Tag Archives: Foreclosures

Florida Real Estate Takes Double Dip

Government programs ending, new foreclosures starting, zombie foreclosures coming back to life and Florida’s weak employment base all add up to bad news for Florida’s real estate market for the next few quarters, says Roy Oppenheim in a video interview

WESTON, Fla., July 26, 2011 — Foreclosure is the new “F” word and it’s back with a vengeance as Florida foreclosure defense activity is up and, as a result, Florida real estate prices are expected to go down again, reports Roy Oppenheim, legal blogger and foreclosure defense attorney at Oppenheim Law (see Oppenheim’s recent video interview discussing Florida real estate’s double dip: http://youtube.com/oppenheimroy).

“Florida real estate prices are likely going to decline again starting in the third quarter of 2011 and into the next few quarters of 2012,” says Oppenheim, who also specializes in foreclosure defense workshops and serves as an expert source to real estate media outlets. “Expect a tidal wave of new foreclosures to hit the Florida markets.”

The Florida Real Estate Double Dip culprits:

“There is just not enough economic support to sustain housing prices,” said Oppenheim. “Meager gains of the market will be washed out by the next tidal wave of foreclosures that only a surge in new construction can save us from.”

Oppenheim Law Foreclosure Truths and Consequences

  • The only remedy for less government benefits is an increase in hiring. But … the job market is dismal. Employers added only 18,000 jobs last month, with millions still unemployed.
  • The situation is even worse in South Florida, with above average unemployment in both Broward and Miami-Dade counties.

Oppenheim Law’s prediction

All of the cuts will result in more Floridians unable to stay in their homes. The more people unable to stay in their homes, the more foreclosures Florida will have.

“The lull in foreclosures, as reported most recently by the media, is merely the eye of the storm,” said Oppenheim.

Oppenheim Law sees a tidal wave of foreclosures about to hit. The Florida real estate foreclosure tides are already starting to rise as noted in the South Florida Law Blog.

About Oppenheim Law

Oppenheim Law is one of the leading Florida real estate and foreclosure defense law firms, founded in 1989. The firm has a 9.6 out of 10 rating from AVVO, the world’s largest legal directory, as well as the highest rating (A-V) conferred by Martindale Hubbell Law Directory, the most respected directory of lawyers and law firms in the U.S. Join Oppenheim Law on Facebook athttp://www.facebook.com/oppenheimlaw

Contact: Lisa Buyer, [email protected], 954-354-1411 x14

Study Reveals Impact of Real Estate ‘Shadow Inventory’ on Recovery

ATLANTA, June 30, 2011 /PRNewswire/ — Despite steady gains in key industry sectors, the nation’s housing market continues to exert pressure on the overall rate of economic recovery. While financial conditions across multiple financial sectors suggest economic stabilization and growth, delinquencies still exceed pre-recession levels due to continued turbulence in the mortgage marketplace, according to Equifax (NYSE: EFX) national credit trend research for May 2011.

Slowing today’s economic recovery are the challenges posed by high shadow inventory levels, which are contributing to the continued rise of severe mortgage delinquencies and write-offs. According to Equifax research, write-off dollars for home finance, which includes first mortgage and home equity installment loans as well as home equity revolving accounts, are still climbing and have yet to show signs of peaking. In fact, home finance write-offs reached $304.6 billion in 2010 compared to a combined total of $126.7 billion for 2006 and 2007.

Equifax data shows that severe delinquencies among these loan vintages have remained nearly constant since the first quarter of 2010. Further analysis reveals that as of May 2011 there are approximately$319.7 billion in 2006 and 2007 first mortgage vintages that are in the initial foreclosure process – many of which may be written off.

Real estate owned (REO) properties represent another roadblock to recovery. According to Equifax, first mortgage REO rates remain high as lenders struggle to divest of properties unsuccessfully sold through a short sale or foreclosure auction. While various factors over the last few years have led to fluctuations in the number of REO properties, REO rates since March 2011 are on the rise and causing continued economic strain. Equifax data shows that in May 2011:

  • Three percent of all U.S. first mortgages representing $21.8 billion were REO properties.
  • Foreclosure complete rates of 1.45 percent were almost in lock step with bankruptcy rates of 1.6 percent – suggesting that the majority of REO properties are the result of bankruptcy proceedings.

 

“Shadow inventory and real estate owned properties are still playing a dominant role in today’s mortgage market and slowing the pace of economic recovery. While we are seeing stabilization across multiple sectors of lending, there remains a significant volume of delinquent first mortgage loans, which has slowed the foreclosure process. Until these foreclosures are processed, the mortgage market will continue to impact economic growth,” said Craig Crabtree, senior vice president and general manager, Equifax Mortgage Services.

Mortgage Banking Giant Agrees to Pay Homeowner $30,000 as Part of Settlement Agreement

With pending counterclaims of fraud and predatory lending, Deutsche Bank agrees to pay defendant $30,000 and issue a letter to correct credit to settle a New Jersey foreclosure action

PHILADELPHIA, June 14, 2011 — Shaffer & Gaier, LLC announced today that its client has agreed to a $30,000 cash settlement with Deutsche Bank in an action filed by the banking giant to foreclosure on a New Jersey investment property worth approximately $65,000.00. As part of the terms of the settlement, the homeowner is entitled to retain the property and collect rental income for an expected period of 15-18 months, free of mortgage payment obligations, after which time he will walk away from the underwater property. The bank has also agreed to issue a letter to correct credit to the defendant, which will be distributed to the three credit bureaus to repair any credit blemishes caused by the suit.

Deutsche Bank, the plaintiff in this case, was acting as the trustee on behalf of Morgan Stanley ABS Capital Inc., Trust 2006-NC5, Mortgage-Pass Through Certificates, Series 2006-NC5, the mortgage pool that claimed to own the defendants loan. While the bank was able to produce an assignment dated and recorded prior to the filing of the foreclosure complaint, one of the most commonly raised foreclosure defenses, defense counsel was able to challenge the bank on several other issues of standing, but ultimately it was the counterclaims of fraud and predatory lending that drove the settlement.

Although predatory lending and fraud claims are common allegations in the foreclosure defense arena, foreclosing banks are usually successful at overcoming the charges with a “holder in due course” defense, hiding behind a securitization process that serves as smoke and mirrors for the true parties to a mortgage transaction. Michael Gaier, partner at the Philadelphia-based law firm of Shaffer & Gaier, LLC, with the help of his partner Michael Shaffer, and a team of mortgage experts, paralegals and associates, has dedicated the last two years of his life to crafting a legal argument that has survived summary judgment motions, overcome protective orders to depose high-level banking executives and gained nine dismissals or settlements in the last 10 weeks alone. “I’m especially pleased with the outcome of this case,” said Mr. Gaier. “This was not the most compelling story of our cases. It was an investment property that was purchased with a limited down payment and has been earning income for the last two years. The issue is that my client never should have been approved for this loan in the first place. The lenders grossly inflated his income on the application, and then hid that from him, and disclosed a rate and payment vastly different from what he ended up with at the closing table and pressured him to close with the threat of forfeiting a deposit. Bottom line is fraud is fraud. I anticipate there will be many more settlements going forward.”

 

National Home Prices Hit New Low in 2011

NEW YORK, May 31, 2011 /PRNewswire/ — Data through March 2011, released today by Standard & Poor’s for its S&P/Case-Shiller(1) Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index declined by 4.2% in the first quarter of 2011, after having fallen 3.6% in the fourth quarter of 2010.  The National Index hit a new recession low with the first quarter’s data and posted an annual decline of 5.1% versus the first quarter of 2010. Nationally, home prices are back to their mid-2002 levels.

As of March 2011, 19 of the 20 MSAs covered by S&P/Case-Shiller Home Price Indices and both monthly composites were down compared to March 2010. Twelve of the 20 MSAs and the 20-City Composite also posted new index lows in March. With an index value of 138.16, the 20-City Composite fell below its earlier reported April 2009 low of 139.26. Minneapolis posted a double-digit 10.0% annual decline, the first market to be back in this territory since March 2010 when Las Vegas was down 12.0% on an annual basis. In the midst of all these falling prices and record lows, Washington DC was the only city where home prices increased on both a monthly (+1.1%) and annual (+4.3%) basis.  Seattle was up a modest 0.1% for the month, but still down 7.5% versus March 2010.

The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 5.1% decline in the first quarter of 2011 over the first quarter of 2010. In March, the 10- and 20-City Composites posted annual rates of decline of 2.9% and 3.6%, respectively. Thirteen of the 20 MSAs and both monthly Composites saw their annual growth rates fall deeper into negative territory in March. While they did not worsen, Chicago, Phoenix and Seattle saw no improvement in their respective annual rates.

“This month’s report is marked by the confirmation of a double-dip in home prices across much of the nation. The National Index, the 20-City Composite and 12 MSAs all hit new lows with data reported through March 2011. The National Index fell 4.2% over the first quarter alone, and is down 5.1% compared to its year-ago level. Home prices continue on their downward spiral with no relief in sight,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “Since December 2010, we have found an increasing number of markets posting new lows. In March 2011, 12 cities – Atlanta, Charlotte, Chicago,Cleveland, Detroit, Las Vegas, Miami, Minneapolis, New York, Phoenix, Portland (OR) and Tampa – fell to their lowest levels as measured by the current housing cycle. Washington D.C. was the only MSA displaying positive trends with an annual growth rate of +4.3% and a 1.1% increase from its February level.

“The rebound in prices seen in 2009 and 2010 was largely due to the first-time home buyers tax credit.  Excluding the results of that policy, there has been no recovery or even stabilization in home prices during or after the recent recession. Further, while last year saw signs of an economic recovery, the most recent data do not point to renewed gains.”

“Looking deeper into the monthly data, 18 MSAs and both Composites were down in March over February. The only two which weren’t, are Washington DC, up 1.1%, and Seattle, up 0.1%. Atlanta,Cleveland, Detroit and Las Vegas are the markets where average home prices are now below their January 2000 levels.  With a March index level of 100.27, Phoenix is not far off.”

As of the first quarter of 2011, average home prices across the United States are back at their mid-2002 levels. The National Index level hit a new low in the first quarter of 2011; it fell by 4.2% in the first quarter of 2011 and is 5.1% below its 2010Q1 level.

Eleven cities and both Composites have posted at least eight consecutive months of negative month-over-month returns. Of these, eight cities are down 1% or more. The only cities to post positive improvements in March versus their February levels are Seattle and Washington D.C. with monthly returns of +0.1% and +1.1% respectively.

 

Fannie, Freddie and Foreclosures- Exploring the True Costs to the US taxpayer

Introducing Fannie Mae, their mission and purpose as explained on fanniemae.com:

“Fannie Mae, (Federal National Mortgage Association) is a government-sponsored enterprise (GSE) chartered by Congress with a mission to provide liquidity, stability and affordability to the U.S. housing and mortgage markets.”

Yet they have managed to do just the opposite of the purpose for which they were created. With record numbers of foreclosures and mortgage problems being reported, I fail to see how I can paint this organization in any kind of favorable light here today.

Fannie Mae would have been in bankruptcy – if they actually applied the true principles within the realm of their creation, as further explained on their homepage (emphasis mine) :

“Fannie Mae was established as a federal agency in 1938, and was chartered by Congress in 1968 as a private shareholder-owned company.”  Yet once again, a company deemed “too big to fail” by our government was in effect bailed out by the U S taxpayers. Whatever happened to investors that do not monitor their investments properly, being made to accept the loss here? Why should our government step in and make the taxpayer bear this debt burden?

Introducing Freddie Mac should have been more aptly named Fannie Mae II, as their mission statements are virtually the same, as reported on freddiemac.com (emphasis mine).

“Freddie Mac was chartered by Congress in 1970 with a public mission to stabilize the nation’s residential mortgage markets and expand opportunities for homeownership and affordable rental housing. Our statutory mission is to provide liquidity, stability and affordability to the U.S. housing market.

Read that mission statement again, then ask yourself, “Have they accomplished their mission, or any part of it today? ” Again, I am trying to shed a positive light on Freddie Mac, but all I see are huge abject failures as to their own mission statement. I think the statement, “To stabilize the nation’s residential mortgage markets,” when looking at our mortgage foreclosure/ housing crisis of today, is ludicrous, to say the least. They claim to be playing an important role in helping people avoid foreclosure, yet at what price to the taxpayers and the economy?

Fannie and Freddie admit to 20 billion in losses.

While it is almost impossible to put a total cost to the taxpayers the full extent of the Fannie Mae and Freddie Mac GSE’s, ( Government Sponsored Enterprises) figures are now emerging that show us the enormity of the waste, abuse and corruption inherent in both of the organizations once again. Another fact that must be addressed is that Congress passed a “Financial Reform Bill” in July of last year that ignored the problems at Fannie and Freddie completely. How can you claim to reform the financial system and ignore the largest mortgage holder in the USA ? That just doesn’t make sense.

Earlier in the spring of 2010, Bloomberg Businessweek printed an article that tried to summarize the problems and expense of taxpayer funding through the government backing of Fannie Mae and Freddie Mac.* The fact that the Fannie and Freddie Foreclosure club is at the center of the housing crisis and financial collapse just cannot be denied. Note that this exposure was before they passed the financial reform bill. They knew the basic facts and chose to ignore them anyway.

When the history books are written about America’s early 21st Century financial system breakdown, what will they make of Fannie Mae and Freddie Mac? These two government-sponsored enterprises (GSEs) that own or guarantee 76 percent of all mortgage originations were at the center of the credit market collapse. Bailing them out has cost the U.S. taxpayer $145 billion and counting.” Estimates of their losses today run much, much higher as new facts emerge.

Keep in mind that this article was written in May of 2010, yet the costs to the taxpayer had already soared to $145 billion dollars. In an earlier article at CDN, “Money for Nothing and Your Houses for Free“, I pointed out how the taxpayer was also paying for the legal costs incurred by the top 3 corruptocrats at Fannie and Freddie, who continued to rake in huge salaries and bonuses after admitting to complicity in cooking the books and inflating the financial outlook at Freddie Mac to increase their bonuses. There appears to be an ever emerging pattern of corrupt practices within the higher ups in both organizations, and it certainly appears to have the approval of our elected officials in Congress, as they refuse to stop this madness mo matter how much proof is put in front of them.

Bloomberg Businessweek further goes on to state how with very little public discussion, or exposure in the media, “ Uncle Sam has basically nationalized their $5.5 trillion in home-loan assets. The Obama Administration has pledged to cover unlimited losses at Fannie and Freddie through 2012, a commitment that goes beyond a prior credit line of $400 billion (which itself had been doubled). In early May, Fannie posted a $13.1 billion loss while Freddie fessed up to losing $6.7 billion. The pair now tote $340 billion in nonperforming assets. ( 2012 also happens to be an election year, and without government protection, the people just might find out how bad this situation really is here, and that could have an enormous effect on said elections).

With all of the books being cooked to the point of complete confusion, I can’t fault the 111th Congress completely here, yet the bleeding of taxpayer dollars was very obvious, even to the most naïve and incompetent of government accountants. On May 11th of that same year Senator McCain called for the stoppage of the Fannie and Freddie debacle. What did the Democratic Majority in the Senate choose to do then? They ignored the calls for true reform at F&F and instead shifted responsibility to the Treasury Department to do some “studies” on how to take F&F off the taxpayers bank account. Meanwhile, record foreclosures, high unemployment, and an economic recession were crushing the country. Is this what the people voted for in the 2010 elections? This writer certainly doesn’t think it is.

There is also a Ginnie Mae, as in Government National Mortgage Association. (GNMA)

This company was originally a part of Fannie Mae and was originally created during the recovery from the Great Depression. This was widely known as the lending arm of HUD, or Housing and Urban Development. In 1968 Fannie Mae and Ginnie Mae split with Fannie Mae going public on the NYSE with Ginnie Mae remaining as a government owned association. So why haven’t we heard much about Ginnie Mae during this housing mortgage crisis in recent years? I plan on researching this entity more thoroughly in a upcoming article in this continuing saga. I can give a hint of what I have found so far on Ginnie Mae. It fits the same pattern as the other family members in the mortgage business attached to our government. One top executive was convicted of mortgage fraud at Lend America.. and continued to to help run the company, with the full endorsement of Ginnie Mae. In December of 2009 the FHA removed Ginnie-approved Lend America from the FHA program completely, mainly due to corruption, fraud and bad lending practices. Yes we have a definite pattern of corruption and incompetence emerging here in all three of these entities.

Fast forward to today. Fannie and Freddie still basically operate on a blank check written on the taxpayers bank account. The housing and mortgage crisis is still crippling our economy, yet I see no proposed legislation to put a stop to this debacle. We the people need to call up and write to our representatives and demand that the taxpayer funding of Fannie and Freddie be stopped immediately. A few Bernie Madoff-style criminal charges are also warranted here, to forcefully send the message that those responsible for this kind of debacle will be held accountable. With the recent announcement by the CBO of the 2011 Federal deficit hitting $1.5 trillion, immediate action is needed. Congress has all the data. No more“studies, no more “reviews”and no more dithering. Stop the bleeding of taxpayer dollars through Fannie and Freddie and do it now, there is no excuse for continuing to allow this massive fraud and abuse of taxpayer dollars.

Sources:

* http://www.businessweek.com/magazine/content/10_21/b4179025062530.htm
** http://conservativedailynews.com/2011/01/money-for-nothing-and-houses-for-free/

Administration Says Its Saving Homes, Oversight Report Says Otherwise

The Congressional Oversight Panel published a report on October 9th assessing the effectiveness of “foreclosure mitigation efforts” for the previous six months.  Many in the media are focusing on how the administration’s foreclosure efforts are failing.  Just reading the executive summary, I was just as troubled by who these efforts are failing.  The first paragraph grabs the attention with, “The combination of federal efforts to combat the financial crisis coupled with mortgage assistance programs makes the taxpayer the ultimate guarantor of a large portion of home mortgages“.  Congratulations, even though you and I knew better than to get into real-estate investing during an obvious bubble.. the government forced us into it and we’re about to take a bath.

On a positive note, the executive summary does say that it is likely that the benefits will eventually outweigh the costs to the taxpayer.  The initiative that is expected to bring about these benefits is Making Homes Affordable (MHA) which is made up of two programs – the Home Affordable Refinance Program (HARP) and Home Affordable Modification Program (HAMP).  HARP focuses on homeowners that are in-good-standing on their home loans but the mortgages are valued higher than the actual value of the home.  HAMP focuses on those that can no-longer afford their mortgages and keeping them out of foreclosure.

HARP reconfigures the loans into stable, affordable loans and has performed almost 96,000 mortgage reconfigurations or refinances.  It is difficult to prove a negative, just as with the “jobs saved or created” angle the administration takes on the stimulus plan.  Here we have another.  Did we actually prevent any foreclosures or just guarantee a more-favorable loan for people that bought too much house?  The report does not even try to compute how many homes loans were saved or prevented from being bad.  Probably because it can’t be done.

HAMP subsidizes the mortgage payments of soon-to-be-foreclosed debtors with taxpayer dollars.  This mortgage modification program reconfigured 1,711 mortgages and put another 362,348 other borrowers into a 3-month trial program.  The U.S. Treasury expects that it will spend almost $43 billion of the $50 billion TARP funds for mortgage modification.  This amount would support about two-and-a-half million loan modifications.  Unfortunately, current estimates are for closer to 12 million foreclosures will occur which means that, “the remaining losses will be massive”.

The report stresses three main reason why these favored programs of the Obama administration may not succeed.  Size, Scope and permanence.

First, the scope of the program will limit it from helping the most-at-risk mortgages.  The eligibility requirements will not allow adjustable rate mortgages or interest-only loans to be subsidized by taxpayer money.  HAMP is also not designed to help with non-payment of mortgages due to unemployment – the main reason for many home-losses in these economic times.  The whole program is built around fixing subprime mortgages, and even the report states that it’s so “six-month-ago”.  Nothing in this bill deals with the actual mortgage crisis that Americans are dealing with.

After scope, the report explains how the size of the program is also insufficient.  Foreclosure starts are coming twice as fast as HAMP modifications and many homeowners that would qualify for the program are losing their houses while waiting for the program to catch up.  This is similar to the cash-for-clunkers issue of too many promises for too little capability.  The car dealers could decide to stop accepting deals under that program to avoid cash-flow disasters.  These homeowner’s only choice is to lose their homes.  Even once the program catches up, it will only be able to service 50% of the Treasuries own estimate for home foreclosures.

Lastly, the Congressional Oversight Panel’s report addresses permanence.  Will these modifications actually result in the prevention of a home loss?  Only a small portion of the modifications done under HAMP have resulted in permanent stable mortgages.  The panel suggests that after massive infusions of taxpayer capital, these loans default anyway.  The report states that real results of these programs will be, “that foreclosure is delayed, not avoided”.

There is some discussion of negative-equity.  If the housing market continues depressing or deflating, more people may consider walking away from their mortgages as there would be no inherent value in the home.  These wealth-lost scenarios could increase foreclosures well-beyond even the pessimistic estimates of the U.S. Treasury.  If this is added into what the report calls “payment reset shock”, due to high loan-to-value adjustable loans, it’s obvious the government has no-chance at making any real dent in the real-estate crisis.

What the report doesn’t consider is the massive de-leveraging that is occurring in the American economy.  In the Conservative Daily News article entitled, “Going Galt Without Realizing“, it is apparent that between the government’s willingness to create money for these mortgage-subsidization programs and American’s lack of willingness to continue borrowing to consume, our fractional reserve systems could add another last straw.  Bank reserves will dwindle as fewer and fewer Americans borrow for homes and autos either because they can’t (due to recent foreclosure or a barely-affordable mortgage) or because this crisis has caused a change-in-behavior towards reduced indebtedness.

Whether we look back at cash-for-clunkers or at this initiative, it becomes obvious that the administration is unable to judge the size, scope, permanence or effectiveness of the programs it supports.

Rebuilding a House of Cards

Many of us have done it.  We’ve gathered a few decks of cards, built it up as high as we could, then watched it fall to the ground.  Of course, we would then re-build just a little higher only to have it also collapse due to its unsupportable architecture.  The only difference being that the second, larger card house, made for a much larger mess when it collapsed.

In 2009, the government is rebuilding the poorly-supported house-of-cards that caused the current recession, and of course, building it bigger.

By over-extending loans to those that could not afford them at housing prices that were unrealistic, the government put the entire economy at-risk.  In order to even come close to servicing the risky loans the government regulators forced upon bank, they had to re-package them into complicated mortgage-backed securities.

These risky loans actually only achieved one thing – creating a bubble in the housing market.  The prices of houses became artificially inflated due to unsupportable demand.  When all those loans defaulted, the financial institutions that held the notes also collapsed.  Then, a correction started to occur.  A naturally-occurring oscillation in the market, but the government could not let that happen.  Bring on… bubble part 2: going for broke.

In a post on Hot Air we see that in August, we watched as sales of existing homes drop by 2.7%.  Experts were expecting an increase.  Due to the fact that 30% of all home sales this year were by first-time home buyers, the National Association of Realtors has begun a campaign designed to influence congress to put more taxpayer subsidies into the housing market.  They correctly believe that once the $8,000-$15,000 tax credit disappears, so will the buyers.  But by stopping it, they are only delaying and magnifying the inevitable – the true correction of the market.  Those subsidies basically inflate the market by the value of the subsidy.  When the subsidy goes, those houses suddenly correct to their actual value – the government creates another wave of people who will be upside-down in their mortgages.

We can already see what happens when the government issues its short-term subsidy/stimulus programs.  Cash for clunkers artificially increased durable goods manufacturing in July.  August tells an entirely different story.  The manufacturing sector is no correcting longer and deeper than it might have if the government had just stayed out.  The 2.4% reduction in durable goods orders is right after the 4.8% increase due to the governments car program.

The FDIC is already holding dangerously small reserves and is considering borrowing from taxpayers to survive the bank bailouts that are already occurring.  The new round of defaults that are incoming will force that action.  More liquidity will be needed in the economy, more money will get “created”, and inflation will result.

In short, we have more vulnerable home owners with upside-down mortgages, a declining manufacturing sector, rising unemployment, an FDIC teetering on the brink, and the knowledge that at some point the subsidies must end or hyper-inflation will take hold.

If we put all of this together, it’s easy to see that we are rebuilding the same house of cards that got us here.  This time we’ve decided to build it higher, in the middle of a storm, with flimsy cards.  Prepare to pick-up the mess.

Adjustible loan disaster looming for California

Members of Congress, the President, and anyone else with an opinion is still blaming the recession on greedy corporations.  This article isn’t about rehashing the debate, but… what about the greedy government elitists?  What about us?

The government needs us to borrow more to feed the partial-reserve economy system we have.  To get us to borrow more, they need us buying cars and houses, and not the cheap ones.  ACORN was out rioting against banks and threatening bankers to force them to give loans to people that could not afford them… ever.  Barney Franks fought against controls in Fannie Mae and Freddie Mac that would have prevented many of the bad loans that greedy wall street corporations then had no choice but to repackage, resell and pray.  God never answered.

The government has done everything it could to keep home values at ridiculous prices and had failed.  Bubble: Part Two, has been setup by the Obama administration and Franks.  Once all the liquidity they are creating has its effect, inflation will follow.  Next will be interest rates that will make the 80’s look like a picnic.

Inflation is hard enough, but what about all those homeowners  that have adjustable loans, on property that is now mortgaged at 125% of actual house value, and they’ve been making minimum payments.  Once the interest rates skyrocket and those ARMs reset… their payments could increase by up to 75% – they will have to simply walk away and leave the bank holding the bag.

According to the most-recent “Negative Equity Data Report” from First American Core Logic, California had 43,000 home owners recently slide into negative equity positions (the house is worth less than the mortgage).  Overall, California has 723,000 properties in a “severe negative equity position” (a.k.a. in real trouble).  Nearly one-third of all mortgages in California are under-water.

18% of interest-only loans are currently 60-days and Californian banks will be stretched to cover loses of that magnitude.  There are those that argue that the ARM catastrophe isn’t that bad and that it will only affect high-end states like California and Florida.  Unfortunately, when those golden and sunshine state banks fail in record numbers…wait for it…  the FDIC is already running out of money [link].

The FDIC will be awarded larger and larger lines of credit to cover the bank failures.  That credit comes from the treasury which gets its money from – the Fed.  Of course the Fed gets money from thin air – aka “printing it”.  Interest rates will go ever higher and now middle-value loans start getting affected.

The recession is not over, and it wasn’t caused by some CEO’s greed.  It was caused by the greed of the average citizen doing what their government wanted them to do – borrow more than they could afford to pay back.  That way, we could look just like them.