Bankrupting the Common People

Housing Bubble Smackdown: Bigger Crash Ahead

Only 30 Percent of Foreclosures Have Been Relisted; 600,000 Foreclosed Homes have Disappeared

April 21, 2009

Global Research - Due to the lifting of the foreclosure moratorium at the end of March, the downward slide in housing is gaining speed. The moratorium was initiated in January to give Obama’s anti-foreclosure program—which is a combination of mortgage modifications and refinancing—a chance to succeed. The goal of the plan was to keep up to 9 million struggling homeowners in their homes, but it’s clear now that the program will fall well-short of its objective.

Another 20 percent carved off the aggregate value of US housing means another $4 trillion loss to homeowners.

In March, housing prices accelerated on the downside indicating bigger adjustments dead-ahead. Trend-lines are steeper now than ever before–nearly perpendicular. Housing prices are not falling, they’re crashing and crashing hard.

Now that the foreclosure moratorium has ended, Notices of Default (NOD) have spiked to an all-time high. These Notices will turn into foreclosures in 4 to 5 months time creating another cascade of foreclosures. Market analysts predict there will be 5 MILLION MORE FORECLOSURES BETWEEN NOW AND 2011. It’s a disaster bigger than Katrina.

Soaring unemployment and rising foreclosures ensure that hundreds of banks and financial institutions will be forced into bankruptcy. Forty percent of delinquent homeowners have already vacated their homes. There’s nothing Obama can do to make them stay.

Worse still, only 30 percent of foreclosures have been relisted for sale suggesting more hanky-panky at the banks. Where have the houses gone? Have they simply vanished?

600,000 "DISAPPEARED HOMES?"

Here’s a excerpt from the SF Gate explaining the mystery:

"Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.

"We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market," said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. "California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage."

In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity—only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as "shadow inventory." ("Banks aren’t Selling Many Foreclosed Homes" SF Gate)

If regulators were deployed to the banks that are keeping foreclosed homes off the market, they would probably find that the banks are actually servicing the mortgages on a monthly basis to conceal the extent of their losses. They’d also find that the banks are trying to keep housing prices artificially high to avoid heftier losses that would put them out of business. One thing is certain, 600,000 "disappeared" homes means that housing prices have a lot farther to fall and that an even larger segment of the banking system is underwater.

Here is more on the story from Mr. Mortgage "California Foreclosures About to Soar… Again:"

"Are you ready to see the future? Tens of thousands of foreclosures are only 1-5 months away from hitting that will take total foreclosure counts back to all-time highs. This will flood an already beaten-bloody real estate market with even more supply just in time for the Spring/Summer home selling season… Foreclosure start (NOD) and Trustee Sale (NTS) notices are going out at levels not seen since mid 2008. Once an NTS goes out, the property is taken to the courthouse and auctioned within 21-45 days… The bottom line is that there is a massive wave of actual foreclosures that will hit beginning in April that can’t be stopped without a national moratorium."

JP Morgan Chase, Wells Fargo and Fannie Mae have all stepped up their foreclosure activity in recent weeks. Delinquencies have skyrocketed foreshadowing more price-slashing into the foreseeable future. According to the Wall Street Journal:

"Ronald Temple, co-director of research at Lazard Asset Management, expects home prices to fall 22% to 27% from their January levels. More than 2.1 million homes will be lost this year because borrowers can’t meet their loan payments, up from about 1.7 million in 2008." (Ruth Simon, "The housing crisis is about to take center stage once again," Wall Street Journal)

Another 20 percent carved off the aggregate value of US housing means another $4 trillion loss to homeowners. That means smaller retirement savings, less discretionary spending, and lower living standards.

The next leg down in housing will be excruciating; every sector will feel the pain. Obama’s $75 billion mortgage rescue plan is a mere pittance; it won’t reduce the principle on mortgages and it won’t stop the bleeding.

Policymakers have decided they’ve done enough and are refusing to help. They don’t see the tsunami looming in front of them plain as day. The housing market is going under and it’s going to drag a good part of the broader economy along with it. Stocks, too.

VIDEO: Sacramento Tent City Homeless Get Vacate Notices

April 13, 2009

iCare America - “What you do to the least of those, you do to me.” iCare America videotapes the police passing out vacate notices to the homeless people living at Tent City in Sacramento, CA. The loss of self-esteem these people experience is magnified by the stigma of violating “laws” because of where they rest their heads. Imagine laying down each night in fear that you will be arrested and knowing there is no safe place to go. Its not right and we will do whatever it takes to bring integrity to this travesty - Val Jon Farris

Increase in First-Time Delinquent Income Taxpayers

April 14, 2009

Reuters - As a deep recession strips Americans of their jobs, homes and investments, the 2009 U.S. tax season promises to see a large uptick in first-time delinquent income taxpayers.

“Our calls are up 280 percent,” said Richard Boggs, founder and chief executive of Los Angeles-based Nationwide Tax Relief, a firm that helps delinquent taxpayers resolve tax issues. “We’ve seen a huge rise in what we call the rookie delinquent taxpayer,” he said. “They are incredibly scared, and they have no idea what’s going to happen to them because, God bless them, they’ve never owed before.”

As the weak economy puts job security and a steady flow of income on a slippery slope, many are wary of the U.S. tax man, tax consultants say. With household balance sheets under pressure, more U.S. households are having trouble keeping up with their day-to-day bills and struggling to pay their taxes.

Riskiest Places For U.S. Homeowners

April 12, 2009

Forbes - The recession may have spread across the global economy, but recovery efforts haven't taken the edge off the mortgage meltdown that helped start it all. In fact, many American real estate markets may be at risk of even worse declines.

While the president's Homeowner Stabilization Initiative, announced on Feb. 18, offers loan modifications for homeowners already in negative-equity situations and the stimulus package offers an $8,000 tax credit for first-time buyers, there are several places where such efforts are likely to have little effect.

Specifically, you don't want to be a homeowner in several parts of California, Florida and the upper Midwest. Detroit, Mich., Miami, Fla., and Merced, Calif., are among the top five riskiest spots for homeowners, ranking second, third and fifth, respectively. California and Florida areas dominate the list, taking up almost three-quarters of the 25 spots.

One thing all the spots on our list have in common, though, is they're only going to get worse. As foreclosures rise and home prices plummet (27% since their 2006 peak, but more than one-third in many other places), the ability of many borrowers to make payments becomes more difficult as unemployment rises.

The national foreclosure average is now 3%, but the average for subprime loans--a disproportionate share of mortgages in high-stress markets--is 13.9%. That number could rise even after the recession ends because solid economic growth can't bring back housing prices that fell so far so fast after the boom.

"We had a housing decline in Massachusetts in the 1990s with no recession," says Mark Fleming, chief economist of real estate analytics firm First American CoreLogic, "and a recession in 2001 within the middle of the housing boom."

In other words, home prices and lending rates rising right along with the economy was never good for borrowers...

U.S. Home Price Drops Set Records in January

April 4, 2009

AP - Home prices sank by the sharpest annual rate on record in January, and the pace continues to accelerate, but there were a handful of battered metro areas where price declines slowed, according to data released Tuesday.

The Standard & Poor's/Case-Shiller index of home prices in 20 major cities tumbled by a record 19 percent from January 2008. It was the largest decline since the index started in 2000. The 10-city index dropped 19.4 percent, also a new record.

All 20 cities in the report showed monthly and annual price declines, with 13 posting new annual records. Prices dropped by more than 10 percent in 14 cities. Faring better were Dallas, Denver and Cleveland, with annual price declines of around 5 percent.

"There are very few bright spots that one can see in the data," David Blitzer, chairman of S&P's index committee, said in a prepared statement. "Most of the nation appears to remain on a downward path."

In the Cleveland, Los Angeles, Las Vegas and Washington D.C. metro areas—all ravaged by foreclosures—annual price declines eased somewhat. Meanwhile, six cities, including Minneapolis, Charlotte, Seattle and New York, showed smaller price declines in January compared with December...

One in Every 10 Americans is Receiving Food Stamps

April 2, 2009

Reuters - A record 32.2 million people -- one in every 10 Americans -- received food stamps at latest count, the government said on Thursday, a reflection of the recession now in its 16th month.

Food stamps are the major U.S. antihunger program and help poor people buy groceries. The average benefit was $112.82 per person in January. The January figure marks the third time in five months that enrollment set a record...

Flint, MI, Considers Shutting Down Quadrants of City

April 1, 2009

Flint Journal (Flint, Michigan) - Property abandonment is getting so bad in Flint that some in government are talking about an extreme measure that was once unthinkable — shutting down portions of the city, officially abandoning them and cutting off police and fire service.

Temporary Mayor Michael Brown made the off-the-cuff suggestion Friday in response to a question at a Rotary Club of Flint luncheon about the thousands of empty houses in Flint.

Brown said that as more people abandon homes, eating away at the city’s tax base and creating more blight, the city might need to examine “shutting down quadrants of the city where we (wouldn’t) provide services...”

U.S. Private Sector Axes 742,000 Jobs in March

April 1, 2009

Reuters - Job losses in the U.S. private sector accelerated in March, more than economists’ expectations, according to a report by ADP Employer Services...

Pension Insurer Shifted to Stocks Just Months Before Collapse

March 30, 2009

Boston Globe - Just months before the start of last year's stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks.

Switching from a heavy reliance on bonds, the Pension Benefit Guaranty Corporation decided to pour billions of dollars into speculative investments such as stocks in emerging foreign markets, real estate, and private equity funds...

Nonetheless, analysts expressed concern that large portions of the trust fund might have been lost at a time when many private pension plans are suffering major losses. The guarantee fund would be the only way to cover the plans if their companies go into bankruptcy.

"The truth is, this could be huge," said Zvi Bodie, a Boston University finance professor who in 2002 advised the agency to rely almost entirely on bonds. "This has the potential to be another several hundred billion dollars. If the auto companies go under, they have huge unfunded liabilities" in pension plans that would be passed on to the agency...

The Pension Benefit Guaranty scandal that isn't (at least not yet)