The government foreclosures program needs to make a bold move now before millions more of foreclosures clobber the whole country again, according to housing analysts and economists.

Economists believe that if the current pace of foreclosures and home loan modifications stay the same, there would be about 9 million more foreclosures by 2012.

Guy Cecala, head of a mortgage industry publication, said that he could not find a positive sign that could signal the start of economic recovery for the country.

Kathleen Engel, a law professor at Cleveland State University, said he has been studying mortgage securitizations and she found that tax liabilities arising from loan modifications are hindering many mortgage lenders from modifying loans. She said the government foreclosures program should include active participation from the U.S. Internal Revenue Service.

Among Engel’s recommendations to expand the government foreclosures program are the removal of the tax liabilities of trusts represented by lenders that modify loans, the extension of the federal $8,000 first-time home buyer tax credit program to higher income levels and to move-up homebuyers that already own homes and the provision of direct federal loans to distressed homeowners so that they can save their homes.

Engel said that the high jobless rate is pushing more families to foreclosures, which are in turn pushing down home prices and hindering the recovery of the housing market and the national economy.

Recently, Treasury Secretary Timothy Geithner and HUD Secretary Shaun Donovan sent letters to the CEOs of the 25 largest mortgage services in the country to pressure them to step up their loan modifications. They said that only around 270,000 loan modifications have been worked out, which is far below the 5-million target of the government foreclosures program.

A team of House Democrats also made a move last week to push the government foreclosures program to do more. The group of Senate Finance Committee Chairperson Chris Dodd and 19 other committee members also wrote Secretary Geithner to develop and implement a more forceful strategy.

However, housing and mortgage analysts said there is no current law that can force mortgage lenders to make loan modifications. They said that the legislators pressuring the federal government to make aggressive moves are to be blamed. They were the ones who rejected the proposal that would have forced mortgage lenders to help more distressed homeowners under the government foreclosures program.

Housing and Urban Development Secretary Shaun Donovan visited Las Vegas, which has topped nationwide foreclosure charts, to promote the expansion of the federal government foreclosures program.

Donovan mentioned that the number of foreclosure actions filed in Las Vegas is higher than the national average by more than seven percent.

In the first quarter, the Las Vegas and Paradise area had more than 35,000 properties with foreclosure actions and one in every 159 houses in the area had a foreclosure filings. Foreclosure actions increased by nearly 104 percent compared to the first quarter of 2008.

According to Secretary Donovan, the government foreclosures program has expanded the loan refinancing scheme of the program by allowing borrowers whose homes are underwater by 125 percent to participate in the program. Previously, only homeowners whose mortgages were 105 percent underwater were allowed to apply for loan refinancing.

The new loan-to-value ratio means more homeowners can apply under the government foreclosures program. For example, a borrower holding a $375,000 home loan can apply for loan refinancing even if his house had gone down in value to $300,000.

Donovan chose Las Vegas as one of the cities he would visit to announce the expansion because an estimated 67 percent of homeowners in the city are staying in homes that have gone down in value substantially lower than their mortgage loans.

The Obama administration is trying its best to reach out to underwater borrowers under the government foreclosures program. But many borrowers are doubtful if the expansion can really help many homeowners in Las Vegas, where home prices have fallen to low levels.

An example is the price of a home on Pine Valley Road where a recently widowed woman has lived for 17 years. She said her house is not in foreclosure, but the homes of her neighbors are. She questioned how her neighbors can apply for refinancing when her own house, which was previously valued at $180,000 has gone down to $80,000.

However, Senator Harry Reid and Representative Dina Titus, who accompanied Secretary Donovan in a tour of lender and government foreclosures in southwest Las Vegas, hoped the expansion can help qualified borrowers.

Titus explained that the expansion is one proof that the federal government is listening to requests or suggestions from the public.

According to two federal government agencies, over 200,000 homeowners have received help under the government foreclosures program since the launching of the Making Home Affordable program.

Under the new refinancing rules, homeowners whose mortgage loans are guaranteed or owned by Freddie Mac can now refinance their mortgage loans with any of the mortgage lenders accredited by Freddie Mac. Previously, Freddie Mac required borrowers to refinance only with their original lenders.

In addition, borrowers are now being helped in their refinancing costs. Freddie Mac has increased the limits of financing costs, closing costs and escrow charges that mortgage borrowers can add into their refinanced mortgage loans. Borrowers can now include up to 4 percent of the refinanced loan or $5,000 of financing costs, whichever is lesser, into the refinanced loan.

Don Bisenius, vice president of Freddie Mac, said the government-controlled company is always looking for ways to make the government foreclosure program beneficial to more American homeowners.

Meanwhile, the Department of Housing and Urban Development has also expanded the use of the $8,000 first-time buyer tax credit provided under the government foreclosure program. Borrowers who are buying homes for the first time can now use the tax credit to help pay their closing costs as long as they take out loans insured by the Federal Housing Administration.

However, the HUD clarified reports of zero-down payment plans by stating that first-time buyers need to invest 3.5 percent or more of the selling price as their down payment.

The only exceptions to the 3.5 percent minimum down payment rule are FHA mortgage loans obtained by borrowers helped by about ten state housing agencies which have their own state bridge loan programs.

These state agencies offer bridge loans at low interest rates or with no interest and secure these loans as short-term liens on the homes purchased. These short term loans are then converted into second mortgage loans if they remain unpaid for a certain period of time.

Under the government foreclosure program, first-time buyers are defined as borrowers who have not owned a house during the three years before the current home purchase. If buyers are single, their income should not exceed $95,000 and if buyers are married couples, their joint income should not exceed $170,000.

Mortgage lenders will also be restricted on what they can charge if the tax credit money is used in advance to cover the mortgage fees. Lenders are restricted to use only up to 2.5 percent of the borrower’s tax credit. HUD explained that the restrictions are part of efforts to prevent any abuse of the government foreclosure program.

The government foreclosures suspension covers defaulting loans that are eligible for any housing initiative of the government.

The current government foreclosures suspension is the second wave after the first program expired on March 6, 2009.

Once again, Freddie Mac told its loan servicers and counselors to find a way to help distressed borrowers to save their homes from government foreclosures.

There are several housing initiatives that have the potential to prevent government foreclosures. They include the refinancing schemes of Freddie Mac, Streamlined Modification Program of the Federal Housing Finance Agency, HOPE NOW Alliance foreclosure prevention plan and refinancing schemes of Federal National Mortgage Association, another government-sponsored enterprise.

According to Freddie Mac’s default asset management officer Ingrid Beckles, the company has told its loan counselors and servicers not to push through with government foreclosures if they were able to establish contact with distressed homeowners.

However, government foreclosures can be implemented if the distressed homeowners, after having been contacted by Freddie Mac representatives, refused to cooperate, failed to show any interest to save their properties or lacked the financial capability to qualify for any refinancing or loan modification schemes.

Meanwhile, the company has also announced a loan modification scheme that targets homeowners who have high risk loans. Under the program, Freddie Mac will hire additional servicers who will focus on troubled homeowners who took out alternative loans and other risky mortgages.

Additionally, Freddie Mac made available highly-trained counselors and loan servicers to assist homeowners who are on the brink of foreclosures and to manage the anticipated increase in the number of callers who will ask for assistance.

On the other hand, HOPE NOW executive director Faith Schwartz said that the agency has successfully modified 123,000 loans in January of this year. The figures represented a 4 percent increase from modification and repayment plans of December 2008.

Also, the alliance of investors, nonprofits and mortgage servicers processed an estimated 125,000 mortgage payment schemes last January.

Meanwhile, RealtyTrac data showed that bank and government foreclosures surged further in February despite implementation of several foreclosure prevention programs.

Every year, the government sets aside a certain amount of money to fund banks and other lending institutions with so that they can in turn provide that money to aspiring homeowners in the form of mortgage loans. When a homeowner applies for a mortgage, they may be allowed to do so as a result of those funds, and thus these types of properties are often referred to as government homes.

Certain homeowners may have access to these properties for different reasons. One of the most common is low income. The government wants to encourage homeownership, so many of the loans they fund are for borrowers with bad credit or the inability to provide any kind of substantial down payment on a home. In fact, there are several government agencies devoted entirely to promoting homeownership through these means, known as the Department of Housing and Urban Development (HUD) and the Federal Housing Authority (FHA). Both HUD and FHA are responsible for awarding many of these home loans each year, and thus are considered to be in charge of them. Another lender is the Department of Veteran Affairs, which provides loans to veterans of wars at discounted rates.

When a homeowner goes into default on a government sponsored loan, it is up to the appropriate government lender to seek to collect the debt through government foreclosures. To enact government foreclosures, the appropriate agency will repossess the home in question and sell it through a public auction.

Often times, government foreclosures can be extremely lucrative for investors and homebuyers. Since the government oversees the loans, they are rarely inflated in value, as many other properties bought through mortgages have been in the past 10 years. This means that the money they need to sell for at auction to satisfy the loan debt is often less for government foreclosures than other types of foreclosed properties.

Government foreclosures offer some great chances for discounted investment as a result, since you can get great discounts off market value off already low-priced mortgage sales. If you’re serious about foreclosed properties investing, and willing to do a little extra legwork to find specifically government foreclosures, buying properties from HUD, FHA or any other outlet can be a great option worth considering.

Essentially, government foreclosures work on the same principles that any foreclosure property does. If a homeowner defaults on their government sponsored home mortgage loan, then the agency in charge of issuing the loan will move to repossess the property in order to sell it and regain some of the money lost on the delinquent loan. There are several different agencies that government foreclosures are available from, and each of them offer different alternatives and ways to buy. One of the most common forms of government foreclosures are sold by the department of Housing and Urban Development (HUD). HUD homes offer great chances for buyers to buy directly from government agencies through either a public auction or a silent bidding process. Often times HUD homes do not raise enough money at auction, and are then awarded to HUD to sell at their own leisure. This gives buyers the opportunity to find HUD homes listings and inspect and research the property as much as they want without the pressure of having to learn as much as they can before an auction date. Instead, you can submit a bid to the HUD authorities on a certain property, and if it is accepted, you will be awarded the home.

Most government foreclosures work under these guidelines, whether they are from the Federal Housing Authority (FHA), the department of Veteran’s Affairs (VA) or other groups. There are all kinds of sources available on the internet for locating government foreclosure listings, making it simple to pursue these valuable chances for discounted home purchase.