Sorry to keep harping on this point, but the more I study the efforts to prevent foreclosures the more I believe that they will indeed have tangible effects.

I do believe that the effects of the recession will provide a substantial counterbalance but it is becoming more evident that our or at least my prognostications about the second wave, or even the contnuity associated with the current wave need to be reevaluated. A few links on the homepage should be read.

The first and most important is this one about our favorite guy Barney Frank urging the immediate appointment of Sheila Blair to suppress foreclosures.

http://feeds.feedburner.com/~r/HousingWire/~3/429025983/

Sheila Bair has been working with the now insolvent Indymac. I followed a link in the above story to learn more about the Indymac model. This link is

http://www.housingwire.com/2008/09/10/consumer-avocates-want-fannie-freddie-to-follow-fdic-on-loan-mods/

Some of the text,

“The FDIC said it would focus on actively modifying loans for delinquent and severely delinquent borrowers, employing so-called “affordability modifications” en masse; in other words, the FDIC will look to write down loans to roughly whatever levels the borrower can afford, a strategy that has long been advocated by consumer groups but panned by industry representatives.

In the program details, the FDIC said it would look to put borrowers with various Alt-A loan products into “affordable” mortgages that would reduce their payment load down to a 38 percent payment-to-income ratio, including principal, interest, taxes and insurance — even if that means writing off principal, or reducing rates well below current market rates to get there.

Borrowers looking to qualify for the program would need to document their income and provide proof of primary residence, the FDIC said. ”

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Once again I do not feel this will stem the depreciation cycle. Yet I am more concerned that it will indeed serve to reduce foreclosures. Working backwards, the logical conclusion is the reduction of distressed properties. The sacrifice of future appreciation that the seller makes is in more and more desireable in light of a substantially lower payment due to loan modification be it principal reduction or rate modification.

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There will be many here that argue that we will not see tangible effects and my counter is that we have already seen tangible effects in the September numbers at the innovest foreclosure forum for SD County. Rich has posted that he feels this is simply a refilling of the pipeline due to legislative changes that affect the foreclosure process. My read is that yes part of this is but not all of it. Finally no matter who is elected president, we will see a major continuation/expansion of this policy.

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The depreciation cycle will indeed continue. It will just be interesting to see the inventory levels.