Government officials from the Treasury Department are hoping that somewhere between 500,000 to 1.5 million distressed home owners in the country, whose mortgage loans are underwater, will be benefited. The program sets as its prime target – home owners who are current on their mortgage payments (despite hardships and not budging to the desire of strategic default as some people do) honestly, but run the risk of default, due to no equity in their homes.

Funds for the program’s implementation and covering losses have been allocated (as usual from the tax-payers’ money) to the tune of $14 billion from the Troubled Asset Relief Program, on the basis of official estimate that one in every five intended mortgage loans of the program could default.

First – the figure of total home owners in underwater status is staggering. As of June 2010 it was estimated by CoreLogic Inc.  that nearly 11 million home loan borrowers in the country – representing 23 percent households with a housing mortgage – were underwater.

No doubt – the record lowest levels of mortgage rates, particularly for a 30-year fixed mortgage is hovering on 4 plus percentage, as never before in the last 50 years. But the question is how many of the distressed home owners can take advantage of these unbelievably low rates – having either used refinancing already or do not qualify for the program. The reason for non-qualification is this program excludes mortgage loans held by Fannie Mae and Freddie Mac – which form the major chunk of the $10 trillion U.S. first-mortgage debts.

The predominant hurdle the program has to cross is dealing with second mortgages – it is essential that second liens must be reduced, so that the mortgage balance is less than 115% of the current value of the underwater home. There are more to it like willingness of investors to forego a portion of the capital.

What the experts say about this? Well – like no two doctors agree, the opinions differ and both sides put forth interesting points for consideration. Here are some of them:

Making money on real estate business hinges on the golden rule “Buy low and sell high” and if this is right, there is no better time than now to plunge head-on. Because in almost all the housing markets, particularly the most sought-after locations of California, Florida, Nevada, and Arizona, you get properties on distress at a fraction of their values. Remember – these properties were unaffordable price-wise during the boom years.

Buying a distressed property –  preferably from a home owner facing foreclosure and in the initial stages of foreclosure to get rid of the property – will be a lucrative proposition. A short sale is also a good option to strike with bounty of cash on the negotiating table.

After carrying out smart rehabs and repairs, not exceeding 20 percent of the home value, you can make the home a top-notch one to get listed for re-sale through listings.

But those who advice –  buy now but don’t flip – ask the vital question, where are the buyers to purchase your property, even if it is handsomely priced? When home values are plummeting by more than 50 percent in almost all the housing markets, there is no guarantee for reaping a good harvest as return on your investment.

Instead they advise – buy now but keep the property for long term of at least 5 years. If the property is given a face-lift, it is a sure-shot that you can derive steady rental income month after month. When the turn-around happens in the present market conditions, you will be hitting a fortune.

Several research studies have been conducted on the subject. Here are some results:

Experian and Oliver Wyman, a research firm in their analysis estimated that among the borrowers of home loan mortgages and were behind their repayment installments by 60 days, the so called strategic default was about 18%. In the year 2008, nearly 588,000 borrowers all over the country defaulted as a strategy, although they are affordable by them. Compared to the year 2007, they found this is a huge difference upwards by 128%.

Further, it was found out that in areas where the prices of properties experienced a steep decline – especially housing markets of California and Florida –  this practice of strategic default was most prevalent. And mortgage loans which originated in 2006 or thereafter, met with this type of borrower-home owners more, the reason being these people did not experience appreciation in their home prices, and they started dipping down.

Chicago Booth/Kellogg School Financial Trust Index collected data in their research, through a conducted survey of around 1,000 people related with mortgage home loans. According to the result, the percentage of home owners willing to default from their mortgage commitments strategically was rising. While this percentage was 31% in March this year, it stood at only 22% in 2009 March.

Interestingly, the co-authors of the research are reported to have attributed one possible reason for rising numbers of strategic default is – some distressed home owners’ belief – the mortgage lenders are not pursuing defaulters aggressively.

Another opinion offered by a spokesperson of Responsible Home Owner Reward, a program working with mortgage lenders in providing financial incentives for borrowers, who run the high risk of defaulting strategically is – people are learning and get emboldened that they have one or two years before being thrown out of a home by the lenders, after refraining from paying mortgages.

On a survey to assess the business activities of Realtors in US, it is found that 22 percent of respondents also offer commercial brokerage; 21 percent are in relocation; 18 percent residential property management; 15 percent counselling and 13 percent land developments, apart from full time residential property real estate business.

In addition, smaller percentages were also in commercial property management; residential appraisal; international; auction and commercial appraisal. Residential brokerage was cited as a secondary business for 11 percent of respondents, who had other primary specialties.

Despite the fact that home sales increased modestly in 2009, the bottom line was only lower value properties. Last year the median income of Realtors fell 3 percent to $35,700, following a decline of 14 percent in 2008. Members, who are licensed as brokers, earned a median income of $49,100 in 2009 and sales agents earned $26,600.

Realtors in the business for two years or less earned a median income of $8,800 on an average, while those in the business for 16 years with impeccable knowledge and experience earned $52,300.

NAR President Vicki Cox Golder says that the longer you are in the real estate business, the more you make based on growth in referrals and repeat clients from serving their long term interests; Real Estate is constantly changing, which is why continuing education is so important.

The median income of 20 percent of all NAR members’ business is from referrals from past clients, ranging from 2 percent for new comers in the business for two years or less, to 23 percent for respondents with at least 16 years of experience.

NAR vice president, Paul Bishop says 24 percent of Realtors in 2010 held at least one out of six certifications in specialized training, up from 16 percent in 2009. The fastest growth in training is for members holding the Short Sales and Foreclosures Resource Certification, underscoring the impact of distressed sales on the housing market.

So you can rest assured that there are sufficient numbers of good and seasoned Realtors in your area, to help you out in your requirements.

The Survey panelist potential home buyers – 17.2% of them say they have plans to buy a home as an investment in the near future – whereas only 5.6% said so during March 2009 – nearly triple time increase. Regarding resources for property purchase, 12.3% of Americans are planning to buy a home in the near future by using 100% down cash; and 12.8% said they will use cash for more than half of the investment through cash and seek finance for the rest of the payment.

Those who will buy the property with less than 50 percent of payment by cash down, and seek financial help for the remainder was 49.2%. It is pertinent to note here that according to the U.S. Census Bureau, one in three U.S. homes are owned by purchasers free and clear, without a mortgage.

How many years they plan to own the homes they buy? For this pertinent question, nearly half of the potential investors in US real estate surveyed – 46.5% to be exact – answered that they plan to own the property for six or more years; 16% of them said they anticipate to hold the purchased home between two and five years; and only 10.6% investors said owning the property for shorter duration of 6 and 24 months.

Will they buy a foreclosure property and live themselves there? The affirmative answer to this question has dropped by 31.1% in the past five months and stood at 26.5% of the Survey panelists saying “Yes”. However, this new Survey by Move Inc. has found that peoples’ interest in purchasing a foreclosure property as an investment – with a view to fix it up and resell – rose by a good 42% – from 11.3% in October 2009 to 16% in March 2010.

So as per voluntary opinions gathered from the above Survey, one can surmise that generally people are interested in making investment in foreclosure properties.

The latest news story pertains to Alex Pembrton and Susan Reboyras, residents of Florida, quoted as example for this bizarre twist to foreclosure episodes. The couple had their home they were living caught into the foreclosure process. The property went underwater for the same and similar reasons of the market value going down below what they owed on mortgage, inability to meet family expenses including medical problems etc. and even after their lending bank allowed them to re-mortgage their home, they used the borrowed money only for their business.

The Florida couple bought a truck with the money, which was necessitated for the attic-renovation business. When circumstances reached a crucial stage, where they had to choose – either declaring bankruptcy by paying off more than the property was worth or resisting the foreclosure action by the bank, they chose the latter option.

They ceased paying the mortgage last summer and concentrated in building their future, by involving themselves fully in their business. The worry of foreclosure of their home did not bother them either – they spent their leisure as any normal persons would – a trip to the local casino; an occasional steak out, or an outing in the airboat they own.

Mr. Permberton is quoted as saying “instead of the house dragging us down, it’s become a life raft; it’s really been a blessing.” Any moral reservations? No –  they still think it is the fault of the bank and not theirs. The pair says they are using the “money saved” by stopping repayment instalment of $1,837 every month wisely.

That said it is a question of throwing good money after the bad money for many Americans. Otherwise how will you explain the 1.7 million foreclosure suits in the country, bogged down by legal counter-suits by troubled home owners, the applied pressure from the government to re-negotiate mortgages and the sheer volume of workload?

It is also a fact that the average borrower facing foreclosure is delinquent by 438 days presently.

Foreclosure activity reports and data from authentic real estate sites reveal that during the first quarter of 2010, there were 930,000 foreclosure listings all over the country. This is up by 7% from the quarter ended December 2009 and significantly up by 16%, compared to the average foreclosure activity figure in the first three quarters of 2009.

The US Treasury Department also confirmed this. The total delinquent households were over 6 million and with the help of HAMP just 228,000 distressed home owners were benefited and another 108,000 applicants were waiting.

Representing US lending banks, Wells Fargo and JP Morgan Chase have already expressed their inability to play along with HAMP. They have told in plain words to the Congressional Panel – a watchdog committee of the implementation and progress of HAMP- that they were “not inclined” to “fully embrace” the proposals contained for banks in HAMP, including banks coming forward to voluntarily lowering the balance outstanding on mortgage loan, in respect of borrowers suffering from unemployment and to work out more affordable levels of repayment.

They pointed out that the plan is short-sighted in that it applies to only a portion of the total borrowers, deeply in trouble and those who meet certain specific criteria. The Congressional Panel during its hearings brought out another obstacle faced by applicants aspiring for loan modifications.

While lending banks are inclined to concentrate on home-equity loans and second liens as well, Pension Funds and Mutual Funds often times hold only first mortgages. This leads to a glaring difference between the two lenders categories. Investors want the second level debt should be reduced first whereas banks want original mortgages to be tackled up front, as this is where they can save their money.

The tussle still continues and the ultimate sufferers are the millions of troubled US home owners.

Citing February statistics, the report says over 50 percent of an estimated 170,000 distressed borrower-home owners are seriously “underwater” by having negative equity of at least 25 percent – meaning for every $1.00 of home value, they owe on mortgage $1.25.

According to the report of the Congressional Oversight Panel, a watch-dog committee on federal bailout plans, released in April – the average troubled home owner that has received a five year modified mortgage had a negative equity of 35 percent, prior to the foreclosure mitigation program. It adds further that after the loan modifications, the average home owner’s burden has actually increased and they are underwater now by more than 43 percent.

Already conducted research surveys have shown that the more underwater home owners are, they are more likely to – fall behind on mortgage repayments; default or simply walk away from their sinking properties.

The government auditors’  report contradicts the COP report saying it understates the problem. The figures given by COP are for first-lien home mortgages only and debt owed on junior liens, such as second liens and home equity liens, is not part of that calculation. Last April, the Obama administration estimated that “up to 50 percent of at-risk mortgages currently have second liens.”

The auditors’ report indicates that – if junior liens were to be included, the percentage of negative equity holders would be higher significantly. In the words of government auditors “The continuing deep level of negative equity for many HAMP permanent modification recipients makes the modifications’ sustainability questionable; even with more affordable payments, deeply underwater borrowers may remain tempted to strategically default or may be compelled to, because core life events, such as death, divorce, disability, marriage, child birth, job loss, or job opportunities necessitate a move.”

In a round-about way, the government auditors say in their report in so many words that troubled home owners, even after availing loan modifications, tend to fail and more delinquencies can be expected in the future.

In the coming years, millions of American families are likely to lose their homes, once their mortgages adjust. The backlog is really huge, despite the federal government’s foreclosure mitigation plans. The HAMP and HAFA programs are yet to bear fruit, even after allocating $75 billion of tax-payers’ money.

Nearly 231,000 distressed home owners were benefited by the loan modification plan, in securing permanent modification to their monthly mortgage bill. But this is just 20 percent of the total sufferers – 1.2 millions of people who started the program over the last year. Lending banks are somewhat reluctant for loan modification, but even if they are ready to do so, there are still hundreds of thousands of borrowers, who do not qualify under the stipulated conditions or default once again even after loan restructuring.

The main catalysts pushing the foreclosure crisis into deep trouble are – raising unemployment rates and reduced income to the families or household this year.  One more surprising fact is that although avoidable laxity in issuing home loans started defaults initially, borrowers with good credit record, who took conventional mortgages at fixed interest rates, are the fastest growing segment of foreclosures.

As of March this year, nearly 7.4 million mortgage borrowers, representing 12 percent of US households with a mortgage were stated to have missed at least one month of payment or in foreclosure already – according to Lender Processing Services Inc.

The statistics for April 2010 are encouraging though. Nearly 334,000 US households reported new foreclosure filings in April, one in every 387 housing units, which is a decrease of more than 9 percent from March and lesser by 2 percent compared to April 2009, and a record decline for the first time in 5 years.

Nevada continued to head the Top 10 list of States hard-hit by foreclosure rates – one in every 69 housing units receiving a foreclosure filing – followed by Arizona, Florida, California and Michigan, in that order.