home market collapse has touched millions of Americans. It has barely touched tens of millions more. Some of the touched and many of the untouched have learned to increase their consumer purchases as the housing catastrophe continues to be part of life.

Douglas A. McIntyre

Recent earnings and forecasts from builders like KB Home (NYSE: KBH), D.R. Horton Inc. (NYSE: DHI), Toll Brothers Inc. (NYSE: TOL), Lennar Corp. (NYSE: LEN), and PulteGroup Inc. (NYSE: PHM) have been mixed, but the trend has been slightly positive for the first time in many quarters.

In the 20-city Case-Shiller index, the one-year decline in Atlanta was worst, at -11.7%, followed by Las Vegas at -8.5% and Minneapolis at -8.4%. The two cities posting one year price gains in October were Detroit, up 2.5%, and Washington, D.C., up 1.3%.

Only one city, Phoenix, posted a month-over-month gain in October, and that gain was a mere 0.3%. The largest decline month-over-month came in Atlanta, at -5%, with Detroit falling -3.3% in the month.

The Case-Shiller indices indicate a couple of things. First, the impact of foreclosed properties still weighs on home prices. And as more foreclosed properties hit the market now that lenders are ending their self-imposed moratorium on foreclosures, more pressure is expected on home prices.

Second, the recent good news on new orders and inventory levels from home builders could be more transient than many had hoped. Even the expected improvements in homebuilding were slight, and remained near recent lows.

Home prices have returned to their level in mid-2003, and the 20-city recovery from its most recent low in March 2011 is up 1.9%. That’s barely better than nothing.

Paul Ausick