Foreclosures will be the wrecking ball for the American economy

[Arraya]

http://theautomaticearth.blogspot.com/2010/04/april-15-2010-foreclosures-wil-be.html

Ilargi: Seven million American households are presently behind on their mortgage payments. Foreclosure filings were reported on 367,056 properties in March (that’s 4.4 million annualized). 1 million repossessions are foreseen in 2010. One in every 138 US homes received foreclosure filings just in the first quarter alone. Of the 230,000 or so “lucky” few who got a mortgage modification done (1.2 million began the program over the past year), 75% already, or still, owe more on the loan than the home is worth. The Obama administration’s foreclosure prevention program is “worth” $75 billion. That so far then comes to $326,000 per lucky owner, who has a 3 in 4 chance (s)he’s underwater regardless. How does one gauge the success of a plan like that?

The foreclosure flood has been temporarily stalled, that’s all there ever was, and now the gates are opening. There were ill-conceived and ill-fated federal programs, states introduced moratoriums and most of all banks delayed foreclosure proceedings either because they liked a full face value loan on their books better than a broken one or because they didn’t like the foreclosure costs (which can run into the tens of thousands of dollars), or perhaps because they’re simply completely overwhelmed and don’t have the people to process all the paperwork.

But the respite is over. Two weeks ago, the Irvine Housing Blog stated in Bank of America to Increase Foreclosure Rate by 600% in 2010 that Bank of America’s OREO department said that the bank would increase its foreclosure activity from 7500 per month to 45,000 per month. That’s 540,000 annualized for just one bank (granted, the biggest one). If this is substantiated, one of two things is true: either 2010 foreclosures will go well over 1 million, or 2011 ones will go so far over it should scare us all breathless. Moreover, there’s a solid chance that numbers like these in 8 months time will have debilitating effects on the overall economy, even before New Year’s.

Not only are foreclosures, short sales and the like devastating for homeowners, they are a death knell for many banks. For the past three years, Washington’s policy has been to sweep anything toxic under the carpet. Well, we’ve run out of carpet. And pondering this unequaled mess, it shouldn’t surprise anyone that jobless claims come in far worse than projected. The very foundations are starting to shake. And it no longer matters what tricks come out of the Fed, the Treasury, Wall Street, the White House or Capitol Hill. There was always just one possible end to the housing crisis: plummeting prices. The glut of newly foreclosed properties added to a hugely oversaturated market will see to it that they do fall, and fast and furious at that.

This will have a cascading effect throughout the economy. Falling home prices will put huge additional numbers of owners underwater. Fannie Mae, Freddie Mac, the FHA, they will all grow beyond salvation, suffering losses (even with funny accounting) that will run in the hundreds of billions of dollars. Property taxes, for many places in America the only thing that stands between mere austerity and full-blown bankruptcy, will have to come down with the home values.

And most and worst of all, the banks which hold large portions of the loans, and which have already received untold trillions of dollars in hand-outs courtesy of the house, will need to come knocking for more, because the process of increasing foreclosures will function to draw toxic paper out of vaults all over the nation, and beyond. Yes, there is a fake recovery in banking, and yes, consumers are fooled enough to go out and buy some more stuff on their credit cards. But there are not nearly enough buyers for all those millions of homes that are now part of the inventory, be it the official or the real one.

How do you get those buyers? Let prices drop 50% from where they are now, that might move some things along. But it would also eradicate the financial system as it is, and, more importantly, as the administration has elected to try and maintain it. There is no smooth solution here, it will get real ugly, and the government’s not on your side. If attitudes and policies don’t change real quick, it’s going to cost you a whole lot of trillions more. Keeping up hugely inflated home prices at all cost has de facto been declared a matter of national security. And to an extent it may well be. But it still must fail. Or not nearly enough people can afford to buy a home. Catch 22. It makes no difference what the next smart way is to keep up appearances even longer: the outcome is as clear as it is inevitable. Real estate built America, and it’s going to take it down. Foreclosures will be the wrecking ball for the American economy.

[5yearwaiter]

[quote=Arraya]http://theautomaticearth.blogspot.com/2010/04/april-15-2010-foreclosures-wil-be.html
Real estate built America, and it’s going to take it down. Foreclosures will be the wrecking ball for the American economy.[/quote]

Then Fed might be really wasting time and as well making more worst scenarios for the future housing. Instead providing loan-mds and all other acts – Fed should have allowed some sort of easy slide in housing, no matter either way there will be some sort of correction but the price slidw would have allowed more stablized future housing. Now there is no stablized housing at all I can see

[5yearwaiter]

[quote=Arraya]http://theautomaticearth.blogspot.com/2010/04/april-15-2010-foreclosures-wil-be.html
Real estate built America, and it’s going to take it down. Foreclosures will be the wrecking ball for the American economy.[/quote]

Then Fed might be really wasting time and as well making more worst scenarios for the future housing. Instead providing loan-mds and all other acts – Fed should have allowed some sort of easy slide in housing, no matter either way there will be some sort of correction but the price slidw would have allowed more stablized future housing. Now there is no stablized housing at all I can see

[5yearwaiter]

[quote=Arraya]http://theautomaticearth.blogspot.com/2010/04/april-15-2010-foreclosures-wil-be.html
Real estate built America, and it’s going to take it down. Foreclosures will be the wrecking ball for the American economy.[/quote]

Then Fed might be really wasting time and as well making more worst scenarios for the future housing. Instead providing loan-mds and all other acts – Fed should have allowed some sort of easy slide in housing, no matter either way there will be some sort of correction but the price slidw would have allowed more stablized future housing. Now there is no stablized housing at all I can see

[5yearwaiter]

[quote=Arraya]http://theautomaticearth.blogspot.com/2010/04/april-15-2010-foreclosures-wil-be.html
Real estate built America, and it’s going to take it down. Foreclosures will be the wrecking ball for the American economy.[/quote]

Then Fed might be really wasting time and as well making more worst scenarios for the future housing. Instead providing loan-mds and all other acts – Fed should have allowed some sort of easy slide in housing, no matter either way there will be some sort of correction but the price slidw would have allowed more stablized future housing. Now there is no stablized housing at all I can see

[5yearwaiter]

[quote=Arraya]http://theautomaticearth.blogspot.com/2010/04/april-15-2010-foreclosures-wil-be.html
Real estate built America, and it’s going to take it down. Foreclosures will be the wrecking ball for the American economy.[/quote]

Then Fed might be really wasting time and as well making more worst scenarios for the future housing. Instead providing loan-mds and all other acts – Fed should have allowed some sort of easy slide in housing, no matter either way there will be some sort of correction but the price slidw would have allowed more stablized future housing. Now there is no stablized housing at all I can see

[investor]

There are 1 trillion in ARM mortgages due to reset in the next 1-4 years. another almost 1 trillion in ALT-A mortgages also due to reset in the next 1-4 years. Commercial loans amounting to 1.5 trillion are due to refinance in the next 1-4 years. Commercial loans have to be re appraised and completly refinanced every 3-10 years, unlike residential loans, so when their values fall 40% and the LTV goes from 100% to 70%, people have to come up with 50% of the original worth of the loan (made back when prices were overinfalted) in order to keep the same property that is going down in value. Commercial loand are also non-recourse, which means that the bank can not come after the person for payment. The bank gets the bad debt back with the property. My concern is that the fed will rescue all of this to the tune of 3-5 trillion, all with new money. I really have a hard time predicting what will happen then, aside from big time infaltion. We are in for a big W in our “recovery”. Buying a home now should be for long term use, not for flipping. You will probably get burned if you try flipping in these changing conditions. You tube has many videos about these topics. Elizabeth Warren, congerssional oversight commission chair, is a good place to start.

[investor]

There are 1 trillion in ARM mortgages due to reset in the next 1-4 years. another almost 1 trillion in ALT-A mortgages also due to reset in the next 1-4 years. Commercial loans amounting to 1.5 trillion are due to refinance in the next 1-4 years. Commercial loans have to be re appraised and completly refinanced every 3-10 years, unlike residential loans, so when their values fall 40% and the LTV goes from 100% to 70%, people have to come up with 50% of the original worth of the loan (made back when prices were overinfalted) in order to keep the same property that is going down in value. Commercial loand are also non-recourse, which means that the bank can not come after the person for payment. The bank gets the bad debt back with the property. My concern is that the fed will rescue all of this to the tune of 3-5 trillion, all with new money. I really have a hard time predicting what will happen then, aside from big time infaltion. We are in for a big W in our “recovery”. Buying a home now should be for long term use, not for flipping. You will probably get burned if you try flipping in these changing conditions. You tube has many videos about these topics. Elizabeth Warren, congerssional oversight commission chair, is a good place to start.

[investor]

There are 1 trillion in ARM mortgages due to reset in the next 1-4 years. another almost 1 trillion in ALT-A mortgages also due to reset in the next 1-4 years. Commercial loans amounting to 1.5 trillion are due to refinance in the next 1-4 years. Commercial loans have to be re appraised and completly refinanced every 3-10 years, unlike residential loans, so when their values fall 40% and the LTV goes from 100% to 70%, people have to come up with 50% of the original worth of the loan (made back when prices were overinfalted) in order to keep the same property that is going down in value. Commercial loand are also non-recourse, which means that the bank can not come after the person for payment. The bank gets the bad debt back with the property. My concern is that the fed will rescue all of this to the tune of 3-5 trillion, all with new money. I really have a hard time predicting what will happen then, aside from big time infaltion. We are in for a big W in our “recovery”. Buying a home now should be for long term use, not for flipping. You will probably get burned if you try flipping in these changing conditions. You tube has many videos about these topics. Elizabeth Warren, congerssional oversight commission chair, is a good place to start.

[investor]

There are 1 trillion in ARM mortgages due to reset in the next 1-4 years. another almost 1 trillion in ALT-A mortgages also due to reset in the next 1-4 years. Commercial loans amounting to 1.5 trillion are due to refinance in the next 1-4 years. Commercial loans have to be re appraised and completly refinanced every 3-10 years, unlike residential loans, so when their values fall 40% and the LTV goes from 100% to 70%, people have to come up with 50% of the original worth of the loan (made back when prices were overinfalted) in order to keep the same property that is going down in value. Commercial loand are also non-recourse, which means that the bank can not come after the person for payment. The bank gets the bad debt back with the property. My concern is that the fed will rescue all of this to the tune of 3-5 trillion, all with new money. I really have a hard time predicting what will happen then, aside from big time infaltion. We are in for a big W in our “recovery”. Buying a home now should be for long term use, not for flipping. You will probably get burned if you try flipping in these changing conditions. You tube has many videos about these topics. Elizabeth Warren, congerssional oversight commission chair, is a good place to start.

[investor]

There are 1 trillion in ARM mortgages due to reset in the next 1-4 years. another almost 1 trillion in ALT-A mortgages also due to reset in the next 1-4 years. Commercial loans amounting to 1.5 trillion are due to refinance in the next 1-4 years. Commercial loans have to be re appraised and completly refinanced every 3-10 years, unlike residential loans, so when their values fall 40% and the LTV goes from 100% to 70%, people have to come up with 50% of the original worth of the loan (made back when prices were overinfalted) in order to keep the same property that is going down in value. Commercial loand are also non-recourse, which means that the bank can not come after the person for payment. The bank gets the bad debt back with the property. My concern is that the fed will rescue all of this to the tune of 3-5 trillion, all with new money. I really have a hard time predicting what will happen then, aside from big time infaltion. We are in for a big W in our “recovery”. Buying a home now should be for long term use, not for flipping. You will probably get burned if you try flipping in these changing conditions. You tube has many videos about these topics. Elizabeth Warren, congerssional oversight commission chair, is a good place to start.

[Author]

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