November 30, 2010

They Want to Steal the Home of Every American

Agenda 21 mandates that there is to be no ownership of private property worldwide. The UN believes that all land, watershed systems, and natural resources must be owned and administered by government. And the first plank of the The Communist Manifesto is the "abolition of property in land and application of all rents of land to public purposes."

Since the start of 2005 to the end of 2010, three million seven-hundred thousand American families have been kicked out onto the street. At an average of 2.3 people per household, that’s 8.5 million Americans who have been directly, physically, affected by the popping of the US Housing Bubble, so far. I estimate that by the time the “dust” settles on the myriad of personal tragedies that resulted from the misguided policies of the Clinton and, more importantly, the Bush era, to “promote” (i.e. subsidize) home ownership, six million American families will have been “de-housed” — that’s 14 million personal tragedies. - 6 Million Foreclosures By 2014, Before It's, News, May 17, 2011

The housing scandal that has cost U.S. homeowners $6.6 trillion in home equity in the past five years and left 14.6 million Americans owing more than their homes are worth. - Obama's Deal for the Bankers: Amnesty for the Indefensible, The Nation, August 24, 2011

For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together. - 50 Statistics About the U.S. Economy That Are Almost Too Crazy to Believe, End of the American Dream, June 2, 2010

The “game plan” of the Wall Street Oligarchs was written well over a century ago; however, it has taken all this time for the Oligarchs to gain such complete control over the “levers of power” that they are now in a position to achieve their dreams. With millions of permanently unemployed workers ready/willing/able to take the jobs of existing workers and work for even lower wages, we effectively became a society of “slaves” totally dependent on pleasing our “masters” for our economic survival. While the majority of us have been turned into slaves, we have not yet had all of our wealth stolen from us. That will take place as the U.S. Greater Depression unfolds. The key difference between the first “Great Depression” and today's “sequel” is that in the 1930's, despite the economic hardship which the “little people” suffered, the vast majority managed to hang onto their homes. The Wall Street Oligarchs plan to correct that “mistake” this time around. While roughly 10 million American homeowners have already lost their homes to the Oligarchs, this doesn't come close to meeting their “target.” Ideally, they would like all of the little people to lose their homes. - Bullion Bulls Canada, The Plundering of America, March 7, 2010

“The Bankers Manifesto of 1892”: When through the process of law, the common people have lost their homes, they will be more tractable and easily governed through the influence of the strong arm of government, applied to a central power of imperial wealth under the control of the leading financiers.

Americans Lost Over $2 Trillion in Retirement Assets and $2 Trillion in Home Values: Banks Bungle Foreclosures, But We’ll Suffer

Americans have recently lost over $2 trillion in their retirement portfolios and $2 trillion in the value of their homes. It is no coincidence that loose lending standards started around 2001 and a new bankruptcy law went into effect in 2005. The easy money via loose lending was necessary to create the housing bubble from 2002-2007, and the new bankruptcy law makes it much harder for households to get out from under their consumer debt and is contributing to the rise in foreclosures across the country. The financial oligarchs have engineered a global economic collapse to usher in a global currency and global government under their control.

October 12, 2010

There’s a joke I like to make to rookies before we go live on our News Hub shows. After the new participant counts to 10 for an audio check, I usually say, “You have passed the exam to become a mortgage banker.” Watch the News Hub. It turns out that’s closer to the truth than most of us ever realized.

Judging by the failure of big banks to get their foreclosures in order, someone who can count to 10 might be overqualified.

What other conclusion can one come to after the wave of moratoriums placed by major banks on their foreclosure proceedings? GMAC, J.P. Morgan Chase & Co. and PNC Financial Group Inc. have halted proceedings in 23 states. Bank of America Corp., living up to its desire to be a national bank, has stopped proceedings in all 50 states.

It’s a humiliating, time-consuming and costly mistake by the banks, and a kind of karmic justice. But their bungling is going to cost us and our economy, as the housing market and people desperate to start anew try to recover.

At issue is “robo-signing,” where bankers signed off on mortgage documents saying they’ve read and understand them — as many as 18,000 a month. Read story on the “robo-signer” controversy in the banking industry.

Sorry, but as judges have pointed out, no one can read a single mortgage document in a day, much less hundreds of them. Now, the banks have to go back and read those tomes of legal gobbledygook and try to make sense of it.

“We haven’t found any errors,” said Brian Moynihan, Bank of America’s president and chief executive. “It’s technical issues and we’re doing our homework.” See story on B. of A.’s decision to halt foreclosures.

‘Unrealistic gains’

Some say the foreclosure halt will be good for housing. Cheap homes won’t be flooding the market. Also, borrowers will be able to save money by staying in their homes as the process drags out, and other borrowers may be able to get current with added time.

But that’s a short-term view. For most borrowers, foreclosure is going to come eventually. Chances are, if a homeowner was unable to rework a loan, they’re not going to be able to do that now. Those homes are going to hit the market eventually, putting more pressure on home prices.

The reality is most Americans who bought during the last decade have an unhealthy amount of personal wealth tied up in their homes. A study by the Congressional Budget Office in 2007 found that rising home prices gave consumers confidence to spend even though household income was flat or falling.

The CBO’s report ominously warned:

A worse outcome for consumer spending is possible if housing prices fall significantly or if some current spending is based on unrealistically optimistic expectations of future gains in home prices.”
At the time, Americans were tapping into their homes like personal piggy banks and using home-equity lines like savings accounts. Borrowing from home values represented 10% of disposable income in 2005, compared with just 2% in 1995, the CBO said. Read the Congressional Budget Office’s report.

Three years after the report came out, it’s safe to say that the CBO understated the effect. Having lost wealth via their housing, Americans are spending less and saving more. The savings rate was 5.8% in August, up from just 1% five years ago, according to the Bureau of Economic Analysis.

In other words, there couldn’t be a worse time for bank blundering to gum up the housing market. Read WSJ story on foreclosure woes on economy.

Mortgage mess

But it shouldn’t surprise us. During the last 15 years, mortgages were put on steroids. Subprime, pay-go, ARMs and other easy-money loans washed over the country. Many borrowers never understood what they were getting into, even when mortgages were relatively simple.

“Consumers are often not able to use the available information to their advantage,” a Harvard study found in 1999. “In many cases, they do not understand financial transactions, or lack confidence about financial issues. Consumers are also likely to underestimate the risks associated with mortgage loans, despite the information they receive from the lender.” Read the Harvard University study on predatory lending.
The main culprit? The confusing, legal mumbo jumbo that home buyers are presented with when they buy a home. It may not be “predatory lending,” but it ain’t easy either.

Given that foreclosure is a costly process — and it could be very costly for banks should they be fined $25,000 for every mortgage using fraudulent paperwork, as many state attorneys general are recommending — banks need to consider alternatives.

One possibility suggested by Wharton Business School’s Alex Edmans would be to offer a bonus to borrowers who repay their loans. Another, proposed by Columbia University’s business school dean R. Glenn Hubbard and vice dean Chris Mayer, would be to offer a massive government-backed streamlined refinancing program. Read the Hubbard-Mayer proposal.

Homeowners should learn their lesson too. They should quit using their homes as credit cards to buy flat-screen TVs and trips to Disney World.

Ultimately, the new Consumer Financial Protection Bureau should simplify the mortgage process. Everyone should know what they’re getting into.

Easy as 1-2-3 would be nice, but for a start, let’s see if we can get everyone to count to 10.

22 Statistics that Prove the Middle Class is Being Systematically Dismantled

  1. 83 percent of all U.S. stocks are in the hands of 1 percent of the people.

  2. 61 percent of Americans "always or usually" live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.

  3. 66 percent of the income growth between 2001 and 2007 went to the top 1% of all Americans.

  4. 36 percent of Americans say that they don't contribute anything to retirement savings.

  5. A staggering 43 percent of Americans have less than $10,000 saved up for retirement.

  6. 24 percent of American workers say that they have postponed their planned retirement age in the past year.

  7. Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008.

  8. Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975.

  9. For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.

  10. In 1950, the ratio of the average executive's paycheck to the average worker's paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.

  11. As of 2007, the bottom 80 percent of American households held about 7% of the liquid financial assets.

  12. The bottom 50 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.

  13. Average Wall Street bonuses for 2009 were up 17 percent when compared with 2008.

  14. In the United States, the average federal worker now earns 60% MORE than the average worker in the private sector.

  15. The top 1 percent of U.S. households own nearly twice as much of America's corporate wealth as they did just 15 years ago.

  16. In America today, the average time needed to find a job has risen to a record 35.2 weeks.

  17. More than 40 percent of Americans who actually are employed are now working in service jobs, which are often very low paying.

  18. For the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.

  19. This is what American workers now must compete against: in China a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour.

  20. Approximately 21 percent of all children in the United States are living below the poverty line in 2010 - the highest rate in 20 years.

  21. Despite the financial crisis, the number of millionaires in the United States rose a whopping 16 percent to 7.8 million in 2009.

  22. The top 10 percent of Americans now earn around 50 percent of our national income.
Source: Business Insider

Housing Disaster Update

Decline of the Empire
December 20, 2010

Is the Housing Market the forgotten crisis, as columnist Rex Nutting recently asserted? It depends. If you check in with Calculated Risk everyday, then you receive the same updates on the disaster I do. But if you look for mainstream media reports, there are few new stories making the rounds because glowing reports are hard to come by. There are no new initiatives to "save" the market because all the previous ones, such as HAMP, were miserable failures. Here's Nutting—

Homeowners_equity For typical Americans, two things determine their financial well-being: Their job and the equity they have in their home [left]. They get almost all of their income from wages and salaries, while most of their wealth is tied up in their house. When wages and house prices are rising, they are confident. When wages and house prices are falling, they are fearful.

Policy makers may have rescued the banks, but they haven’t figured out a way to bring back the jobs that were lost, nor have they found any answer to the problem that was the nucleus of the crisis: housing...

Housing is the forgotten crisis. It wasn’t always so neglected. Early on in the downturn, the government dug deep into its policy tool kit to find answers for the collapse of housing.

They lowered interest rates in an effort to boost affordability. They took over Fannie Mae and Freddie Mac, and they told the Federal Housing Administration to lend freely. The Federal Reserve purchased more than $1 trillion in mortgage-backed securities and bonds to support housing. They approved tax credits for buyers, and extended those credits several times. They tried to get lenders to modify loans.

Nothing has worked.

Not only has nothing worked, but the Housing Market continues to deteriorate. According to Core Logic's House Price Index, house prices have fallen for 3 months in a row, the most recent decline being 1.9% in October from the September level, which itself showed a decline of 1.8% from August.


From Calculated Risk. I took the liberty of marking the Bubble Era (1995-2007). The bubbly times also include the first first bubble in Tech (the Web, Telecommunications) as reflected in the NASDAQ. This first bubble burst in 2000. From CR: "In Q3 2010, household percent equity (of household real estate) declined to 38.8% as the value of real estate assets fell by almost $650 billion. Note: Something less than one-third of households have no mortgage debt. So the approximately 50+ million households with mortgages have far less than 38.8% equity."

As house prices decline, more mortgages go underwater (i.e. into negative equity), there are more foreclosures and unsold inventory increases. This cause house prices to decline further, which means more mortgages go underwater ... and so on. I don't exactly when this pernicious positive feedback loop will stabilize, and neither does anybody else. When it does, we can say the Housing Market has hit bottom.

Nutting is concerned about the impact that equity loss has on "consumer" spending. I have decided that I will never again use the word "consumer" without quotation marks. From Nutting—

Since early 2006, American families have lost $7 trillion in home equity — more than half of their equity has simply vanished. Many millions, of course, have lost everything they put into their house, and more.

Years of blood, tears and sweat equity gone. Remember, for most families, home equity accounts for most of their wealth. In the past, wealth in the form of home equity has often been the ticket to upward mobility; many a small business or college education has been funded from real estate wealth...

Rising housing wealth helped drive consumer spending in the middle of the last decade. The best guess by economists is that consumers will spend about a nickel more if their housing wealth rises by $1, or spend a nickel less if wealth falls by a dollar. The bubble boosted consumption by about 6 trillion nickels.

Needless to say, spending driven by phony equity created by the bubble is not coming back anytime soon. Nutting does not mention, and may not know, that Americans flocked into houses during the bubbly times to compensate for the wealth they were not accruing in wages and incomes. The median income in the United States has been falling since 1997, and it's not an accident that this fall comes just after the beginning of the Bubble Era (see chart above).

Anyway, that's all over and done with. The bubbles being blown now by the Federal Reserve will not have a new "positive" effect on household balance sheets. Rising gasoline prices or rising stock prices or rising asset prices in China do not increase the household wealth of ordinary Americans.

Nutting goes on to say that the rich are spending more money, as I've written about lately. Of course this does nothing to help the Middle Class, whose ranks are dwindling, nor does it help the poor, whose ranks are swelling. Here's Nutting's conclusion—

The upper middle class and the rich, of course, haven’t slowed down. Spending isn’t as volatile for them as it is for the rest of us. Their holdings of stocks, mutual funds and other financial assets are worth more than their home equity, so they feel richer than they did a year ago.

Not so for those in the middle or bottom of the income scale, who have fewer financial resources to buffer themselves from economic shocks. For them, the recession never ended. And it might be getting worse.

The huge loss of phony housing equity that ordinary Americans have sustained over the last 3 years accentuates the failure of real median wages and incomes to rise for 13 years now. Americans were not buffered from economic shocks before the Housing Bubble, they weren't protected from economic shocks during the Housing Bubble—obviously!—and now they are more vulnerable than ever before after the Housing Bubble. Homeowners will continue to lose equity until the Housing Market bottoms out. Nobody knows when that will occur. Will it happen next year? — unlikely. 2012? — perhaps. 2013? — possibly.

From this point of view, the American economy has been fraudulent for a long, long time now. The collapse of the Housing Bubble exposed this fraud. But if you read DOTE every day, you already know that. Nothing has changed, at least for the better. In fact, some circumstances have gotten worse. Counterintuitively, mortgage interest rates are rising post-QE2. Will wonders never cease?

There's your housing disaster update.

Program Will Pay Homeowners to Sell at a Loss

Feds $75 billion million mortgage modification plan will allow owners to sell for less than they owe (via a short sale) and will give them a little cash to speed them on their way

The New York Times
March 7, 2010

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

“We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser.
The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure.

To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.

For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.

For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.

If short sales are about to have their moment, it has been a long time coming. At the beginning of the foreclosure crisis, lenders shunned short sales. They were not equipped to deal with the labor-intensive process and were suspicious of it.

The lenders’ thinking, said the economist Thomas Lawler, went like this:
“I lend someone $200,000 to buy a house. Then he says: ‘Look, I have someone willing to pay $150,000 for it; otherwise I think I’m going to default.’ Do I really believe the borrower can’t pay it back? And is $150,000 a reasonable offer for the property?”
Short sales are “tailor-made for fraud,” said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae.

Last year, short sales started to increase, although they remain relatively uncommon. Fannie Mae said preforeclosure deals on loans in its portfolio more than tripled in 2009, to 36,968. But real estate agents say many lenders still seem to disapprove of short sales.

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

Mr. Paul, the Phoenix agent, was skeptical.
“In a perfect world, this would work,” he said. “But because estimates of value are inherently subjective, it won’t. The banks don’t want to sell at a discount.”
There are myriad other potential conflicts over short sales that may not be solved by the program, which was announced on Nov. 30 but whose details are still being fine-tuned. Many would-be short sellers have second and even third mortgages on their houses. Banks that own these loans are in a position to block any sale unless they get a piece of the deal.
“You have one loan, it’s no sweat to get a short sale,” said Howard Chase, a Miami Beach agent who says he does around 20 short sales a month. “But the second mortgage often is the obstacle.”
Major lenders seem to be taking a cautious approach to the new initiative. In many cases, big banks do not actually own the mortgages; they simply administer them and collect payments. J. K. Huey, a Wells Fargo vice president, said a short sale, like a loan modification, would have to meet the requirements of the investor who owns the loan.
“This is not an opportunity for the customer to just walk away,” Ms. Huey said. “If someone doesn’t come to us saying, ‘I’ve done everything I can, I used all my savings, I borrowed money and, by the way, I’m losing my job and moving to another city, and have all the documentation,’ we’re not going to do a short sale.”
But even if lenders want to treat short sales as a last resort for desperate borrowers, in reality the standards seem to be looser.

Sree Reddy, a lawyer and commercial real estate investor who lives in Miami Beach, bought a one-bedroom condominium in 2005, spent about $30,000 on improvements and ended up owing $540,000. Three years later, the value had fallen by 40 percent.

Mr. Reddy wanted to get out from under his crushing monthly payments. He lost a lot of money in the crash but was not in default. Nevertheless, his bank let him sell the place for $360,000 last summer.
“A short sale provides peace of mind,” said Mr. Reddy, 32. “If you’re in foreclosure, you don’t know when they’re ultimately going to take the place away from you.”
Mr. Reddy still lives in the apartment complex where he bought that condo, but is now a renter paying about half of his old mortgage payment. Another benefit, he said:
“The place I’m in now is nicer and a little bigger.”

New Foreclosure Crisis Has Much Broader Implications

Seeking Alpha
October 12, 2010

According to international economist Hernando De Soto, one of the key differences between an undeveloped economy and a developed one is clarity of ownership of real estate [one of the 10 planks of the Communist Manifesto is the "abolition of property in land and application of all rents of land to public purposes"]. The recently emerging foreclosure crisis in the United States indicates a movement toward the third world model.

There is still a large overhang of U.S. properties with severe mortgage delinquencies and this problem is likely to continue for several more years. As early as three years ago however, problems with implementing the foreclosure process became evident.

During the housing bubble, banks became sloppy and didn't properly transfer ownership papers when loans were securitized into bonds. The current owners of those bonds frequently can't produce the appropriate documents in foreclosures cases in the 23 states that require court action for a foreclosure. This led to the 'show me the note' movement after a federal judge ruled in 2007 that Deutsche Bank lacked standing in 14 foreclosure cases because it could not produce the relevant documents. A number of similar judicial rulings followed.

The banks have gotten around this problem by producing notarized affidavits from 'expert' witnesses who claim they have thoroughly reviewed a packet of documents related to an individual foreclosure and that they are valid and complete. One such 'expert' was Jeffrey Stephan, who has admitted under oath to having signed off on the documents for 10,000 foreclosure cases per month for the last five years. Mr. Stephan not only did this for GMAC (its parent Ally Financial is 56% owned by the U.S. government), but also for J.P. Morgan Chase and numerous other banks.

This process is now being called robo-signing. It should be referred to as robo-perjury. While I am not a lawyer, it would seem to me that a number of other possible crimes might also be involved here as well, such as racketeering and criminal conspiracy. Whatever criminal activity took place, a majority government owned enterprise participated in it.

Readers should ask themselves if there is any reason to think that the big banks are acting any differently in their other consumer credit cases, such as defaults on credit cards.

The revelations from GMAC loan officer Stephan have caused a foreclosure moratorium to be put into effect by a number of lenders. The lenders were apparently shocked to find out that one person couldn't actually read and thoroughly review 10,000 legally dense document packets per month. Apparently none of the 'brilliant' members of the U.S. judiciary caught on either. Yes, it would certainly have taken a legal genius of Clarence Darrow's caliber to figure out that something that was impossible just couldn't happen. GMAC was the first to stop foreclosures in the 23 judicial states (those that require court cases for foreclosure). J.P. Morgan Chase followed. On October 8th, Bank of America suspended foreclosure activity in all 50 states.

Interestingly, the current administration is opposed to a foreclosure freeze. According to the Center for Responsive Politics, employees of J.P. Morgan Chase, Citigroup and Goldman Sachs were three of the largest sources of funds for Obama's 2008 presidential bid. Only a cynic would think that this would have something to do with his administration's pro-bank view in the foreclosure crisis. Some might even claim that it looks like everything is being done to further the interests of an economic and political elite, just as happens in a corrupt Third World country.

If this were true, the banks won't be punished for flagrantly disregarding the rule of law, since it is only the little people that need to worry about such niceties.

Apartments Rents Rising in U.S. as Millions of Homes are Going into Foreclosure and $40 Billion Per Year Is Being Spent on Federally-subsidized Rental Housing

The first plank in "The Communist Manifesto," by Karl Marx, page 25: Abolition of property in land and application of all rents of land to public purposes.

According to the U.S. Department of Housing & Urban Development's (HUD) in its dataset "A Picture of Subsidized Households - 2008" released on July 1, 2010:
The Office of Policy Development and Research has updated its comprehensive profile of subsidized housing in the United States. The Picture of Subsidized Households 2008 data set describes the nearly 5 million households living in HUD-subsidized housing. The programs covered — public housing, Housing Choice Vouchers, Section 8 project-based housing, New Construction and Substantial Rehabilitation, and Section 202 and 811 Supportive Housing — provide subsidies that reduce rents for low-income tenants who meet eligibility requirements.
According to the Congressional Budget Office from its November 2009 report titled "An Overview of Federal Support for Housing":
Federal spending programs for rental housing take two forms: payments for households to rent housing in the private market and payments to public housing authorities (PHAs) and private developers to build and operate rental housing.

The largest of those programs is the Housing Choice Voucher program, also known as Section 8, which was funded at about $16 billion in 2009. The voucher program sets the portion of income that a qualifying household pays to a private landlord, with the PHA paying the difference between the tenant’s portion and a market-rate rent determined by HUD.

The second-largest program, funded at about $11 billion in 2009 and also administered by HUD, is the public housing program. That program provides funds for PHAs to operate, renovate, and build publicly owned housing developments.

Finally, HUD also operates the project-based voucher programs ($9 billion), in which HUD agrees to pay the owner of a rental unit the difference between 30 percent of the tenant’s income and the rent of the unit.

Eight additional programs provided between $150 million and $3 billion in support of rental housing in 2009 (see Figure 4). They include, in descending order of support provided, Homeless Assistance Grants, the HOME Investment Partnership, Native American Block Grants, Rental Assistance Subsidy (assistance for low-income, elderly, and disabled renters in rural areas), Housing Programs for the Elderly, Housing Programs for the Disabled, Community Development Block Grants, and Housing for People with AIDS.

In addition, two federal agencies—FHA and USDA—provide direct loans and guarantees to support rental housing. Just as with mortgage-related programs for homeownership, loans and guarantees made by those agencies in 2009 resulted in no significant costs or savings to the government under the method of accounting specified in the Federal Credit Reform Act.

Figure 4.

Federal Support for Rental Housing, 2009

(Billions of dollars)

Sources: Congressional Budget Office (for spending amounts); Joint Committee on Taxation, Estimates of Federal Tax Expenditures for Fiscal Years 20082012 (2008) (for tax expenditure amounts).

Note: HOPE = Homeownership and Opportunity for People Everywhere; USDA = U.S. Department of Agriculture.

a. Supports homeownership and rental housing.

Apartment Rents Set to Rise, Fueling Inflation: NAR

November 29, 2010

US apartment rents are expected to climb next year as the economy recovers from recession, a rise that may fuel inflation, a real-estate industry group said Monday.

Multifamily real estate will star in an overall modest improvement in commercial property markets in 2011, the National Association of Realtors said in an outlook report. NAR said ailing commercial real-estate markets -- office, industrial, retail and rental housing -- were flattening out after a steep plunge amid the worst recession in decades. Lawrence Yun, NAR chief economist, predicted a rise in demand, as the economy slowly recovers from the downturn that officially ended in June 2009.

The number of people setting up a new home has plummeted amid high unemployment and plunging home values after a housing bubble collapsed more than three years ago.
"Multifamily housing is the one commercial sector that has held on relatively well in the past year, and can expect the best performance in 2011," he said.
Yun predicted apartment rents could rise by one to two percent in 2011, after having fallen in 2009 and showing no growth this year.
"This rent rise therefore could start to force up broader consumer prices as well," he said.
The cost of rent or mortgages is the biggest component in the government's consumer price index, accounting for 32 percent of its total weight, he noted.

Multifamily vacancy rates were forecast to decline from 6.4 percent in the current quarter to 5.8 percent in the fourth quarter of 2011.

Consumer price inflation has remained subdued in recent months despite a rise in energy prices, while the core inflation has trended lower, the Federal Reserve noted last week in the minutes of its last policy-setting meeting.

The central bank used weak inflation as a key justification for its controversial plan to buy an extra 600 billion dollars in Treasury bonds to juice the flagging recovery.

Critics, including several participants in the November 2-3 Federal Open Market Committee meeting, have said the plan risks spurring inflation.

NAR said the outlook for the office and industrial markets had improved, with modestly declining vacancy rates expected in 2011, while the retail sector would essentially hold steady. Vacancy rates stuck in double digits, nevertheless, signal rents would remain under severe pressure.
"High vacancy rates imply falling rents," Yun said.

More Cities Considering Bulldozing Foreclosed and Abandoned Homes
November 18, 2010

If you have been following the real estate market at all for the last few years, you know that home prices have plummeted since the market peaked in 2006/7. On average, home values are 25 percent off their peak values. In fact, according to an article from the Boston Globe, we are on pace to eclipse the home price declines that occurred during the Great Depression. Simply put, the situation is not good.

There are many reasons that home prices are declining, but the chief reason is supply and demand. Many parts of this country overbuilt during the bubble years. There is a 10.7 month supply of homes on the market right now (compared to about six months of supply in a normal market). There are also millions more houses in shadow inventory that have yet to come to the market. There is also a paucity of demand for homes, due in part to continued high unemployment, and due in part to the acceleration of home purchases into the spring months as a result of the first time homebuyer tax credit. Economics 101 tells us that when supply outstrips demand, prices will fall accordingly. Price stability will not return to the housing market until the excess supply has been dealt with or until prices fall to match demand.

There is an article today on Bloomberg by Brian Louis that details the efforts of some midwestern cities to raze some of these excess houses. In many ways, these Rust Belt cities face unique challenges not seen in other parts of the country. Part of the problem is the erosion of the manufacturing base in this country, which has caused many of the traditional sources of employment (i.e. auto manufacturing, steel manufacturing, etc) to leave these areas. As a result, unemployment is especially high, and the populations of many of these cities have been steadily shrinking since the 1970-80s.

I touched on this topic back in May when Detroit undertook a plan to bulldoze significant numbers of blighted houses. The city of Detroit has 51,000 homes for sale, a population of 911,000, and unemployment rates that are between 25 and 30 percent. Barring some sort of economic miracle, there is not going to be an influx of people looking to move to Detroit and occupy these homes. In a lot of ways, the only sensible choice is to bulldoze them (whereas places like Phoenix might reasonably anticipate future growth and just sit on excess homes).

Cleveland is another city that is considering destroying blighted homes. Gus Frangos, the President of the Cuyahoga Land Reutilization Corp was quoted in the Bloomberg article as saying:

"You really have to bury the dead right now. You have to remove blight. It's unfortunately on a grand scale".

I wouldn't normally advocate for the destruction of homes except as a last resort. Blight drags down everybody's property values. Boarded-up houses are eyesores, are unsafe, and are often associated with crime. In cities that have no reasonable hope for significant population growth in the near future, bulldozing may be the only option.

The Plundering of America (Excerpt)

By Jeff Nielson
March 7, 2010

...With millions of permanently unemployed workers ready/willing/able to take the jobs of existing workers and work for even lower wages, we effectively became a society of “slaves” totally dependent on pleasing our “masters” for our economic survival.

Even this level of economic oppression is not enough to sate the relentless greed of the ultra-wealthy. While the majority of us have been turned into slaves, we have not yet had all of our wealth stolen from us. That will take place as the U.S. Greater Depression unfolds.

The key difference between the first Great Depression” and today's “sequel” is that in the 1930's, despite the economic hardship which the “little people” suffered, the vast majority managed to hang onto their homes. The Wall Street Oligarchs plan to correct that “mistake” this time around.

While roughly 10 million American homeowners have already lost their homes to the Oligarchs, this doesn't come close to meeting their “target.” Ideally, they would like all of the little people to lose their homes. Taking a quote from “The Bankers Manifesto of 1892”:

When through the process of law, the common people have lost their homes, they will be more tractable and easily governed through the influence of the strong arm of government, applied to a central power of imperial wealth under the control of the leading financiers [i.e. the banksters].

Thus, the “game plan” of the Wall Street Oligarchs was written well over a century ago; however, it has taken all this time for the Oligarchs to gain such complete control over the “levers of power” that they are now in a position to achieve their dreams.

Quite simply, they want to steal the homes of every American, while the iron-fist of a Fascist government keeps the masses from rising up against them: hence the need to invent “The War on Terror” in order to 'justify' the creation of the Homeland Security Department: the instrument of U.S. facism.

Thanks to “The Patriot Act,” Americans no longer have any “constitutional rights.” Instead, they have constitutional privileges which can be completely revoked simply by uttering the magic word “terrorism.” Should U.S. “terrorists” seek to oppose their political/economic oppression, in some meaningful sense, such “terrorists” will simply disappear -- without “wasting” a lot of time with formal charges or lawyers or even trials.

Meanwhile, the Obama regime has created a second U.S. housing-bubble (see “The U.S. Government's Zero-Downpayment Mortgages”). It has created a brand-new “sub-prime sector” -- except this time around, the U.S. government (i.e. U.S. taxpayers) is “guaranteeing” nearly 100% of all these loans, while the Oligarchs allow none of their own money to be put at risk in this second bubble.

And the “risks” are as obvious as they are numerous. Millions of already-foreclosed homes have been held off of the market, allowing the propaganda-machine to pretend that housing inventories are only half as large as they really are, which in turn, has allowed some momentary price stability. This is totally a mirage.

With the U.S. economy still plummeting downward (putting aside the totally fictional “GDP” numbers of the U.S. government), job losses are about to re-accelerate, interest rates can only go higher, millions of hopelessly-insolvent “option-ARM” mortgages are about to reset, and retiring baby-boomers need to dump trillions of dollars of real estate onto the market (to partially compensate for a $3 trillion short-fall in their pensions and their own lack of savings).

And, at some point, the millions of homes which the Oligarchs have hidden from the market will show up in inventories. Indicating that this second “crash” has now begun, recent figures for the sale of both new and existing-homes have shown a sudden collapse.

There is a real “war” taking place today: an economic war, which has been instigated by the ultra-wealthy, prosecuted by the U.S. government, and directed at the American people. Having already robbed Americans of their political power through the establishment of the Wall Street-owned, two-party dictatorship, the Oligarchs now want to rob the people of their last vestiges of “economic power” -- in order to turn Americans into “serfs,” which they consider to be the only rightful place for the “little people.”

Given how we have meekly submitted to the plans of the Oligarchs, it becomes harder and harder each day to argue that we do not deserve to be serfs.

Is Government About to Make the Mortgage Market Even Worse?

Let me share something with you. The real estate market is a joke. We cannot get loans for the average American citizen who wants to buy a house because government-backed loans are requiring that the homes have little if no damage ... seems fair right? ... NO. Their requirements are unreasonable. For example, you cannot purchase any home with chipped/pealing paint or damages due to plumbing, electric, etc., or even homes with very little mold in the basement that could be cleaned with bleach. Who is buying these homes? ... the foreign investors mostly ... very sad. Now you would think that the conventional loan market would be more flexible since it is not government backed ... but, NO, it is not. My friend had 50% down and was willing to clean what little water damage in the basement got through a cracked window (and caused little mold). However, the bank said no, she could NOT. The home, I am sure, will be purchased by an investor — whether foreign or domestic — and it will be purchased for probably 1/2 the price because they will pay cash ... so very sad. I have people dying to buy homes but they cannot, and credit has nothing to do with it. It is the foreclosed homes that are going to the investors. Once in awhile a FHA/VA/USDA will slide through the cracks, but not usually. Now the government-backed loans are running out of money ... I had a settlement on a USDA loan and the government ran out of money, so we had to wait until the government gave us money to settle, which was three weeks later ... and then after that I was told not to count on funding for these government-backed loans for long (they cannot promise us anything). That leaves only the rich investors with cash to buy these good deals ... very frustrating. - Camille, Realtor in Frederick and Washington Counties of Maryland.

September 29, 2010

Today's weekly mortgage applications survey from the Mortgage Bankers Association might seem to offer a small glimmer of hope.

Yes, refinancings -- which have been running at around 80 percent of all mortgage applications -- fell despite a new record low average rate on the 30-year fixed of 4.38 percent.

Not so good.

But on the other hand, purchase applications rose 2.4 percent, largely driven by a 4.5 percent increase in government purchase applications (FHA).

Great, except for that last part.

Government purchase applications have been driving the market for the past year, accounting for, at times, nearly half of all new loans. That may be about to change.

New premium authority (translation: higher prices) goes into effect next week, on Oct. 4. New seller concessions policies are about to go into effect as well.
"These two policy changes will increase the opportunity for private capital to return to the market while improving the safety and soundness of FHA," FHA Commissioner David Stevens tells me.
The trouble is, there's really nobody out there in the mortgage market other than Fannie and Freddie. And their loan limits, as well as super-tight underwriting and fees, are pricing many potential buyers/borrowers out of the housing market.
"While there is still clearly a long way to go for private capital participation levels to reach more normalized levels, we are seeing the beginning of some increased levels of private capital," argues Stevens.
He cites a 60 percent increase in jumbo loan production in Q2 (according to National Mortgage News). The trouble is that was largely refinancings, not new-purchase loans -- and dare I mention a 60 percent increase from a market on complete life support -- still isn't exactly healthy.
"The private-label RMBS market for new mortgage origination has been dormant since early 2008, save for one transaction completed this spring," Tom Deutsch, Executive Director of the American Securitization Forum testified before a House committee this morning.
I'm not saying private capital isn't preparing to come back -- there is an awful lot of cash on the sidelines. I'm just saying it's nowhere near where it needs to be to reinvigorate the housing/mortgage market now. Banks don't have the cash either, as they have been and will be further constrained by various policy initiatives requiring higher capital levels.

Granted, FHA's share is falling overall, opening up share for the private mortgage insurers, and Stevens argues that will open up more opportunities for borrowers.
"MI (mortgage insurance) in conjunction with a Freddie or Fannie mortgage lays the groundwork for establishing the threshold levels at which point private capital pricing can succeed in attracting the consumer more broadly," he says.
Look, I'm all about laying the groundwork for the future, but we need buyers back in the market right this minute, as sales plummet and prices waiver. Analyst Meredith Whitney said on CNBC yesterday,
"In October we're going to see a really ugly Case Shiller number."

"Unless you have near perfect credit and a substantial down payment, FHA is still the only game in town for a large number of Americans," notes Guy Cecala of Inside Mortgage Finance.
Mortgage-purchase applications are 32 percent lower than they were last year, and they weren't great last year. While still the cheapest game in town, FHA loans are about to get more expensive, and that's going to knock the numbers down yet again.

Is It Really That Hard to Get a Mortgage Loan?

By By Linda A Urbick, EZine Articles
November 16, 2010

Well according to all the news feeds that is the perception of many and that is because we have all been spoiled by the easing up on qualifying for home mortgages since 2004. But in reality we are back to the basics.

Qualifying for real estate mortgages are now back to where they were prior to 2003. Any one applying for a loan had to meet the following criteria:

Income (proven) that the borrowers made enough money to cover not only the mortgage, but other expenses -- such as utilities, groceries, raising children, cars, insurance etc.

Stated income -- are you kidding. Bankers never relied on this data, verification was always required. Under the old guidelines, a borrower could state whatever amount was required to get the loan. As far as I know, state income is gone. If you are able to get a "stated income" mortgage loan be prepared to pay higher interest rates and provide larger down payments.

2 Years tax returns and W2's to validate the income

Good credit

Cash for the down payment, prepaids and closing costs -- again bank statements or other financial statements as proof.

Front end ratios had to be between 28 and 30%, back end ratios 36 to 38% (and if everything else was superb sometimes we were able to get approvals with a 40% back ratio).

  • Front end ratio - amount of income to cover the mortgage payment and any escrow account -- PITI -- principal, interest, taxes, insurance and homeowners dues.
  • Back end ratio - amount of income required to cover the mortgage and any recurring expenses such as credit cards, alimony, car payments. Ensuring the borrower had enough money left over every month to pay for living necessities.

Down payments at the very minimum 5%, 20% to eliminate PMI (private mortgage insurance) required by lenders for less than 20% down. 100% financing and, in some cases, 105% financing was never heard of or the unbelievable low interest rates we are still experiencing.

The bottom line: we are now back to the basics and this is good for all of us -- sellers, buyers and bankers. There is a difference in stretching your income a little bit and buying a home way beyond your means, especially with an adjustable rate mortgage. We should all be thankful for the due diligence that is now required to purchase a home mortgage.

Report: 1 in 3 Loan Applications Denied

Associated Press
September 30, 2009

Nearly one in three borrowers who applied for a mortgage last year was denied as lenders kept their standards tight as the mortgage crisis accelerated, the government reported Wednesday.

In its annual look at mortgage practices among lending institutions, Federal Reserve said the denial rate for all home loans was about 32 percent last year — about the same as in 2007, but up from 29 percent in 2006. The denial rates for blacks and Hispanics were more than twice as high as the rate for white borrowers.

The report highlights massive changes in the lending industry after the housing market bust. Overall loan applications were down by a third from a year earlier, and were half the level in 2006.

Loans backed by the Federal Housing Administration soared to 21 percent of all loans made last year from less than 5 percent in both 2005 and 2006.

For black borrowers, more than half of all loans were FHA-insured, more than triple a year earlier. For Hispanics, that number shot up to 45 percent, more than four times as high as in 2007. That was troubling news for consumer advocates.
"I'm hard-pressed to believe that many of those borrowers couldn't have been served by the private sector," said John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer group in Washington. "It implies that the industry has shut down in serving this population."
High-priced loans with rates at least 3 percentage points above the rate for prime loans, shrunk to nearly 12 percent of the market from a high of 29 percent in 2006. But that figure mainly reflects unusually low interest rates during the recession, the report said, and understates the disappearance from the market of high-priced subprime loans made to borrowers with poor credit.

Last year, about 17 percent of blacks and 15 percent of Hispanics got high-priced loans, compared with about 7 percent of whites. Even controlling for factors that might widen that discrepancy, there still a gap of almost 8 percentage points between the number of blacks and whites who got high-cost loans.

The mortgage industry says lenders are not discriminating by race, and are making adjustments based on borrowers' risk profile — such as their credit score and the size of their down payments.
"You still have a certain degree of risk-based pricing in the market," said Jay Brinkmann, the Mortgage Bankers Association's chief economist.
Lenders also scaled back dramatically on the amount of so-called "piggyback" mortgages, in which borrowers used second mortgages to avoid making a 20 percent down payment. Those loans have virtually disappeared from the market: Only 98,000 were made last year, down from 1.3 million annually in 2006.

The data, collected from nearly 8,400 lenders, is required under the Home Mortgage Disclosure Act of 1975.

Nearly Impossible to Get Home Loans with Record Low Prices

April 2, 2010

For the first time in three years, home prices in Phoenix are starting to hold steady.

There were almost 9,000 homes sold during the month of February in Maricopa and Pinal counties. That's up 13 percent from last year, but if you're thinking it's easy to go out and get a loan, tight lending by banks is causing a rough-go for homebuyers.
"Given the exceptional assistance banks received to get them through a difficult time, we expect them to explore every responsible way to help get our economy moving again." said President Obama.
Despite his urging and last year's $200 billion bailout from taxpayers, getting a new home loan from the bank is harder than ever -- even for well-qualified buyers.
"We have amazing credit and little debt and we're already homeowners and you would think that they would make it extremely easy for us to get a loan." said Beth Tapper.
But the reality is that unless you have near perfect credit and at least 20 percent down, you're likely to get turned down flat.
"It's just a fundamental psychological shift in terms of the attitudes of what kind of home we thought we could get into versus what kind of home we reasonably should be able to get into given our income, assets and credit scores." said Paul Habibi from the UCLA Anderson School of Management.
The banks themselves are at least partly to blame. Lax lending practices during the housing boom set the stage for massive losses during the downturn, but for now, buyers are the ones paying for it.
"The pendulums from the banks swings things one way and then it swings the other way. We had, in a sense, you could say, promiscuous lending to begin with a few years ago. And then now we had the crash and the lending pendulum has swung the opposite direction." said Whit Proudy from Strong and Prouty Realty.
In expensive housing markets you see on the West coast, the problem is worse. High prices mean even relatively modest houses require "jumbo" loans which are even harder to get -- making a housing rebound a distant prospect.

Right now, foreclosures account for half of all Phoenix sales and it's still taking anywhere from three weeks to six months to sell a home here in the valley. The median price is $135,000.

Jumbo Mortgage Loans Are Tough to Get
December 4, 2009

People looking to finance a luxury home purchase usually need a jumbo mortgage loan. Although many lenders are more strict about who they will approve for jumbo mortgages, there is still money available for certain borrowers.

Mortgages That Are Super-sized

Any mortgage that is too big to be bought by Fannie Mae or Freddie Mac is considered a jumbo loan. Mortgage loans up to $417,000 are considered conforming loans, while those between $417,000 and $729,750 are considered conforming jumbo loans. Anything above that amount is a jumbo mortgage.

Because home values differ across the country, conforming loan amounts differ depending upon the location. Some of the states with the highest number of jumbo mortgage loans are Hawaii, California, New York, and New Jersey.

Who Can Get a Jumbo Mortgage Loan?

Not everyone who wants a jumbo mortgage can get one. Many mortgage lenders are requiring people to have down payments of as much as 40% of the purchase price, according to a U.S. News & World Report article. They also want borrowers to have credit scores of 720 and higher. Borrowers also should be prepared to document their income and show that they have several months of reserves in the bank.

Mortgage Rates Fall

Jumbo loans currently have some of the lowest mortgage rates ever. Jumbo mortgage rates averaged 5.88% in the week ended Nov. 27. Jumbo mortgages can have fixed or adjustable rates. But because of the tough lending requirements, many luxury homes are just sitting on the market.

Many expensive homes have had price reductions but still get no takers. Luxury homes listed at $2 million and up make up only 2% of the listings at real estate information site Trulia, but account for 25% of the $28.1 billion in home price reductions. Many borrowers either are unwilling to take out such large mortgage loans, or can't qualify with mortgage lenders.

Mortgage Refinancing Can Be Tough

Homeowners who already have a jumbo mortgage loan are likely to have a tough time trying to refinance. Back in March, 4.83% of jumbo mortgages were 90 or more days delinquent, according to statistics from First American CoreLogic.

While it is tough to qualify for a jumbo loan, some mortgage lenders are still handing out money to people with healthy incomes and stellar credit. When shopping for a jumbo loan it's important to compare all the terms and conditions, not just mortgage rates. Borrowers can begin their search for a jumbo mortgage loan here.

Mortgage Modifications Hard To Get
January 11, 2011

Here are the three basic reasons according to an article by The Associated Press:
  • Loan modifications often don't work out because the homeowner doesn't understand what's out there,

  • The lender is reluctant to write off part of the loan, or

  • The terms of a government-back loan limit what the bank can offer a borrower.
Homeowners in the article talk about working for months to modify their mortgages. You'd think that if the same effort went into making money, they wouldn't need to modify their mortgages.

The Federal Housing Administration is a focus of this article. The FHA has only needed a $3 billion bailout since the housing crisis struck.

Here's more:

FHA says it's costing the taxpayers nothing because the money used to pay the claims comes from the mortgage insurance payments by the homeowners who borrow under the program.

FHA paid about $12.8 billion on nearly 100,000 such claims on foreclosed homes in 2010, an average of $128,000 per claim, said Department of Housing and Urban Development spokesman Lemar Wooley.

The year before, FHA paid 70,000 claims at an average cost of about $117,000, for a total of nearly $8.2 billion.

The loans have become very popular in the last four years, up from 2 percent of the mortgage industry's volume in 2006 to about 30 percent today.

FHA loans have a lower foreclosure rate than non-FHA loans. At the end of the third fiscal quarter of 2010, the foreclosure rate for all loans was 4.39 percent compared to 3.32 percent for FHA loans, Wooley said, citing Mortgage Bankers Association delinquency data.

Wooley said banks can't simply foreclose on a person with an FHA loan to save themselves the hassle and possible monetary loss of a loan modification. FHA-approved lenders are required to try to help the borrowers avoid foreclosure or they face penalties, he said.
"Lenders that do not engage in loss mitigation and are paid a claim by HUD are subject to administrative action, including penalties in the amount of three times the amount of the claim paid to that lender," Wooley said.

U.S. Loan Effort is Seen as Adding to Housing Woes

By Peter S. Goodman, New York Times
January 1, 2010

The Obama administration’s $75 billion program to protect homeowners from foreclosure has been widely pronounced a disappointment, and some economists and real estate experts now contend it has done more harm than good.

Since President Obama announced the program in February, it has lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes.

As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.

Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system.

“The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis,” said Kevin Katari, managing member of Watershed Asset Management, a San Francisco-based hedge fund. “We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway.”
Mr. Katari contends that banks have been using temporary loan modifications under the Obama plan as justification to avoid an honest accounting of the mortgage losses still on their books. Only after banks are forced to acknowledge losses and the real estate market absorbs a now pent-up surge of foreclosed properties will housing prices drop to levels at which enough Americans can afford to buy, he argues.
“Then the carpenters can go back to work,” Mr. Katari said. “The roofers can go back to work, and we start building housing again. If this drips out over the next few years, that whole sector of the economy isn’t going to recover.”
The Treasury Department publicly maintains that its program is on track.
“The program is meeting its intended goal of providing immediate relief to homeowners across the country,” a department spokeswoman, Meg Reilly, wrote in an e-mail message.
But behind the scenes, Treasury officials appear to have concluded that growing numbers of delinquent borrowers simply lack enough income to afford their homes and must be eased out.

In late November, with scant public disclosure, the Treasury Department started the Foreclosure Alternatives Program, through which it will encourage arrangements that result in distressed borrowers surrendering their homes. The program will pay incentives to mortgage companies that allow homeowners to sell properties for less than they owe on their mortgages — short sales, in real estate parlance. The government will also pay incentives to mortgage companies that allow delinquent borrowers to hand over their deeds in lieu of foreclosing.

Ms. Reilly, the Treasury spokeswoman, said the foreclosure alternatives program did not represent a new policy.
“We have said from the start that modifications will not be the solution for all homeowners and will not solve the housing crisis alone,” Ms. Reilly said by e-mail. “This has always been a multi-pronged effort.”
Whatever the merits of its plans, the administration has clearly failed to reverse the foreclosure crisis.

In 2008, more than 1.7 million homes were “lost” through foreclosures, short sales or deeds in lieu of foreclosure, according to Moody’s Last year, more than two million homes were lost, and expects that this year’s number will swell to 2.4 million.
“I don’t think there’s any way for Treasury to tweak their plan, or to cajole, pressure or entice servicers to do more to address the crisis,” said Mark Zandi, chief economist at Moody’s “For some folks, it is doing more harm than good, because ultimately, at the end of the day, they are going back into the foreclosure morass.”
Mr. Zandi argues that the administration needs a new initiative that attacks a primary source of foreclosures: the roughly 15 million American homeowners who are underwater, meaning they owe the bank more than their home is worth.

Increasingly, such borrowers are inclined to walk away and accept foreclosure, rather than continuing to make payments on properties in which they own no equity. A paper by researchers at the Amherst Securities Group suggests that being underwater “is a far more important predictor of defaults than unemployment.”

From its inception, the Obama plan has drawn criticism for failing to compel banks to write down the size of outstanding mortgage balances, which would restore equity for underwater borrowers, giving them greater incentive to make payments. A vast majority of modifications merely decrease monthly payments by lowering the interest rate.

Mr. Zandi proposes that the Treasury Department push banks to write down some loan balances by reimbursing the companies for their losses. He pointedly rejects the notion that government ought to get out of the way and let foreclosures work their way through the market, saying that course risks a surge of foreclosures and declining house prices that could pull the economy back into recession.
“We want to overwhelm this problem,” he said. “If we do go back into recession, it will be very difficult to get out.”
Under the current program, the government provides cash incentives to mortgage companies that lower monthly payments for borrowers facing hardships. The Treasury Department set a goal of three to four million permanent loan modifications by 2012.
“That’s overly optimistic at this stage,” said Richard H. Neiman, the superintendent of banks for New York State and an appointee to the Congressional Oversight Panel, a body created to keep tabs on taxpayer bailout funds. “There’s a great deal of frustration and disappointment.”
As of mid-December, some 759,000 homeowners had received loan modifications on a trial basis typically lasting three to five months. But only about 31,000 had received permanent modifications — a step that requires borrowers to make timely trial payments and submit paperwork verifying their financial situation.

The government has pressured mortgage companies to move faster. Still, it argues that trial modifications are themselves a considerable help.
“Almost three-quarters of a million Americans now are benefiting from modification programs that reduce their monthly payments dramatically, on average $550 a month,” Treasury Secretary Timothy F. Geithner said last month at a hearing before the Congressional Oversight Panel. “That is a meaningful amount of support.”
But mortgage experts and lawyers who represent borrowers facing foreclosure argue that recipients of trial loan modifications often wind up worse off.

In Lakeland, Fla., Jaimie S. Smith, 29, called her mortgage company, then Washington Mutual, in October 2008, when she realized she would get a smaller bonus from her employer, a furniture company, threatening her ability to continue the $1,250 monthly mortgage payments on her three-bedroom house.

In April, Chase, which had taken over Washington Mutual, lowered her payment to $1,033.62 in a trial that was supposed to last three months.

Ms. Smith made all three payments on time and submitted required documents, Chase confirms. She called the bank almost weekly to inquire about a permanent loan modification. Each time, she says, Chase told her to continue making trial payments and await word on a permanent modification.

Then, in October, a startling legal notice arrived in the mail: Chase had foreclosed on her house and sold it at auction for $100. (The purchaser? Chase.)
“I cried,” she said. “I was hysterical. I bawled my eyes out.”
Later that week came another letter from Chase: “Congratulations on qualifying for a Making Home Affordable loan modification!”

When Ms. Smith frantically called the bank to try to overturn the sale, she was told that the house was no longer hers. Chase would not tell her how long she could remain there, she says. She feared the sheriff would show up at her door with eviction papers, or that she would return home to find her belongings piled on the curb. So Ms. Smith anxiously set about looking for a new place to live.

She had been planning to continue an online graduate school program in supply chain management, and she had about $4,000 in borrowed funds to pay tuition. She scrapped her studies and used the money to pay the security deposit and first month’s rent on an apartment.

Later, she hired a lawyer, who is seeking compensation from Chase. A judge later vacated the sale. Chase is still offering to make her loan modification permanent, but Ms. Smith has already moved out and is conflicted about what to do.
“I could have just walked away,” said Ms. Smith. “If they had said, ‘We can’t work with you,’ I’d have said: ‘What are my options? Short sale?’ None of this would have happened. God knows, I never would have wanted to go through this. I’d still be in grad school. I would not have paid all that money to them. I could have saved that money.”
A Chase spokeswoman, Christine Holevas, confirmed that the bank mistakenly foreclosed on Ms. Smith’s house and sold it at the same time it was extending the loan modification offer.
“There was a systems glitch,” Ms. Holevas said. “We are sorry that an error happened. We’re trying very hard to do what we can to keep folks in their homes. We are dealing with many, many individuals.”
Many borrowers complain they were told by mortgage companies their credit would not be damaged by accepting a loan modification, only to discover otherwise.

In a telephone conference with reporters, Jack Schakett, Bank of America’s credit loss mitigation executive, confirmed that even borrowers who were current before agreeing to loan modifications and who then made timely payments were reported to credit rating agencies as making only partial payments.

The biggest source of concern remains the growing numbers of underwater borrowers — now about one-third of all American homeowners with mortgages, according to The Obama administration clearly grasped the threat as it created its program, yet opted not to focus on writing down loan balances.
“This is a conscious choice we made, not to start with principal reduction,” Mr. Geithner told the Congressional Oversight Panel. “We thought it would be dramatically more expensive for the American taxpayer, harder to justify, create much greater risk of unfairness.”
Mr. Geithner’s explanation did not satisfy the panel’s chairwoman, Elizabeth Warren.
“Are we creating a program in which we’re talking about potentially spending $75 billion to try to modify people into mortgages that will reduce the number of foreclosures in the short term, but just kick the can down the road?” she asked, raising the prospect “that we’ll be looking at an economy with elevated mortgage foreclosures not just for a year or two, but for many years. How do you deal with that problem, Mr. Secretary?”
A good question, Mr. Geithner conceded.
“What to do about it,” he said. “That’s a hard thing.”

Obama's Deal for the Bankers: Amnesty for the Indefensible

This story originally appeared at Truthdig. Robert Scheer is the author of The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street (Nation Books).

The Nation
August 24, 2011

They will get away with it, at least in this life. “They” are the Wall Street usurers, people of a sort condemned in Scripture, who have brought more misery to this nation than we have known since the Great Depression. “They” will not suffer for their crimes because they have a majority ownership position in our political system. That is the meaning of the banking plea bargain that the Obama administration is pressuring state attorneys general to negotiate with the titans of the financial world.

It is a sellout deal that, in return for a pittance of compensation by banks to ripped-off mortgage holders, would grant the banks blanket immunity from any prosecution. That is intended to short-circuit investigations by a score of aggressive state officials, inquiries that offer the public a last best hope to get to the bottom of the housing scandal that has cost U.S. homeowners $6.6 trillion in home equity in the past five years and left 14.6 million Americans owing more than their homes are worth.

The $20 billion or so that the banks would pony up is chump change to them compared with the trillions that the Fed and other public agencies spent to bail them out. The banks were given direct cash subsidies, virtually zero-interest loans, and the Fed took $2 trillion in bad paper off their hands while the banks exacerbated the banking crisis they had created through additional shady practices, including fraudulent mortgage foreclosures.

Yet the administration has rushed to the aid of the banks once again and is attempting to intimidate the few state attorneys general who have the gumption to protect the public interest they are sworn to serve. As Gretchen Morgenson of The New York Times reported:

“Eric T. Schneiderman, the attorney general of New York, has come under increasing pressure from the Obama administration to drop his opposition to a wide-ranging state settlement with banks over dubious foreclosure practices. …

“In recent weeks, Shaun Donovan, the secretary of Housing and Urban Development, and high-level Justice Department officials have been waging an intensifying campaign to try to persuade the attorney general to support the settlement. …”

Donovan has good reason not to want an exploration of the origins of the housing meltdown: He has been a big-time player in the housing racket for decades. Back in the Clinton administration, when government-supported housing became a fig leaf for bundling suspect mortgages into what turned out to be toxic securities, Donovan was a deputy assistant secretary at HUD and acting Federal Housing Administration commissioner. He was up to his eyeballs in this business when the Clinton administration pushed through legislation banning any regulation of the market in derivatives based on home mortgages.

Armed with his insider connections, Donovan then went to work for the Prudential conglomerate (no surprise there), working deals with the same government housing agencies that he had helped run.

As The New York Times reported in 2008 after President Barack Obama picked him to be secretary of HUD,

“Mr. Donovan was a managing director at Prudential Mortgage Capital Co., in charge of its portfolio of investments in affordable housing loans, including Fannie Mae and the Federal Housing Administration debt.”

The HUD website boasts in its bio of Donovan that “under Secretary Donovan’s leadership, HUD has helped stabilize the housing market and worked to keep responsible families in their homes.” If that is so, we have to assume that the tens of millions savaged by an out-of-control banking industry were not “responsible.” And if the housing market has in any way been “stabilized,” why did the Commerce Department report Tuesday that new home sales have dropped for the third month in a row?

Shifting the blame from the swindlers to the victims is the cynical rot at the core of the response of both the Bush and Obama administrations to the housing collapse. It is a response that aims to forgive and forget the crimes of Wall Street while allowing ordinary folks to sink deeper into the pit of debt and despair. It infects Donovan and many others who claim to be concerned for the very homeowners they are betraying by undermining the few officials such as Schneiderman who seek to hold the bankers accountable.

In her article about the pressure being brought to bear on Schneiderman to go along with the sellout, Morgenson reported that according to an attendee at a memorial service this month for former New York Gov. Hugh Carey, as Schneiderman was leaving he “became embroiled in a contentious conversation with Kathryn S. Wylde, a member of the board of the Federal Reserve Bank of New York who represents the public.”

When interviewed by Morgenson, Wylde claimed that her conversation with Schneiderman was “not unpleasant” but that she told him:

“It is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street—love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.”

When haven’t they done that?

Nine Months Later, Obama Plan to Help 1.5 Million Struggling Homeowners Yet to Launch
Is Bank of America's loan modification program really helping homeowners?
Record 3 million homeowners plagued by foreclosure
Three reasons home prices are heading lower
Forget the Mortgage, I'm Paying My Credit Card Bill
Amid high unemployment and sliding home prices, a growing number of struggling consumers are doing what was once considered unthinkable: paying their credit card bills instead of their mortgages.
Strategic Defaults and the Foreclosure Crisis
Foreclosure filings were reported on more than 2.8 million properties in 2009, up 21 percent from the previous year and 120 percent from 2007, according to RealtyTrac.
Home Prices Stabilize Further, But More Drops May Be in Store
Home prices in 20 major cities declined 5.3 percent in November 2009 from a year earlier, a significant improvement over the 13.3 annual drop posted in July, according to the most recent S&P/Case-Shiller home price report. The figures, released Tuesday, represent the third month in a row of single-digit declines following 20 consecutive months of double-digit drops. But a number of factors—including the effects of a federal tax credit, still-elevated home inventories, and the prospect of higher mortgage rates—threaten to drag home prices lower from here.
Homeowners Facing Foreclosure Can Stay in Homes for 6 Months If They Turn Over the Deed to Citi
10 foreclosures for every home saved
The Obama administration's mortgage-modification program is not keeping pace with the deluge of foreclosures hitting the market, a government watchdog found. Only 168,708 homeowners have received long-term mortgage modifications under the president's plan, as of February, a small fraction of the 6 million borrowers who are more than 60 days behind on their loans. The president's foreclosure-prevention plan will likely assist only 1 million troubled borrowers, short of the administration's original goal of up to 4 million homeowners. The program is funded with $50 billion in Troubled Assets Relief, or TARP, funds, putting it under the panel's purview.
Section 8 Program Fact Sheet

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