May US Foreclosures 3rd Highest Month on Record

How will we ever be able to turn the corner if we can not stop people from losing their homes?

U.S. foreclosure activity for May ebbed from April's record, but mortgages still failed at a staggering pace as President Barack Obama's rescue programs had not had time to fully take root, RealtyTrac said on Thursday.

Foreclosure filings dipped 6 percent in the month but increased 18 percent from May 2008, marking the third highest month on record.

The reasons for this foreclosure crisis are much more than bad loans to people who could not pay. It is systemic greed by big corporations that are shipping our jobs overseas which in turn is forcing more and more people to compete for the few jobs that remain. This is causing wages to drop and the prices of homes are plummeting as a result.

If these corporations really care about America why don't they stop shipping our jobs overseas and help rebuild the middle class? It is time to outlaw corporate money in politics. Until we do that our slide to a country of haves and have nots will continue with most of us ending up in the have not column.

Foreclosure Crisis Deepens

The foreclosure crisis deepens.

More homeowners than ever before are falling behind on their mortgage payments and sliding into foreclosure, according to figures released on Thursday, a sign that the country’s housing crisis is spreading through the ranks of previously stable borrowers.

About 5.4 million of the country’s 45 million home loans were delinquent or in some stage of the foreclosure process in the first three months of the year, according to the Mortgage Bankers Association. About 12.07 percent of all mortgages were delinquent or in foreclosure, up from 11.93 percent at the end of 2008.

Temporary halts on foreclosures imposed by lenders and mortgage underwriters have mostly ended, and banks are moving quickly against delinquent homeowners.

Housing specialists said the number of foreclosures would probably keep rising as more people lose their jobs or are forced to trade full-time work for part-time. Nearly six million jobs have been lost since the recession began a year and a half ago, and many economists expect the unemployment rate to rise to 10 percent from its current 8.9 percent.

More defaults by unemployed homeowners could shunt more houses onto an already saturated market, economists said, dragging prices down farther.

This should come as no surprise as the ranks of the unemployed just keep growing. At a time when corporations need to be putting the citizens of this country first they are instead opting for profits over people. I know of many companies that are still outsourcing the jobs they have to India and other far away places. How is our economy ever expected to recover when this trend of outsourcing shows no limits to the number and types of jobs that are being lost?

When will Congress finally side with the American people and demand fair trade policies on not just goods but on services and employment as well. Jobs are a commodity and there should be tariffs on the services provided by workers in other countries. In the end your home is only worth what someone is willing to pay for it and in the current economic climate that doesn't appear to be too much.

New home sales fall by 37.8% from 2007 levels to lowest level on record

Sales of new homes fell by 37.8 percent from 2007 sales. Total sales in 2008 were 482,000 compared to 776,000 (the total sold in 2007), according to Mission Residential. The median new home price dropped by 9.3 on a a year-over-year basis.

These numbers may actually be skewed higher because the monthly sales data does not reflect cancellations, which means sales are probably lower and actual inventories higher. Because of these adjustments the actual supply on the market jumped to 12.9 months in December. Don't expect home builder stocks to recover any time soon.

Richard Moody, Chief Economist for Mission Residential says "new home prices will remain under steady downward pressure, and new residential construction may bottom later this year but will remain weak through 2010." Low-priced foreclosures are adding to the market stresses that home builders face. "To the extent that low mortgage rates and sales incentives, such as buyer's tax credits, do facilitate sales, those sales are increasingly titled towards existing homes," Moody added.

There is some good news. Builders do appear to have a handle on building starts. Now that starts of new homes have dropped well below the sales rate, the front end of the pipeline is under control. But, completions of new homes intended for sale are still running well ahead of sales. So the breaks are not fully in place yet. Until builders can turn the tide and shorten inventory supply we won't see a turnaround in the building industry.

Home Prices Post Record 15.3% Drop

Prices in 20 cities fall for 21st month in a row. One sign of hope: Pace of decline eased in many areas.

U.S. home prices posted record declines in April, extending a painful losing streak for U.S. home prices.

The S&P/Case-Shiller 20-city Home Price Index fell to a record low of 15.3% on a year-over-year basis, and was down 1.4% from March. The 10-city index was down 16.3% year-over-year and 1.6% for the month.

The 20-city index is based on data going back 19 years, while the 10-city index is 21 years old.

There is one sliver of hope. Although every city surveyed posted year-over-year price drops, the month-to-month pace of declines did slow in many cities. And eight metro areas actually posted gains from March to April.

Bright spots
Hard-hit Cleveland was the biggest winner, with prices up 2.9%. Charlotte, N.C. posted a slight gain of 0.2%, up for the second straight month, while Dallas prices were up 1.1% in April, also up for the second month in a row.

"There might be some regional pockets of improvement, but on an annual basis the overall numbers continue to decline," said David Blitzer, Chairman of the Index Committee at Standard & Poor's.

Indeed, there are anecdotal reports that investors have begun to snap up distressed Cleveland properties at very low prices, according to Dean Baker, Co-Director of the Center for Economic and Policy Research, a Washington-based think tank.

"The data suggests that Cleveland has found a bottom," he said, "although it's just one month's data and I wouldn't make too much of it."

Also on Tuesday, the Office of Federal Housing Enterprise Oversight (OFHEO) reported that its monthly house price purchase index was down 4.6% year-over-year in April.

While the closely-watched Case-Shiller index tracks the sale prices of the same homes over the years, OFHEO's index only tracks sales of homes with mortgages insured by Freddie Mac and Fannie Mae. These loans were for $417,000 or less, until Fannie and Freddie's loan limits were raised in early March.

The overall price declines reported by Case-Shiller have been remarkably consistent over the past two years. Prices on the 20-city index have dropped for 21 straight months, since July 2006. The 10-city index has fallen every month since June 2006.

Declines accelerating
What's more, recent drops have been particularly steep. The 20-city index fell 2.2% in March, 2.6% in February and 2.3% in January, and is now it down another 1.4%.

"In the bubble markets, we continue to see very rapid rates of price declines," said Baker. "If anything, it may be accelerating."

Las Vegas prices plunged 26.8% compared with April of 2007, the worst drop among the 20 cities Case-Shiller covers. Prices there fell 2% in April.

Other hard hit cities include Miami (down 26.7% year-over-year and 4.1% in April), Phoenix (25% and 3.4%) and Los Angeles (23.1% and 2.2%).

"Bubble markets are now trapped in a vicious negative cycle," said Mark Zandi, chief economist for Moody's Economy.com, "with foreclosures driving prices down, which leads to more foreclosures."

Foreclosures account for a much larger proportion of sales than they did a year ago, he said, and that pulls down the numbers. "But just because the average home in your market is down 25%," he said, "doesn't mean that your house is down 25%."

Still, plummeting prices could derail some of the foreclosure prevention efforts underway across the nation. As home prices fall, that wipes out home equity, often leaving homeowners underwater, with mortgages worth more than their homes.

Some 10 million homeowners are now underwater, according to Economy.com, and that number will continue to grow as home prices plummet.

Underwater borrowers have higher rates of foreclosure than those with some home equity, since they can't tap their homes for cash in case of an emergency. And some owners are simply walking away from homes that have lost so much value rather than continuing to make expensive payments every month.

The flood of foreclosures may be darkening an already bleak picture, said Zandi, "but the market is very bad right now."

If you feel poorer lately its not just a feeling it is a reality. We are facing an economic perfect storm that has the ability to wreak havoc for the next few years as we try to dig our way out of the mess left behind by the awful policies of this administration.

They allowed the financial industry to regulate itself and as usual the American people are left holding the bag while those at the helm of these financial firms walked away with millions. Once again the little guy gets screwed while the rich laugh all the way to the bank after robbing the middle and lower classes.

New Home Sales: Biggest Drop Ever

Weak December sales caps 2007's record slide, with prices for the month off sharply from a year earlier.

New home sales posted the biggest drop on record in 2007, according to the government's latest look at the battered housing market, as a year that saw a meltdown in the mortgage market and a drop in home values ended with yet more signs of weakness.

December sales came in at an annual rate of 604,000, the Census Bureau report showed, down from 634,000 in November, which was also revised lower.

The reading was well below the consensus forecast of 645,000, according to economists surveyed by Briefing.com.

The weak December sales left full-year new home sales at 774,000, down 26 percent from the 1.05 million sales in 2006. That was the biggest drop since the government started tracking new home sales in 1963, surpassing the 23 percent decline posted in 1980.

No bottom yet Adam York, an economist with Wachovia, said the report confirms fears that the housing market won't bounce back anytime soon.

"We're expecting sales to decline into at least mid-2008," he said. "We think housing still has a long way to go."

Its really amazing how much damage has been done to the housing market as a result of the subprime mortgage crisis. By giving loans to those that could least afford it, the price of homes remained artificially high and the resulting bubble has burst causing financially pain not only in the United States but around the world.

Will we learn anything from this situation and enact meaningful reforms to stop the next crisis from happening? History says no so let the buyer beware.

Home Sales Record First Drop On Record

The median price for a homes dropped 1.3 percent to $219,000 in 2007, while total home sales plunged by 13 percent for the year.

Prices of homes sold in December registered the biggest year-over-year decline on record, according to a report from an industry trade group, and 2007 is the first year on record that has seen a drop.

The National Association of Realtors (NAR) said on Thursday that the median price of homes sold in December fell nearly 6 percent from a year earlier to $208,400. The three biggest declines in prices ever recorded have now come in the last four months.

In addition to the December price decline, NAR reported the median price for all homes sold in 2007 fell 1.3 percent to $218,900, the first time that the annual price reading has shown a decline since the group started tracking that measure in 1968.

Now that we have definitive proof that the housing market has collapsed, what next for beleaguered homeowners? The problem is that this will effect all aspects of the economy. Do you think they will be building homes in Florida with foreclosures on every block? Do you think homeowners will be remodeling when their homes are declining in value?

What about those that lose their jobs as a result of this mess? How many of them will wind up in foreclosure? Do you understand now why this is bringing down the economy?

Home Prices Post Record Drop

Hey don't worry, the fools who caused this mess all walked away with millions while the average homeowner has been clobbered.

Home prices fell 6.7 percent in October, compared with a year ago, according to the S&P/Case-Shiller 10-city home-price index, a record drop as housing markets continued to deteriorate.

It was the largest drop in more than 16 years and marked the 10th consecutive month of price depreciation and 23 months of decelerating returns.

"No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," said Robert J. Shiller, chief economist at MacroMarkets in a release.

Case-Shiller's 20-city index fell 6.1 percent. Shiller noted that 11 of the markets in the 20-city index posted a record fall.

Some economists are beginning to lower their expectations for housing markets, predicting a longer and deeper price slump than they had previously forecast.

Several factors are hurting markets: Inventories are high with an 11-month supply of homes already for sale; a spike in foreclosures has added to the supply; and there are many vacant homes on the market, which tend to have very motivated sellers, depressing prices more quickly.

This is the result of deregulation and greed. Unfortunately greed will always be present which is why we need more oversight not less. This idea that industry will police itself is insane and the proof as they say is in the pudding.

US Foreclosure Filings Up 68 Pct in Nov.

The housing market just continues to decline.

U.S. homeowners increasingly failed to keep up with their home loan payments in November, as the number of foreclosure filings surged 68 percent nationwide compared with the same month a year ago, according to a mortgage research company.

In all, 201,950 foreclosure filings were reported last month, compared with 120,334 in November 2006, Irvine-based RealtyTrac Inc. said Wednesday.

I predict the housing market and subsequent economic decline will be the number one issue in the 2008 Presidential campaign and that can only spell doom for the Republican nominee.

It is hard to run on failed economic policies and even harder when you still beleive in the same policies that got us into this mess.

New Home Prices Plunge

New home prices plunge but buying still lags.

The biggest plunge in new home prices in 37 years was not enough to revive October sales, according to the government's latest reading on the battered housing and home building markets.

The sales pace for October was well short of economists' forecasts. The Census Bureau's latest report also sharply cut back on its earlier estimates for sales in August and September, when a meltdown in mortgage markets kept many potential buyers from getting the financing they needed.

Also depressing sales and prices was a record 191,000 completed new homes on the market that have not yet been sold.

This report tells you that home prices have a lot more to fall. Even with the steepest price drop in 37 years, people are still not buying. Where is the bottom in this market and how much of the economy will it take down with it?

Consumer debt is at an all time high and the affordability index at an all time low. Together this is a toxic mix for the housing market. Fear will keep even those who can afford a home on the sidelines while this all shakes out. The economic worries for 2008 seem to grow by the day.

Next year should be so much fun.

Foreclosures Still Going Strong

With reports like this you have to wonder where the bottom is in this housing market?

Three states, California, Florida and Ohio, continue to dominate new foreclosure filings, as most of the nation saw increases in the third quarter, according to a new survey.

During the period ended Sept. 30, 77 out of the nation's 100 largest metropolitan areas reported rises in delinquencies compared with the previous three months, according to the latest report from RealtyTrac, an online marketer of foreclosure properties.

The three most affected states reveal the two main causes of mortgage payment problems: economic weakness, as exemplified by Ohio, and speculative excess that led to high home prices and unaffordable mortgages, as represented by California and Florida.

With states like Ohio and Michigan firmly entrenched at the top of the foreclosure lists you begin to realize that its as much economic weakness as it is the subprime mortgage mess. Our manufacturing base is gone and reports like this solidify that fact.

In the past few months, the foreclosure story has become a tale of two regions. Some of the hardest-hit states have traditionally been in the Midwest, where plant closings and job losses have hit the economy there hard.

The other region is the Sun Belt, which is showing even more significant foreclosure growth as out-sized price increases in the first half of the decade led to virtually unchecked real estate speculation.

According to the Center for Responsible Lending, 7.2 million households have subprime mortgages, and more than 14 percent of those are in default. It projects that one of every five of those loans issued in 2005 and 2006 will end in foreclosure, with 2.2 million families losing their homes.

This report only makes my prediction of a recession stronger. The Federal Reserve will do all it can to ward off recession until at least the next administration takes office. I feel sorry for the next President. The mess they are inheriting will be monumental.

Foreclosures Just Keep On Rising

Foreclosure filings rise with more on the horizon as interest rates jump on a record number of adjustable mortgages.

Foreclosure filings climbed during the third quarter of 2007 with no relief in sight, according to a report released Thursday.

The report by RealtyTrac, an online marketer of foreclosure properties, showed the number of filings rose 30 percent from the previous quarter and nearly doubled from a year earlier.

"Given the number of loans due to reset through the middle of 2008, and the continuing weakness in home sales, we would expect foreclosure activity to remain high and even increase over the next year in many markets," James J. Saccacio, chief executive of RealtyTrac said in a statement.

More than 635,000 foreclosure filings were reported nationwide - one for every 196 households. The filings include everything from default notices to auction sale notices to actual bank repossessions.

"August and September were the two highest monthly foreclosure filing totals we've seen since we began issuing our report in January 2005," said Saccacio.

There is not much to add to such a bleak housing picture except that the housing situation and the coming recession is the worst possible news for the Republican party. They have driven the economy into the ground and the American people are finally waking up and realizing that. They will be severely punished at the ballot box in 2008 and it could not happen to a nicer bunch of fools.

A Foreclosure Nightmare - A Real Story

This is the story of someone facing a mortgage foreclosure, someone who is trying desperately to work with the mortgage company to work out payment. The problem is the mortgage company is unwilling to bend at all. Let me give you the details.

My sister purchased a home in Spring Hill FL a few years back before her husband decided to get a drug problem and skip out on her and the children. This was her second marriage. Her first husband was killed by a co-worker some years back. Through two marriages she has 7 children. I know that is just insane and it is no ones problem but her own that she was so irresponsible to keep having children that she simply could not afford. That fact means very little in terms of this discussion. She has been making her mortgage payments every month but had not paid her taxes which she believed were part of her payments but her contract called for her to pay the taxes directly. This put her behind two payments. She was not aware of this fact until after the first year of non tax payment. The mortgage company paid the taxes and she had her payment increased to cover the tax escrow. They included the first years unpaid tax as well as escrowing for the second year. She began making the higher payments by taking on a second job but has been unable to get caught up. Each month she is late they continue to pile on late charges and they threaten her daily with foreclosure. Today she asked me to talk to them. I agreed to help her out financially to get her caught up. My conversation with Chase Mortgage Services was less than productive. In fact it was down right frustrating and disheartening.

I told them I was willing to help her get caught up and asked how much they had piled on in late charges. The late charges were close to $500.00. Since her pay periods are such that she can only pay at the end of each month late charges are assessed every month. I asked if they could change the due date so she could avoid all the late charges, that was refused. I asked if they could waive the late charges so that she would be able to get caught up more easily, that was refused. At that point I asked what I could do to get this matter resolved. I was told the only way to avoid her being sent to foreclosure was to pay $1200 immediately or it would progress to the next level. That would mean legal fees and additional charges and for sure this would lead to foreclosure. I offered to pay half of that immediately and then $500.00 monthly until the account was caught up. That would be in addition to the monthly payment that she has been making every single month. My offer was refused. I told them that the house would never be sold since there are foreclosures all over the area that she lives. I asked why they would want another foreclosed property on their books when they were receiving payments every month. My sister, in prior conversations with Chase Mortgage Services said that she would make up the entire balance with her tax refund that she would receive in February. Now remember she was making a monthly payment at the higher rate this whole time. In my discussions with Chase it was revealed that they were also charging her for homeowners insurance which she pays herself on a monthly basis and it is one bill that she is not behind on. This was an obvious Chase mistake and I pointed that out. Again I was told it didn't matter that they needed a payment of $1200 now or they would start foreclosure proceedings. We went to them willing to do what was necessary to get this mortgage caught up. All we asked was that they meet us half way. I told them my sister was a single mother with seven children and that meant nothing to them. The prospect of a homeless family fell on deaf ears.

My sister has two jobs and one doesn't provide health care and the second job the employee costs of the plan are too high and therefore unaffordable. She is one of the 47 million uninsured. Her children would benefit from SCHIP but she was recently told that she earned too much to have them qualify. Her children would have been covered under the bill vetoed by that moronic fool we call President Bush. Her story is certainly not unique. It is a story shared by millions while those at the top continue to gain an ever larger percentage of the pie. When will this madness stop? We are a country will a shrinking middle class an ever expanding deficit. We spend more on defense than all the nations of the world combined yet are losing two wars simultaneously.

If anyone knows of any legal recourse we have to stave off foreclosure that would not involve heavy legal fees please let me know. This situation has left me so angry I could spit nails. Here you have someone who is saying I am not avoiding paying what I owe I just need some flexibility to allow me to get the payments caught up and the flexibility is not there. Hell human decency doesn't even seem to be there on the part of Chase Mortgage Services. This situation seems like a perfect campaign issue for any of the Democratic hopefuls especially John Edwards who has made poverty a major focus of his campaign. If any member of the campaign staff happens to see this we would welcome the opportunity to take this story national. This is the type of situation that can happen to almost anyone struggling to make ends meet.

This incident has made me want to turn this site into a movement. My sister is one of tens of millions of working poor who are being destroyed by the corporate culture that permeates every part of our government. I want to build Save The Middle Class into a not for profit aimed at helping the middle and lower classes stand up to the systematic elimination that has been happening to them since the early 1980's.

It is time to make our voices heard loud and clear. It is time that we say enough is enough and demand fundamental changes to our political process. It is time for us to say that we will no longer sit by and watch as everything we have worked for is gobbled up by the wealthiest among us. We will not exist solely to service the rich and be grateful for the scraps they wish to throw our way. We will not let the working poor replace the middle class in this country which is happening at an alarming rate. We must demand that our Presidential hopefuls pay more than lip service to the plight of the middle and lower classes. It is an issue that can be agreed upon by both liberals and conservatives. It is an issue where mutual cooperation could be achieved. Please recommend this story so that we can start the process of saving the middle class and taking back our country.

Mortgage Meltdown More Costly Than The Savings and Loan Debacle of the 90's

Reports Suggest Broader Losses From Mortgages

Every time economists and Wall Street executives think they have acknowledged the full extent of the losses from the meltdown in real estate mortgages, more bad news turns up.

Merrill Lynch said yesterday that it would take a charge for mortgage-related securities on its books that is $3 billion more than the $5 billion it expected just two weeks ago. And a report from the National Association of Realtors showed that sales of existing homes in September fell twice as much as economists had expected, to their lowest level in nearly 10 years.

Ask yourself a question - what are the similarities of these two events? With both it was trusted financial institutions conducting shady business with the customer holding the bag. Will we need to bail out the financial institutions this time as well?

At this juncture, economists say the troubles in the mortgage market could, all told, cost financial firms and investors up to $400 billion.

That is far more than the roughly $240 billion cost, adjusted for inflation, of the savings and loan crisis of the early 1990s, according to estimates of the combined financial toll of that crisis on both the federal government and private sector. The loss in total real estate wealth is expected to range from $2 trillion to $4 trillion, depending on how far home prices fall, according to several economists.

With numbers like this do you still think we can avoid a recession? This is what happens with a lack of regulation oh and of course a Republican administration that beleivves in letting industry police itself.

Home Builders: Worst Is Yet To Come

The battered markets for real estate and home building still have farther to fall, according to a range of economists who spoke Wednesday at a forecast conference sponsored by the National Association of Home Builders.

The economists agreed that the problems with home finance markets will continue to hit housing into next year, and that even when there is a recovery, it will be a slow process that will see weakness continue into 2009.

While most said they believed the overall U.S. economy can weather the housing downturn, several saw significant risk of a recession. Mark Zandi, chief economist of Moody's Economy.com, said that large areas of the country will fall into recession, if they haven't done so already.

The economists also admitted to being surprised by how bad the housing downturn has become, and all said that making forecasts of a recovery is difficult due to the problems in the credit markets.

"This time, we just don't know how it's going to pan out because the securities markets have become so much more important," said David Seiders, chief economist with the builder's trade group.

The economists were surprised at how bad it is? What world are they living in? The savings rate is negative, personal debt is at an all time high and home affordability at an all time low. Subprime loans were the perfect teaser to keep the housing market sizzling. The problem is too much sizzle usually leads to a burn. The housing market could be charred beyond recognition.

Dollar Hits New Low as Unemployment Claims Spike Upward

The euro reaches $1.4305 after U.S. jobless claims spike.

The dollar fell to a new record low against the euro on Thursday, with the 13-nation European currency breaking through the $1.43 mark for the first time after Washington reported a spike in jobless claims.

The euro rose to $1.4305 in early afternoon trading in Europe shortly after the U.S. Labor Department reported that applications for jobless benefits hit 337,000 last week - up 28,000 from the week before and the biggest one-week surge since claims jumped 42,000 the week of Feb. 10.

It settled back slightly, to $1.4290, but was still up more than a penny from the $1.4186 it bought in late New York trading on Wednesday and was higher than the previous record of $1.4282 set Oct. 1.

The jobless increase was four times the gain of 6,000 that economists had been expecting and was taken as a possible sign that the labor market is starting to weaken under the impact of a housing downturn and turmoil in credit markets.

Earlier this week, both Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke warned that the housing crisis was likely to last longer than had been expected.

Of course the housing crisis will last longer. Who exactly will buy all these homes after foreclosure? Real wages are down for six years under this administration and the savings rate is negative for the first time since the great depression. With new underwriting standards on loans less people will qualify. This all adds up to a disaster in the making.

This is what happens when you kill the middle class.

Builders' Confidence At All-Time Low

Home builders see weakest buyer traffic in 23-year history of trade group survey, outlook for future remains at record low as well.

The nation's home builders' confidence in the battered market for new homes fell further in October, and a measure of their outlook remained at a record low level, according to the latest industry survey.

The National Association of Home Builders/Wells Fargo Housing Market Index showed the overall confidence measure sank to 18, the worst reading on record for the 23-year old monthly survey.

The trade group's statement said the problems included decreased availability of subprime mortgages, a glut of new homes available for sale and reports about declining home values.

The builders' expectations for the market six months from now came in with a reading of 26, matching the lowest reading on record that was set in September. And their view of current buyers' traffic fell to a record low reading of 15.

"Builders in the field are reporting that, while their special sales incentives are attracting interest among consumers, many potential buyers are either holding out for even better deals or hesitating due to concerns about negative and confusing media reports on home values," said NAHB President Brian Catalde.

The overall confidence reading reflects the eighth straight month in which that measure has declined. It has fallen sharply, and is down from a very strong reading of 74 only two years ago. A reading of 50 in any of the three measures indicates the number of positive responses from builders is equal to the number of negative responses.

The housing woes continue unabated with the worst still to come. The housing market correction will be very painful for millions but hopefully after the dust settles we will have a market that is both affordable and vibrant. This could not come at a worse time for the Republican party. What accomplishments can they point to over the past eight years? The rich got richer and the poor got poorer, not exactly a 30 second political commercial to sway the masses.

Home Ownership Declines Under Bush

This is what you call a successful Presidency.

For the first time since the Carter administration, homeownership in the United States is set to decline over a president's tenure. When President Bush took office in 2001, homeownership stood at 67.6 percent. It rose as the mortgage bubble inflated but is projected to fall to 67 percent by early 2009, which would come to 700,000 fewer homeowners than when Mr. Bush started. The decline, calculated by Moody's Economy.com, is inexorable unless the government launches a heroic effort to help hundreds of thousands of defaulting borrowers stay in their homes.

The foreclosure crisis is rooted in reckless and shamefully underregulated mortgage lending. Many homeowners, mainly subprime borrowers with low incomes and poor credit, are now stuck in adjustable-rate loans that have become unaffordable as monthly payments have spiked upward. Their predicament is not entirely of their own making, and even if it were they would need to be bailed out because mass foreclosures would wreak unacceptable damage on the economic and social life of the nation.

The relief efforts so far have been too little, too late. In August, the White House established a program to allow an additional 80,000 borrowers to refinance their loans through the Federal Housing Administration, on top of 160,000 who were already eligible. That's not enough. Foreclosure filings soared to nearly 244,000 in August alone.

Federal regulators and Treasury officials are urging mortgage lenders and mortgage servicers to do their utmost to modify loan terms for at-risk borrowers, but saying "please" hasn't worked. To be effective, modifications must reduce a loan's interest rate or balance or extend its term, or some combination of the three. Gretchen Morgenson reported recently in The Times that a survey of 16 top subprime servicers by Moody's Investors Service found that in the first half of the year, modifications were made to an average of only 1 percent of loans on which monthly payments had increased.

Does anyone still think the middle class is not an endangered species? This is the most destructive administration in our history.

When The Bubble Burst

This is what happens when the bubble bursts.

Out on Phoenix's suburban fringes, where cement mixers are fast colonizing hay and cotton fields, the day is winding to a close. The home hour has arrived.

But sundown gives away a troubling secret: Behind dark windows and unanswered doors, it's clear nobody is coming home.

They're empty, left behind by a rising tide of foreclosures

This is the story of one town on the outskirts of Phoenix but it could be many towns all across America as the roaring home prices have come crashing to the ground and brought with it the financial downfall of many middle class Americans. How did this happen? Stupidity, greed and the desire to live the so called American dream combined to create one of the biggest financial disasters in our nations history. The real problem is that the pain is just beginning.

Just last week banks and investment firms all across the country started reporting staggering losses as a result of these ill advised loan programs that were a disaster waiting to happen. So far firms have reported $20 billion in losses and it is just the beginning. What this all shows is that our economy is built on smoke and mirrors and when the smoke clears the devastation that will be felt by the middle class will be just another nail in its coffin.

The American Dream is overdue for revision.

"There's been a huge shift in the way people view their houses," says John Karevoll of DataQuick Information Systems. "Your house now can basically be used as an ATM."

The problem is that the ATM is out of funds and the economy will soon show the signs of this disaster in all areas. The trickle down theory of Reagan, that was called voodoo economics by the first President Bush but was embraced by the imbecile that currently occupies 1600 Pennsylvania Ave, is one that guarantees ever greater wealth to those at the top while those at the bottom wait for their scraps. Now we are seeing that theory in action and its not pretty.
When there is no middle class in America we will cease to be the beacon of hope that has attracted those to our shores. That shining beacon that was once the world's envy is now just a flicker and unless we fight to reignite the flame we will see the further erosion of the everyday person's standard of living while the rich will get ever richer.

Is this what you want for our future? It is time for the middle class to fight back and demand policies that benefit us all not just those rich enough to be able to make large campaign contributions. It is time for public financing of campaigns. Without it there is no chance for a different outcome.

Pending Home Sales At Record Low

Realtors report shows sharp drop in homes under contract, as mortgage lenders shut off financing needed to close deals.

The meltdown in the mortgage market in August dried up the supply of homeowners looking to sell, as an industry group reported the lowest recorded level of homes under contract.

The National Association of Realtors' pending home sales index fell to a record low of 85.5 from an upwardly revised 91.4 reading in July. That broke the previous low of 89.8 in September 2001, the period in which the terrorist attack shook buyer confidence. The trade group started the index in 2001.

This time the hit to home sales came from buyers having trouble finding the financing they needed to buy homes, coupled with the reluctance of some buyers to jump into the battered market.

"Fewer contracts were being written because of mortgage availability issues, and a separate internal survey of our members shows more than 10 percent of sales contracts fell through at the last moment in August, primarily the result of canceled loan commitments," said a statement from Lawrence Yun, senior economist for the group. "The volume of activity we're seeing today is below sustainable market fundamentals because some creditworthy people are trying to buy homes but can't because of the credit crunch."

Most lending institutions have raised the standards by which people can qualify for a loan. Those raised standards have made many people ineligible for the same loan that they could have qualified for during the rise of the housing market. The market which has a glut of homes will continue to see prices decline until this credit issue is resolved.

The pain in the housing industry is far from over and the indutries which rely on the houisng market will continue to face similar recessionary prewsures.

More Banks Could Join The Red-Flag Parade

After warnings by Citi and UBS, JPMorgan and others could follow with bad news of their own, though retail banking could lessen the pain.

Citigroup and UBS may not be the only banks breaking bad news to investors this month.

Analysts warn that other retail banks that report quarterly earnings in October, including JPMorgan Chase and Washington Mutual, could suffer similar pains.

Before Monday's opening bell, Citigroup warned that its third-quarter earnings could fall 60 percent because of its exposure to subprime-backed mortgage securities.

That announcement came just hours after Swiss-banking giant UBS said it would take a take a writedown of $3.4 billion and post a loss in the third quarter because of subprime-related losses.

The ones who will really get hurt by these results are the employees of these firms. I predict you will see layoffs at all these firms as they try to turn their financial results around. The workers who didn't create the problem will need to pay the price for the executive who knowingly created loans that they knew could not be paid back. As usual those who suffer most are those that deserve it least.

Bankruptcy 'tweak' could save 600,000 homes

Consumer group pushes for change to bankruptcy law; others worry about negative impact on mortgage-debt markets.

One consumer group estimates that 600,000 foreclosures could be avoided over the next two years by making a simple change to the bankruptcy code.

The Center for Responsible Lending (CRL) calls it a tweak, but it could be a significant change for homeowners and the market for mortgage-backed securities.

CRL's proposal - reflected in a House bill recently introduced - would make changes to the regulations for Chapter 13 bankruptcies, which don't wipe out debts, but rather establish a repayment plan.

Under current law, when a person files for Ch. 13 bankruptcy, judges cannot reduce mortgage debt owed on a person's primary residence, although they may modify mortgages on investment property or second homes.

Under the House bill, the bankruptcy judge would have the option of reducing what the homeowner owes the lender. Say a homeowner's property is worth less than what he owes. The judge could reduce the principal to match the home's current market value as well as reduce the loan's interest rate.

The rest of the original principal would then be treated as unsecured. That means it becomes a lower priority for repayment than the borrower's secured debt, such as the newly reduced principal on his home. Unsecured debts may be discharged.

This is exactly what should be done. The homeowner gets some reprieve on what is owed and can negotiate a better loan and the bank avoids a costly foreclosure. Look for the pro business crowd to scream loudly that this will ruin the market but what other options are available? They should have been screaming when these lending institutions were making loans to people without proper documentation. Its amazing how quiet the business community is when they are making huge profits off the backs of those that can least afford it. It is time for them to feel the same pain as those they tricked into these awful loans.

New Home Sales Hit 7 Year Low

Sales weaker than forecasts as lower prices can't clear out glut; pace of sales falls to levels not seen since June 2000.

The pace of new home sales fell to a seven-year low in August, according to a government report Thursday that showed the battered housing and home building markets even weaker than forecasts.

New homes sold at an annual pace of 795,000 in August, according to the Census Bureau, down 8 percent from the revised 867,000 sales pace in July.

It was the slowest pace of sales since June 2000, as buyers had trouble finding mortgages or selling their existing homes. Economists surveyed by Briefing.com had forecast that sales would fall to a pace of 825,000.

The report also showed the median price of a new home fell 7.4 percent from year earlier levels to $225,700 in the month, as prices were pressured by both the problems in mortgage finance and the excess supply of homes on the market.

The inventory of new homes on the market rose to an 8.2 month supply, as the glut of completed homes without a buyer was near a record high, with 180,000 completed homes listed for sale, just off the record high of 182,000 set in May of this year.

Can the entire housing market decline be blamed on just the mortgage meltdown or could it be that the affordability index, which is at an all time low, has played an equally important part of the housing market decline? In my area of New York it would be very hard to find many people who could afford their own home in today's market.

In the end it is all supply and demand and when the supply is overpriced the demand is low. How far will the prices fall? I believe in many areas you could see declines of 20% before this correction is over. The market needs to be affordable in order to grow. At present prices it is still unaffordable for most and this report on sales proves that point.

Home Sales Continue Spiral Down

Sales of existing homes drop for 13th consecutive month.

Housing markets continued to slump across the nation in August as the number of existing homes sold dropped for the 13th straight month, according to the latest report from the National Association of Realtors.

Sales fell 4.3 percent from July to a seasonally adjusted annualized rate of 5.50 million. Sales have fallen 12.8 percent since last August's pace of 6.31 million homes.

Lawrence Yun, senior economist for NAR, blamed much on the loss on the current credit crunch. "The unusual disruptions in the mortgage market, including a significant rise in jumbo loan rates, resulted in a fairly high number of postponed or cancelled sales, with many buyers having to search for other financing when loan commitments fell through," he said in a statement.

The slump pushed up the inventory glut to 4.58 million existing homes, the highest level in 16 years. There is now a 10-month supply of homes on the market at the present rate of sales.

They keep telling us the U.S. economy is healthy yet the housing market has collapsed, the Federal Reserve felt a rate cut was necessary to ward off inflation and the U.S. dollar continues its free fall. Now that is a good economy.

August Foreclosure Filings Highest Since Jan 05

Foreclosure filings rose 36 percent in August from July and 115 percent from a year ago, hit by declines in once-hot housing markets such as California, Nevada and Florida, according to a report released on Tuesday.

RealtyTrac's U.S. Foreclosure Market Report found the number of foreclosure filings in August -- default notices, auction sale notices and bank repossessions -- was 243,947, the highest since it began its monthly report in January 2005, just months before the housing boom peaked.

That translates into one foreclosure filing in August for every 510 households, also a high for the RealtyTrac report.

"The jump in foreclosure filings this month might be the beginning of the next wave of increased foreclosure activity, as a large number of subprime adjustable rate loans are beginning to reset now," James Saccacio, RealtyTrac's chief executive, said in statement.

Will the Federal Reserve rate cut help homeowners who are close to foreclosure? The answer is probably no since many banks have raised their underwriting standards and whatever equity these homeowners had has evaporated with the housing price decline. This will make many of them unable to qualify for any loan.

The Bloodbath in The Mortgage Industry Continues

Countrywide Cuts Foretell Loss of U.S. Mortgage Jobs

The worst U.S. housing slump in 16 years may lead mortgage companies to eliminate almost 100,000 jobs, more than double the number already cut this year.

As many as 20 percent of the nation's real estate loan officers and mortgage brokers will be fired, according to Josh Rosner, managing director at the New York investment research firm Graham Fisher & Co. That's in addition to the 10 percent reduction from December to July that thinned their ranks to 450,000 as investors stopped buying mortgages and lenders curtailed financing to avoid rising subprime defaults.

``Originations are going to decline dramatically,'' Rosner said. ``We are just at the front-end of seeing the large banks and investment banks start to cut their capacity.''

Countrywide Financial Corp. said Sept. 7 it will cut 10,000 to 12,000 jobs. Lehman Brothers Holdings Inc., the biggest underwriter of mortgage-backed bonds, and IndyMac Bancorp Inc., the second-biggest U.S. home-loan company, also announced job reductions last week.

At least 100 mortgage companies have sought buyers or halted lending since the start of 2006, according to data compiled by Bloomberg. A record number of Americans faced foreclosures in the second quarter, the Mortgage Bankers Association in Washington reported last week.

The housing bubble didn't just burst, it exploded all over the whole economy and will have chilling effects on many industries. Unfortunately the pain is just starting and could get a whole lot worse before it gets better.

Unexpected Job Dip In Aug. Jolts Stocks, Ups Recession Odds

The U.S. economy lost jobs for the first time in four years in August, raising the odds of a recession and making aggressive Federal Reserve interest rate cuts more likely.

Nonfarm payrolls fell by 4,000, the Labor Department said Friday, confounding Wall Street's forecast of a 110,000-job gain. It was the first decline since August 2003.

June and July payrolls were revised down by a combined 81,000.

The jobless rate held steady at 4.6%, near a six-year low, according to the separate household survey. But that was because 592,000 people left the work force.

"There's not a lot of sugar coating that can be done here," said Richard DeKaser, chief economist at National City Corp. (NYSE:NCC) "I think it's time for some aggressive action" by the Fed.

Payrolls at builders dropped by 22,000 in August after falling 14,000 the month before. More construction job losses are likely.

Pending home sales plunged in July to the lowest since September 2001. That was before lenders began tightening credit even further as Wall Street lost its appetite for buying mortgages.

Countrywide Financial cfc said late Friday that it will cut 10,000 to 12,000 jobs over three months, up to 20% of its work force. Earlier, IndyMac imb said it would cut 1,000 jobs, the latest in a slew of lender-related layoffs in recent weeks.

But labor weakness was widespread, one of the first clear signs that the housing and credit woes are hurting the broader economy.

Why was everyone so shocked at this report? Did anyone really think the bursting of the housing bubble would not eventually take down the entire economy? I have been saying since I started this site that a recession was coming. This report certainly makes that more likely. Who will really suffer? The poor and middle classes will bear the brunt of any downturn while those that helped cause it, with economic ponzi schemes like subprime mortgages, will weather the storm just fine.

Homes Entering Foreclosure At Record

The housing slump, Midwestern economic woes and resetting ARMs send late payments higher.

The delinquency rate for mortgage borrowers spiked higher in the second quarter and the number of homes entering the foreclosure process hit a record high, according to a report released Thursday.

Deliquencies hit 5.12 percent of all outstanding mortgages, up from 4.39 percent a year ago, the Mortgage Bankers Association (MBA) said in a quarterly survey.

Serious delinquencies, those 90 days or more late, jumped to 1.11 percent of all loans, from 0.98 percent in the first quarter.

The loans actually entering foreclosure proceedings stood at 0.65 percent, a rise from 0.58 percent in the first three months - and the highest rate in the MBA's 55-year history.

This disaster is the result of greedy mortgage brokers and banks which loaned money knowing damn well that the borrowers could not pay it. Where are the criminal charges against those that run these institutions?

Record Drop In Pending Home Sales

Index that measures contracts being signed for existing home sales drops to lowest level since 9/11 attack.

The meltdown in the mortgage market caused the biggest drop on record in July for pending home sales, taking the index down to the lowest level since the month that included the Sept. 11, 2001 terrorist attack.

The National Association of Realtors' pending home sales index, which measures contracts to buy existing homes, fell 12.2 percent to a reading of 89.9.

It is the second lowest reading on record for the seven-year-old index, trailing only the 89.8 reading in September 2001. Economists had been looking for only about a 2 percent decline in the latest reading.

"There's bad reports and then there are truly awful ones. This is clearly the latter," said Mike Larson, real estate analyst for independent research firm Weiss Research. "Even I'm shocked by a 12 percent decline."

Now I really do think we will be headed into a recession very soon. The housing market has been what has propelled the economy for the past few years as homes prices skyrocketed.

This report is just the latest in a long string of reports that shows our housing market is collapsing around us. If this trend does not stop look for foreclosures to be even worse than expected. Also look for layoffs in construction and industries that rely on a vibrant housing market. The worst is yet to come and this could not be worse news for the Republicans.

July Construction Drop Largest In 6 months

Construction activity plunged in July by the biggest amount in six months as spending on homes fell for a record 17th straight month.

The Commerce Department reported Tuesday that construction spending dropped 0.4 percent in July, compared with June, the weakest showing since a 0.6 percent fall in January.

It was a bigger drop than economists had been expecting and underscored the continued drag the severe slump in housing is having on building activity.

The worst is yet to come in the housing market as more families are forced into foreclosure and the glut of homes on the market grows. The more that grows the less construction activity will be needed. This will cause layoffs in the construction industry and and other industries connected to the housing market. I still think the worst is yet to come and that the housing market will not see significant improvement until the affordability index comes back to reasonable levels.

The lower and middle classes are hurting as a result of the housing bubble and the pain will continue to be felt until after the Presidential election.

Housing Troubles Worsen For The Poor

The numbers of low-income families devoting high levels of income to housing costs are soaring according to a new study.

The housing boom may have ended, but even at its peak, it left legions of low-income, working families worse off in its wake.

According to a new study from the Center for Housing Policy (CHP), an affiliation of the National Housing Conference (NHC), the percentage of low income households forced to spend more than half their earnings for housing needs exploded as housing prices boomed.

This report does not come as a shock. In NY many of the normally poorer area were gentrified as the middle class sought out less expensive areas in which to live. Many times gentrifying areas inhabited by the poor who were then not able to afford their own areas.

The median price of a single family house soared by about 86 percent from 1997 to 2005, according to statistics from the Office of Federal Housing Enterprise Oversight. Housing prices hit their peak in 2005, when they jumped almost 13 percent for the year.

"Home prices went up far faster than any wage growth," said Lipman, "especially among low income families, whose real wages have either risen anemically or actually fallen."

As usual it is the poor who will suffer the most as the rich get an ever bigger slice of the pie and the rest of us are left to fight over the scraps.

Home Prices Continue To Slide

Who will be buying a home in this current market?

Home prices have shown few signs of any turnaround, and a new report sees the downward slide continuing.

On Tuesday, Standard and Poor's said its nationwide S&P/Case-Shiller Home Price Index fell 3.2 percent in the second quarter, compared with a year ago. For the three months ended June 30, prices dropped 0.9 percent from the first quarter.

Major housing markets showed worse declines. The Case-Shiller index covering 20 top metro areas for the month of June fell 3.5 percent, and the 10-city index dropped 4.1 percent year-over-year.

"The pullback in the U.S. residential real estate market is showing no signs of slowing down," Robert J. Shiller, Chief Economist at MacroMarkets LLC said in a statement. "The year-over-year decline reported in the 2nd quarter of 2007 for the National Home Price Index is the lowest point in its reported history, which dates back to January 1987."

That sucking sound you hear is the price of your home going down the toilet. Look for more foreclosures as people owe more than the home is worth and will be unable to sell the home to get out of rising ARM rates.

Banks will be bailed out by the government when its revealed that the subprime mess has severely damaged their operations, but the homeowner who took out the subprime mortgage will just get ruined credit and financial hardship.

Poll: Subprime Big Threat to Economy

The risk of massive defaults on subprime mortgages and heavy debts now poses a bigger threat to U.S. economic prosperity than terrorism, a panel of U.S. business economists said on Monday.

"The combined threat of subprime loan defaults and excessive indebtedness has supplanted terrorism and the Middle East as the biggest short-term threat to the U.S. economy," the National Association for Business Economics said.

The conclusion was based on a survey of 258 NABE members conducted between July 24 and Aug. 14 and updates one done in March.

Only 20 percent of members said terrorism was now their top concern, compared with 35 percent in March.

"Meanwhile, 18 percent of those surveyed pointed to the effects of the subprime debacle as their biggest concern, and the related issue of 'excessive household and/or corporate debt' was cited by another 14 percent," NABE said.

I have said it for months, the subprime mess will bring about recession. Who is to blame? I would say it is the financial institutions that loaned money knowing full well the borrower was not qualified to repay. Who will the government bail out when the shit hits the fan? It will be the financial institution while the homeowner is left in ruins.

Glut Of Homes Hits 16-year High

Homeowners trying to sell last month faced the biggest glut of homes on the market in about 16 years, as declining sales and growing problems in the mortgage market helped push home prices down for the 12th straight month.

The National Association of Realtors said sales by homeowners slipped to an annual rate of 5.75 million last month, down 0.2 percent from the revised 5.76 million pace in June. Economists surveyed by Briefing.com had forecast the sales rate would fall to 5.7 million in the latest reading.

Not only did sales slip but the number of homes for sale jumped 5.1 percent, the group said, meaning there is now a 9.6-month supply of homes for sale, up from 9.1-months in the June reading. It was the biggest supply of homes by that measure since October 1991.

"Forget 'location, location, location.' The most important factor in today's real estate market is 'supply, supply, supply,'" said Mike Larson, a real estate analyst at with independent research firm Weiss Research.

"We are literally swimming in an ocean of homes for sale. In fact, at 4.59 million units, we have the most raw inventory for sale in history," he said. "Until we work through this extremely large inventory glut, we're not going to see any momentum in home prices."

With that number of homes per sale and a population leery of buying during this time, the near future for the housing market looks grim. Reducing the available homes for sale at this time will be hard with even more foreclosures expected in the coming months. I would guess many of the homes for sale will be pulled of the market rather than sold as owners not forced to move will decide to wait it out and hope for the best.

Drop Foreseen in Median Price of U.S. Homes

The median price of American homes is expected to fall this year for the first time since federal housing agencies began keeping statistics in 1950.

Economists say the decline, which could be foreshadowed in a widely followed government price index to be released this week, will probably be modest — from 1 percent to 2 percent — but could continue in 2008 and 2009. Rather than being limited to the once-booming Northeast and California, price declines are also occurring in cities like Chicago, Minneapolis and Houston, where the increases of the last decade were modest by comparison.

Anyone that has read this site knows that I feel we are moving towards recession, it seems some forecasters are also calling for a slowdown:

While the housing slump has already rattled financial markets, it has so far had only a modest effect on consumer spending and economic growth. But forecasters now believe that its impact will lead to a slowdown over the next year or two.

“For most people, this is not a disaster,” said Nigel Gault, an economist with Global Insight, a research firm in Waltham, Mass. “But it’s enough to cause them to pull back.”

In recent years, many families used their homes as a kind of piggy bank, borrowing against their equity and increasing their spending more rapidly than their income was rising. A recent research paper co-written by the vice chairman of the Federal Reserve said that the rise in home prices was the primary reason that consumer borrowing has soared since 2001.

That is exactly what I have been saying. The decline in home prices had led to a decline of what I like to call the "wealth factor". People simply do not feel as financially stable as they did before. It becomes a self fulfilling prophesy. Consumers feel less wealthy and stop spending and that lack of spending results in an economic downturn and a further erosion of home prices. Hang on folks, we are in for a bumpy ride.

New Homes Sales Rise But Prices Fall

New home sales posted an unexpected gain in July, according to a government report Friday a rare ray of good news in the stormy housing market but economists warn the glint of sunshine is likely to be short-lived.

New home sales rose 2.8 percent to an annual rate of 870,000 from a revised 846,000 rate in June, the Commerce Department reported. Economists had been looking for sales to fall to a rate of about 825,000, a level that would have been a seven-year low.

Even with the unexpected rise, the pace of sales only looked good by comparison to very weak sales seen so far this year. The pace of sales is still off 10.2 percent from year ago levels, and the July sales pace would have been lower than any monthly reading seen from October 2001 through January of this year.

Much of the increase came in the West, which saw sales jump 22 percent from June. The South posted only a 0.6 percent rise, while the Midwest and Northeast continued to see new home sales fall. All four regions have sales well below year-earlier levels.

Economists said that problems in the secondary market for mortgages seen in August, which has made subprime mortgages and the so-called jumbo mortgages more difficult to come by, will hit results going forward.

"We were in a slightly stronger position going into this latest hurt than we thought we were. That's the good news," said Bill Hampel, chief economist for the Credit Union National Association. "But this is probably the last bit of good news we'll get from this market for a long time."

This latest report was unexpected but it would appear from the comments that the worst in the housing market is far from over. There are still many hurdles to overcome such as the expected foreclosures, stricter underwriting guidelines and higher mortgage interest rates which could derail any unexpected uptick in the housing market.

I have said for some time that any extended housing slump will push the economy into recession and I stand by that prediction. I hope I am wrong and that the downturn will just slow growth and not push us into recession.

U.S. Foreclosures Rise Sharply In July

Foreclosure filings rose 9 percent from June to July and surged 93 percent over the same period last year, with Nevada, Georgia and Michigan accounting for the highest foreclosure rates nationwide, a research firm said Tuesday.

In all, 179,599 foreclosure filings were reported during July, up from 92,845 in the year-ago month, according to Irvine-based RealtyTrac Inc.

A total of 164,644 foreclosure filings were reported in June.

The national foreclosure rate in July was one filing for every 693 households, the firm said.

"While 43 states experienced year-over-year increases in foreclosure activity, just five states — California, Florida, Michigan, Ohio and Georgia — accounted for more than half of the nation's total foreclosure filings," said RealtyTrac Chief Executive James J. Saccacio.

Nevada posted the highest foreclosure rate: one filing for every 199 households, or more than three times the national average. It reported 5,116 filings during the month, an increase of 8 percent from June.

Seeing Nevada, Florida, Ohio and Georgia on this list must be giving the Republican party many sleepless nights.

The foreclusire nightmares that are resulting from the subprime mortgage debacle will cause economic downturn in these states. With Ohio trending blue and Nevada and Florida truly purple states, the chances of a democratic president in 2008 grow.

Kicking Them When They Are Down

Did you know that you need to pay tax on a foreclosed mortgage? Neither did I.

Two years ago, William Stout lost his home in Allentown, Pa., to foreclosure when he could no longer make the payments on his $106,000 mortgage. Wells Fargo offered the two-bedroom house for sale on the courthouse steps. No bidders came forward. So Wells Fargo bought it for $1, county records show.

Despite the setback, Mr. Stout was relieved that his debt was wiped clean and he could make a new start. He married and moved in with his wife, Denise.

But on July 9, they received a bill from the Internal Revenue Service for $34,603 in back taxes. The letter explained that the debt canceled by Wells Fargo upon foreclosure was subject to income taxes, as well as penalties and late fees. The couple had a month to challenge the charges.

This revelation stunned me. This is the last indignity to people who are being forced from their homes. The one thing to remember is that all of these homeowners will not qualify for a new mortgage for many years, a tax judgement will only make that situation worse.

I posted this story to highlight the plight of the middle class. Most of the people caught up in this subprime debacle are low and middle class who were trying to achieve the American dream. This dream has turned into a nightmare that threatens to involve us all.

One Family's Journey Into a Subprime Trap

From the Wall Street Journal Online:

Nearly two years ago, Mario and Leticia Montes found a home they loved, a gray stucco bungalow with a hot tub in the backyard in a middle-class neighborhood of Orange County.

The price was a major stretch at $567,000. But the couple, who had sold a home a few years earlier to move to a better area, was tired of renting. Mr. and Mrs. Montes convened a meeting with their two teenage daughters around the kitchen table to hash out the implications. "We agreed we wanted to be homeowners again," says Mr. Montes, "even if it meant the end of vacations and not eating out as often."

Like many people who jumped into the rising housing market in recent years, they had little money for a down payment and chose a loan that would hold their monthly payments down for the first two years, then "reset" to a much higher level. Mr. and Mrs. Montes say their mortgage broker assured them they would be able to refinance in a couple of years to keep their payments affordable.

With a December "reset" on their loan looming, however, the refinancing option now looks impossible. A friend who works as a loan officer called with some bad news this week: Similar homes in their area have been selling for $535,000 to $565,000 recently. That means the Monteses' loan balance may exceed the value of their home.

The Monteses are caught in a trap -- one that hundreds of thousands of people could face as the housing market totters and the easy credit of recent years dries up. They in effect bet that the boom in housing prices would continue. It was more important to hop onto the escalator than to wait until they could afford to make the leap according to traditional measures.

With mortgage banks and brokers threatened with extinction, lenders that embraced all kinds of risky loans two years ago are enforcing increasingly strict standards. They are refusing even to consider extending new credit to people like the Monteses who lack any equity in their homes. "We have a disaster on our hands," says Mr. Montes, a 48-year-old warehouse manager. He fears he won't be able to handle the payments after the December reset and wonders whether the family can avert foreclosure. "At this point," he says, "we really don't have a plan."

Until recently, the Montes family didn't seem like the type that would find itself faced with foreclosure. They live in a solid neighborhood and are both employed and in good health. "My wife and I make pretty good money," says Mr. Montes. Mrs. Montes works as a school secretary. Together, they earned nearly $90,000 last year.

But they already pay about $38,400 a year on their home loans, even before taxes and insurance. In December, when their primary loan "resets" to a higher rate, that cost will rise to about $50,000 a year, Mr. Montes says.

Lenders have been tightening their standards for the past year in the face of rising defaults and growing jitters among the investors who provide funding for loans. That tightening has accelerated in the past two weeks as many lenders -- uncertain at what price they might be able to sell loans -- have stopped making all but the safest ones.

"It's getting worse and worse," says Jeff Lazerson, chief executive of Mortgage Grader, a mortgage broker in Laguna Niguel, who tried to help the Montes family last spring but concluded even then that they couldn't qualify for a new loan. Many people who have been counting on a refinancing to ease their debt burdens will find that's now impossible, he says: "It's either work 24 hours a day to make ends meet [with the existing loan] or mail the keys back to the bank."

Being stuck with little or no home equity is no longer a rare situation. Christopher Cagan, director of research at First American CoreLogic, a housing and mortgage data supplier in Santa Ana, recently found that nearly 7% of 32 million U.S. households studied as of December owed more than their homes were worth, based on computer estimates of the property values. An additional 4% had home equity of 5% or less. Since then, house prices have edged down in much of the country, erasing more home equity. Without a cushion of equity, homeowners are vulnerable to losing their homes to foreclosure if they suddenly are out of work, suffer a serious illness or, like the Montes family, face a jump in mortgage payments.

Partly as a result, foreclosures are surging. Moody's Economy.com, a research firm in West Chester, Pa., projects that lenders will acquire about 760,000 homes through foreclosure this year and 935,000 in 2008, up from an average of about 440,000 a year from 2000 through 2006.

When the Monteses decided to buy the bungalow in 2005, they had only a so-so credit record and little savings. So they settled for a "subprime" loan, with costlier terms than those available in the prime market.

The Monteses' primary loan is the type that became the dominant subprime mortgage during the housing boom of the first half of this decade -- and now has become a symbol of misguided lending, swept away by regulatory fiat and investors' flight from mortgages deemed too risky. These loans are known in the trade as 2/28 mortgages. The interest rate is fixed at a relatively low rate for the first two years (5.45% in the Monteses' case), then floats at a predetermined margin above an interest-rate index for the next 28 years. In many cases, that "reset" of the interest rate after two years leads to a monthly payment increase of 30% or more.

U.S. lenders originated about $600 billion of subprime home loans in 2006, or 20% of all home mortgages, according to Inside Mortgage Finance, a trade publication. About 56% of those subprime loans were 2/28 mortgages, says Keith Ernst, senior policy counsel at the Center for Responsible Lending, a nonprofit research and lobbying group in Durham, N.C. Mario and Leticia Montes and daughter, Christina, in front of their house in Fullerton, Calif.

The lending industry touted the 2/28 loans as "affordability" mortgages, because they helped people buy houses that wouldn't have been affordable with the higher immediate payments on 30-year fixed-rate mortgages. To make the loans even more affordable in the early years, they were often structured as "interest-only," meaning that principal payments were deferred until later.

Lenders sometimes described these loans as "credit-repair tools." The idea was that people with blemished credit records could take out a 2/28 subprime loan and keep up with the payments long enough to improve their credit records and qualify for a less-costly prime loan.

Earlier this year, regulators ordered subprime lenders to make such loans based on the borrower's ability to afford the loan after the reset, not just for the initial two years, as was the common practice. That change, along with tighter guidelines from rating agencies and risk-aversion among investors, has recently prompted major subprime lenders to stop making 2/28 loans. Instead, they are making more subprime loans that carry a fixed rate for at least five years, as well as ones that hold down payments by stretching the payments over 40 years instead of 30.

The Montes family got their loan through a mortgage broker in Rancho Cucamonga. Using what was then a common formula, the broker offered to arrange for two loans, one to cover about 80% of the home price and the other, a so-called piggyback loan, for the rest. For the first two years, their total monthly mortgage payments are about $3,200. The loans are initially interest-only.

Mr. Montes recalls feeling edgy about whether he would be able to afford the higher costs -- about $900 more per month -- due to take effect after two years. But he says the broker assured him he could refinance before those costs kicked in.


Mr. Montes preferred not to name the broker publicly because the broker has a business connection with a relative of the Monteses. The broker declined to comment.

Mrs. Montes says she was apprehensive about the broker's assurances. "But I blame that on that I don't understand the lingo they were talking," she says. "It's a scary experience.... All I could see was all these numbers flash before me.... I said, 'Mario, I hope you don't get into something that is going to hurt us.'"

They moved into their home and hung a sign on the front door reading, "Life is a daily celebration of love." Within months, things started going wrong. The Monteses received a letter informing them their property taxes had been reassessed based on the $567,000 sale price instead of its previous $389,000 value. That raised their taxes to $6,000 from $2,900 a year and would have increased their monthly payments (including the mortgages and taxes) to $3,931. "Whoa!" Mr. Montes recalls saying. "I can't afford this. I went into emergency mode."

He was able to successfully challenge part of the tax increase, but another shock came in late February of this year when he began looking at refinancing possibilities. Mr. Montes says four brokers -- including the one who arranged the original loan -- turned him away, saying it wouldn't be possible to refinance because, with home prices flat at best, the family had little or no equity in the home. Worse for the Monteses, they learned that they faced a $12,000 prepayment penalty if they refinanced within three years of the original mortgages -- something that Mr. Montes says wasn't made clear to him when he took out those loans.

Then another broker told him in March that his home had gained enough in value for him to qualify for a more affordable loan. They paid for an appraisal and were told their home was worth $620,000, or about $53,000 more than they paid in 2005. The Monteses were jubilant, thinking their home was saved. But more than three months later, the broker outlined a package that would have involved payments far higher than indicated in earlier meetings.

Next, Mr. Montes sought the help of Laurie Arnold, a former neighbor who is a loan officer at IndyMac Bancorp, a large lender based in Pasadena. In another blow, Mr. Montes learned that the appraisal he had done in March -- at a cost of $375 -- is no longer valid. Ms. Arnold sounded out appraisers and concluded that there was no hope the house could appraise for enough to allow the family to qualify for a refinancing. Based on recent sale prices and other data, Zillow.com, an online service that provides home-value information, estimates that the price of a typical home in Fullerton is down 6.7% from a year ago.

The Monteses now hope for help from the company that services their loan, America's Servicing Co., a unit of Wells Fargo & Co. Mr. Montes telephoned America's Servicing Tuesday to ask whether it might consider a modification in the terms of the loans to help him keep the payments affordable beyond the reset date. An employee of the servicing company said that wouldn't be possible if the family has no home equity, Mr. Montes says.

A Wells spokesman declined to comment on the Monteses' loan but said the bank reviews requests for loan modifications "on a case-by-case basis and works with customers on solutions that address their individual financial needs."

Mr. Montes says the family may try to sell the house, but that would be tricky in today's weak market. Or they could try to trim other expenses and keep meeting the higher monthly home payments that are due to take effect in December.

There is very little wiggle room. Mr. and Mrs. Montes also have two car loans, with payments totaling about $700 a month, and are borrowing more money to help put their elder daughter through college. They recently had to tell their younger daughter they couldn't afford $70 a month for her to take piano lessons.

The couple now eat out once or twice a month, instead of once or twice a week before they bought the house. They have yet to visit a nearby jazz club they had hoped to frequent. The trips they used to take to Lake Tahoe now are out of the question.

To bring in a bit more income, Mr. Montes two weeks ago found a weekend job as a bartender for a catering company. He says he might be able to take on a third job.

"Bottom line, it's our little home," Mrs. Montes told a visitor one evening in April as tears welled in her eyes. "We're going to keep it. Hopefully, we won't go down and if we do, we're going to go down with a fight."

In Mortgage Meltdown, Missed Signs

How can we trust the "Financial Experts" if they could not see this coming although some did and made a bundle

All through last year, Jim Melcher saw the signs of a rapidly deteriorating American housing market — riskier mortgages, rising delinquencies and more homes falling into foreclosure. And with $100 million in assets at his hedge fund, Balestra Capital, he was in a position to do something about it.

So in October, as mortgage-backed bonds were still flying high, he bet $10 million that these bonds would plunge in value, using complex derivatives available to any institutional investor. As his gamble began to pay off in the first months of 2007, Mr. Melcher, a money manager based in New York, plowed the profits into ever bigger wagers that the mortgage crisis would worsen further, eventually risking some $60 million of the fund’s money.

“We saw the opportunity of a lifetime, and since then events have unfolded on schedule,” he said. Mr. Melcher’s flagship fund has since doubled in value, even as this summer’s market turmoil cost other investors billions, forced the closing of several major hedge funds and pushed the stock market down 7 percent since mid-July. This week, Mr. Melcher is heading to Paris for a vacation with his wife.

As I have been saying for some time, the financial
markets have become like Las Vegas. The problem I have is how could they have not seen this coming? I am certainly not a financial expert but I would put my knowledge of the markets above a majority of Americans simply because of my employment in the financial service field for the past 15 years.

How could you think that a housing market could sustain ever increasing price growth without a similar growth in wages? How could you think that a population with a negative savings rate and ever increasing debt could keep up this dizzying upward spiral in home prices. I knew logically it could not be sustained as I believe so did most experts but they remained silent. Why would they remain silent? The real question is did they remain silent or were they told to shut up?

I am the President of my cooperative board where I live and it was my decision as to where to place the cooperatives reserve funds. I was offered the opportunity by our broker to invest in mortgage backed securities. I was told they were "A" rated and did not pose a risk to capital. I did not believe that to be the case knowing what I knew about the state of the current mortgage industry. I chose instead CD's at lower returns but with no risk to principal. My last call to the broker revealed that the bonds I was pitched were actually down although I was not told to what extent. If I could make the right decision, why couldn't the experts? Was it just dumb luck?

It seems ethics and logic go out the window when a quick buck can be made. The problem is that we will all suffer now as a result of this greed. Read the rest of the linked story. It is eye opening in many ways.

Housing Starts At Decade Low

Housing starts and permits both fall more than forecasts as builders pull back from troubled market.

Housing starts and permits both fell to the lowest levels in more than a decade, as the latest readings on the battered housing and homebuilding markets came in below expectations Thursday.

Housing starts fell 6.1 percent to an annual rate of 1.38 million in July from a revised 1.47 million rate in June. Economists surveyed by Briefing.com had forecast starts would fall to a 1.41 million pace in June.

The latest reading is the lowest level of starts since January 1997 and is down nearly 21 percent from year-earlier levels.

Starts of single-family homes fell even more sharply, dropping 7.3 percent to just over a 1 million annual rate, the lowest since December 1996 and the second lowest level in more than 12 years.

What we are witnessing is a meltdown of our housing market which has kept the economy afloat. I do not understand those who keep saying that the broader economy is just fine. How could it be when housing has been the strongest economic component? The problem with the housing market is that it is just like the dot com boom, it is not real.

The subprime mortgage debacle allowed people to buy homes at inflated prices that they could not afford. The supposed financial experts could not see this coming? I could see this coming and I am not an expert although I play one on this blog.

Foreclosures, Ballot Initiatives and the 2008 Race

I was listening to 7 Days In America on Air America Radio when I heard Bob Shrum say this election was going to be about national security. My first thought was what was Bob Shrum still doing talking about politics. He has been involved with 8 Presidential campaigns and all were losers. His opinions are about as valid as Britney Spears.

This next election will be partially about national security but any campaign that ignores the economic realities of today will be the losing campaign. One of the major economic issues will the subprime mortgage debacle and the resulting record number of foreclosures. This will be especially true in two very important states for the 2008 election, Ohio and Florida.

Of the 500 zip codes with the highest level of foreclosures 72 are in Florida and 49 are in Ohio. That ranks these states as the number two and three in the country behind California. That will cause the foreclosure crisis to extend to many other parts of the economy throughout the country but most specifically in these states.

Is there anyone that doesn't understand that the downturn in the housing market will affect the construction industry, the home remodeling industry and every other industry that depends on a healthy housing market? So although you may not be having difficulty making your mortgage payments you will be especially affected in these states with lower home values and lower overall economic activity.

This same scenario is also present in Colorado, Nevada and Arizona where they are also seeing sharp increases in foreclosures. Lower home values will affect the "wealth factor" which is how many people judge whether or not to make that big ticket purchase. If you feel wealthy then you will spend, if suddenly you see your net worth shrinking as the result of lower home prices, then you will be less likely to make the purchase. It is this wealth factor that I believe will make Ohio and possibly Florida vote Democratic in 2008.

I believe the Republican party also believes this so they are trying to change the allocation of electoral votes in California. . With one ballot initiative they could recapture the votes they lose in Ohio. Do you think that is a coincidence?

Our economy is hanging by a thread and the Republicans understand that. They also know they will be blamed for the eceonomic downturn that is now beginning to surface. If you can't win on the merits then you cheat. That is the Republican mantra. It is up to the progressive community to stop this legal attempt to steal the 2008 election.

Mortgage Meltdown Contagion

Anyone who has read this site from its inception knows that I have been saying that the housing market turmoil would be felt throughout the economy. Now economists are beginning to see it my way.

The outlook for the housing market looks even bleaker than it did a week ago. Last Friday we reported that foreclosures were skyrocketing, home prices falling and recovery forecasts were being scaled back.

And now this week, the mortgage meltdown spread to the financial markets with ebola-like speed, sparking fears that tighter credit will have a broader impact on consumers, markets and the economy.

The U.S. government continues to downplay the risk of the meltdown spreading. Treasury Secretary Henry Paulson has said the effects are largely contained.

This is what happens when only those on upper income levels decide what will happen for the rest of us. I am not an economist but could see the writing on the wall. These people live in a fantasy world where money is never an issue. That is not the reality for the majority of the American population. How could anyone really believe that a housing market in free fall and a mortgage industry crumbling before our eyes would not have an effect on the broader economy?

When the Federal Reserve met this week, the central bank said that inflation is the greatest threat to the economy, not the mortgage crisis.

And in late July, William Poole, the president of the St. Louis Federal Reserve branch, said, "Unless the pressure becomes much more severe, the problems would not impact consumer spending or credit quality more generally."

Yet, Countrywide Financial, the nation's largest mortgage lender by volume, reported Thursday that "unprecedented disruptions" in the mortgage market were forcing it to cut way back on the number of loans it was securitizing and selling in the secondary markets.

If I could see the writing on the wall and I am just a lowly blogger with a financial service background why didn't the experts see this coming?

I have said this before but we are looking at the start of a perfect storm economically that will sweep the Democrats into power in 2008 in both houses of Congress as well as the Presidency. Unfortunately the pain that will be felt by the lower and middle classes will be widespread. As usual the wealthy will weather the storm just fine.

Mortgage Defaults Growing

AIG, the world's largest insurer and one of the biggest mortgage lenders, said residential mortgage delinquencies and defaults are becoming more common among borrowers in the category just above subprime.

It said 10.8 percent of subprime mortgages were 60 days overdue, compared with 4.6 percent in the category with credit scores just above subprime, indicating that the threat to the mortgage market may be spreading.

While maintaining that it is "comfortable" with its mortgage exposure, AIG gave a gloomy assessment of the market in a presentation to investors and analysts.

It said delinquency rates for first mortgages had risen to 3.98 percent in June from 3.56 in April and a low of 3.08 in July 2005. First mortgages represent 90 percent of AIG's domestic mortgage business.

AIG divided its mortgage portfolio into three categories: subprime, for borrowers with credit scores below 620; "non-prime," for borrowers with credit scores between 620 and 659; and prime, for borrowers with credit ratings above 660.

As of June 30, AIG's finance arm, which originates first and second mortgages, recorded delinquencies of 3.68 percent in subprime, 2.13 percent in non-prime, and 0.81 percent in prime.

Does anyone still hold out hope that this mortgage crisis will not spread into the greater economy? You need to remember that the U.S. savings rate is negative which means those most at risk for foreclosure have the least saved to avoid it.

Unfortunately for many the dream of home ownership has turned into a nightmare that may yet effect us all.

Feds Leave Key Interest Rate Unchanged

Wall Street turbulence, Main Street credit problems and a nationwide housing slump pose increasing risks to the economy, the Federal Reserve said Tuesday, even as it left interest rates unchanged.

Although Federal Reserve Chairman Ben Bernanke and his central bank colleagues acknowledged challenges that have intensified since their last meeting in late June, they nonetheless expressed hope that the economy will safely make its way.

The policymakers also clung to their belief that the biggest potential danger to the economy is that inflation won't recede as they anticipate.

Against these economic crosscurrents, the Fed left an important interest rate at 5.25 percent on Tuesday. In turn, commercial banks' prime interest rate for certain credit cards, home equity lines of credit and other loans _ would stay at 8.25 percent.

The problem for the Federal Reserve is how to respond to the growing housing and stock market turbulence without sounding like the sky is falling. They felt the best way to accomplish this was to acknowledge the problem exists but downplay the severity.

The credit markets are very tight right now and that should slow mergers and acquisitions which are a main reason for the stock markets rise. You can also look to foreign markets which are also down. Investments in such countries as Brazil, India and Russia are seen as much more risky and with the flight to more stable investments you may see these markets decline or grow much more slowly.

Believing that the housing market problems will not reach into the broader economy is naive and you will see greater stock market volatility for some time to come. The housing market will not recover until 2009 and the pain and suffering for the middle class will continue during that time. The housing market correction will leave many middle class people feeling much less wealthy which will cause them to slow spending.

I have said the US economy will slip into recession or will grow at a rate just above recession for the next year. I stick by that prediction.

John Stewart On The Subprime Mess

This is very funny but also very true. It is always the poor who are taken advantage of. It is the dream of owning a home, a dream that seemed unattainable until these subprime loans on board. Now many will lose their homes and the dream will turn into a nightmare.