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CNN — The total number of bankruptcies filed in the third quarter surged 33% in 2009 and is at the highest level since 2005, according to data released Wednesday.

The American Bankruptcy Institute, an industry research firm, said 388,485 bankruptcies were filed during the last quarter, compared to 292,291 filed during the same period in 2008, according to data released by the Administrative Office of the U.S. Courts.

Filings for the first nine months of the year climbed 35% to 1,100,035, compared to 841,496 filings during the same period in 2008. A total of 1,117,771 bankruptcies were filed last year.

“The spike in bankruptcy filings for both consumers and businesses reflect the continuing effects of today’s weak economy,” said ABI executive director Samuel Gerdano in a statement. “With unemployment surpassing 10% and credit to businesses remaining tight, consumers and businesses are increasingly turning to the financial relief of bankruptcy.”

Bankruptcies are at the highest level since 2005, when 2,078,415 were filed before Congress passed amendments to the Bankruptcy Code, said ABI.

In October 2005, Congress implemented legislation making it more difficult for filers to prove they should be allowed to clear their debts in a Chapter 7 bankruptcy, forcing more to file under Chapter 13. The law triggered more Americans to rush to file for bankruptcy in the months before the law went into affect.

The ABI report said business bankruptcy filings rose 32% in the third quarter of 2009 to 15,177, and filings for the first nine months of the year totaled 45,510, topping the total 43,546 business bankruptcies filed in 2008.

Personal bankruptcies increased 33% to 373,308 during the last quarter, led by a 42% hike in Chapter 7 filings, which totaled 265,721. The number of consumers filing Chapter 13 bankruptcies rose 15% to 107,142 filings in the third quarter, according to ABI.

During a twelve-month period ending Sept. 30 2009, the report said total filings increased more than 34% to 1,402,816, compared to 1,042,993 in the same period of 2008.

Nevada had the highest rate per capita filings in the country, with 10.49 residents per thousand filing for bankruptcy in the year ended Sept. 30. The state also had the highest rate of filings for chapter 7 bankruptcies at 7.53.

Tennessee had the highest rate of filings for Chapter 13 bankruptcies in the 12-month period with 4.36 people per thousand.

In the Eastern District of California, filings were up 51.% over the same period from the year before:  According to the clerk’s office, here are the statistics

UNITED STATES BANKRUPTCY COURT
Eastern District of California

STATISTICAL REPORT
YEAR TO DATE COMPARISON

Total filings were up 49.3%, as indicated.  Significantly, Chapter 11 filings were up 78.9%, and total filings were 23,853.  These statistics of course do not reflect those ineligible for Chapter 7 because of the means test, or those who were bankruptcy candidates but unable to confirm a plan because of the means test and therefore did not file.

I also got an interesting email from Mike Dillard with a Technicolor view of the recession by county

The Decline: The Geography of a Recession

Things don’t look too much better, either statistically or in color.

paulbar Uncategorized Administrative Office, Amendments, American Bankruptcy Institute, Bankruptcy Code, Business Bankruptcies, Business Bankruptcy Filings, Chapter 13, Chapter 7 Bankruptcy, Cnn, Debts, Executive Director, Filers, First Nine Months, Gloom, Last Quarter, Months Of The Year, Personal Bankruptcies, Recession, Spike, Unemployment

It appears that the Federal plan to revitalize the mortgage industry that was announced in February is off to a slow start. The first institutions to join began accepting applications in April.  The Treasury Department reported that only 9% of delinquent borrowers are in trial modifications. The figure represented 235,247 loans that were at least two months delinquent. The Obama administration said it was on pace to help up to four million homeowners over the next three years. That projection anticipates that there are a lot more defaults on the horizon.

After hearing a flood of complaints from borrowers who complained about lack of response to loan mod requests, Tuesday’s report came a week after the administration invited servicers to Washington, D.C., to discuss ramping up the program’s implementation. Officials want to see 500,000 loan modifications under way by Nov. 1.

The administration is apparently hoping to “hold institutions responsible” for their performance by releasing the servicer’s progress reports. The monthly reports will allow the public to see which institutions are lagging in implementing the plan. This of course assumes that the institutions could be publicly shamed into compliance or that would somehow magically rewrite loans for the borrows. The question is whether this is like asking the fox to guard the henhouse after raiding it.  If the numbers regarding the institutions’ losses were not enough to influence their behavior, it is doubtful how forcing disclosure of their record regarding implementing loan modifications is going to influence their actions.

Institutions have extended modification offers to 406,542 troubled borrowers, or only 15% of those behind in payments. The bulk of trial modifications have been done by a handful of servicers. There is an obvious staffing problem which may be a major impediment that needs to be removed before any substantial numbers are achieved.

Performance was very uneven among the 38 servicers participating in the program, which was led by Saxon Mortgage Services, a subsidiary of Morgan Stanley putting 25% of its delinquent loans into trial modifications. Saxon was followed by Aurora Loan Services, a subsidiary of Lehman Brothers Bank, with 21%.

GMAC Mortgage, which is partly owned by the federal government, put 20% of its delinquent loans into trial modifications.

Among the major banks, JPMorgan Chase came in first with 20% of late loans in trial modifications, followed by Citigroup with 15%. Wells Fargo and Bank of America lagged behind the pack with 6% and 5%, respectively.

Servicers contacted acknowledged they need to improve their performance, saying they were committed to the president’s foreclosure prevention plan. They also stressed that they were doing many modifications outside of
the administration’s initiative.

Wells Fargo said it will eliminate its backlog within weeks, attributing it to the time lag between when the government announced the initiative and when it released the guidelines. It did not start modifying loans owned by private investors until the end of June, though it began adjusting loans owned by Fannie Mae and Freddie Mac in April. The bank vowed that it soon will be able to send eligible borrowers the trial modification agreement within 48 hours. In a change from past practices, it will enroll homeowners in a preliminary adjustment right away after receiving the initial application if they meet the basic eligibility requirements. During the three-month trial, the servicer will gather additional information to see whether the borrower qualifies for a permanent modification.

Wells Fargo, Chase, Citigroup and Bank of America promised to ramp up efforts to expedite the loan process.

Bank of America also acknowledged it needs to improve its efforts to reach out to those in need. B of A, which purchased the behemoth Countrywide Financial last year, had done only 28,000 trial modifications after extending nearly 100,000.00 offers. That number accounts for nearly one in four trial modifications offered under the Obama plan, but has by far the largest number of eligible delinquent loans: nearly 800,000.

Amidst complaints of lost paperwork and lack of response, both the Obama administration and the industry are feeling mounting pressure to respond to calls and applications.

The Criteria for the Program is follows:

1) Participation by Institutions in the program is voluntary, though once an institution agrees to participate, it must offer a trial modification to those who meet the criteria. The 38 participating servicers cover 85% of mortgages.

2) The loan modification plan allows eligible borrowers who are in or at risk of default to lower their monthly payments to no more than 31% of their pre-tax income through a loan modification. Adjusting the loan must recover more value than foreclosing on the home would for a modification to be offered.

3) The adjustments are made permanent after the homeowner makes three on-time payments. Homeowners, servicers and mortgage investors receive thousands of dollars in incentive payments in hopes of increasing participation.

So far, the government has committed $20 billion to the effort and has said it would provide $75 billion overall. There did not appear to be any information on loans modified after bankruptcy proceedings were initiated or how many borrowers were in default following permanent modification or how many failed to meet the trial period.

Earlier this year, congress defeated the bill that would allow modifications of loans in the bankruptcy court with the unemployment rate growing and number of defaults continuing to rise, time will tell whether publishing reports will be effective holding the institutions responsible. Given the poor performance rate thus far in proportion to the eligible number loans, the mortgage crisis continues to slow down the economy.

paulbar THE CURRENT BUZZ Cnn, Compliance, Delinquent Borrowers, Disclosure, Flood, Fox, Handful, Henhouse, Horizon, Impediment, Implementation, Initiative, Institutions, Losses, Metrics, Mortgage Industry, Nbsp, Nov 1, Pace, Saxon Mortgage Services, Subsidiary, Substantial Numbers, Treasury Department, Washington D C