The Housing Bubble

Ive come to distrust government numbers regarding the economy. Like many people Ive come to rely on my own set of “tells” I use to guage the health of the economy. The mens shelter now has a line extending onto the street on saturday mornings in DC.

Life Only Takes Visa, You Losers

http://www.creditslips.org/creditslips/2007/10/life-only-takes.html

I saw on Patrick about Lahde Capital making 1000% in year betting against subprime. At first I was happy to just avoid buying a house, but now I am filled with greed (haha)….

But seriously, how can we profit? Has that train already left? Are there any funds I can get into for less then $250k (Lahde min).

I know this is a tricky thing for blog managers. Can we all agree to just ‘think aloud’ as opposed to ‘giving advice.’

At this point I would like to not only miss the bust (check), but profit from it.

The guy who wrote the piece about the SD bankruptcy court which I posted it yesterday added a little to it. This judge made the ruling sua sponte which is even more interesting! Wow, you don’t see that very often.

“One of of our lawyers was sitting in court waiting on a hearing and heard what happened. This was a relief from stay motion. Something the lender has to do to proceed on a bk. The motion was unopposed meaning the debtor did not defend it. THE JUDGE DID THIS ON HER OWN!!!!. The lawyers fell off the bench when they heard it.

We are now going to oppose every relief from stay if the names on the mortgages don’t match the parities filing in court. Same as the Boyko case in Ohio but in an NON-Judicial foreclosure state.

EVEN BIGGER though is that if the lender has not perfected their lien when the bk is filed, we can avoid it. Meaning they lose their security and stand in line with the rest of the unsecured creditors. The debtors get a 75k homestead that stands in front of the now unsecured lender.

This is a huge problem for securitized mortgages.”

No more legal paper free ride — the parties must prove they are a successor in interest to the original mortgage.”

Battle Lines….

http://online.wsj.com/article/SB119696216000715924.html?mod=todays_us_page_one

Popular Debt….

http://www.wrisley.com/bonner.htm

“For centuries, the mystics of spirit have proclaimed that faith is superior to reason, but have not dared deny the existence of reason. Their heirs and products, the mystics of muscle, have completed their job and achieved their dream: they proclaim that everything is faith, and call it a revolt against believing. As revolt against unproved assertions, they proclaim that nothing can be proved; as revolt against supernatural knowledge, they proclaim that no knowledge is possible; as-revolt against the enemies of science, they proclaim that science is superstition; as revolt against the enslavement of the mind, they proclaim that there is no mind.”

John Galt

Who ever says RE cannot be worthless hasn’t been to Detroit. CFC has a few choice properties in the Motor City listed for $1.

Below find the CFC property owned website. Pick “MI” for Michigan and then choose sort “by list price” to see the great deals!

http://www.countrywide.com/purchase/f_reo.asp

http://www.reuters.com/article/marketsNews/idUKL0925559020071209?rpc=44

Pensacola, FL

Desperately hoping for a GF to come along:

http://tinyurl.com/37yhts

http://tinyurl.com/33fx6q

How to Solve a Subprime Mess? An Iowan Says, Let’s Caucus

By VIKAS BAJAJ — NY Times
Published: December 9, 2007
http://www.nytimes.com/2007/12/09/business/09ag.html?_r=1&oref=slogin

A HALF-DOZEN years before subprime mortgages were on the national agenda, Tom Miller, the attorney general of Iowa, led teams of state officials from around the country in negotiating settlements totaling more than $800 million with two large home lenders that were accused of misleading and overcharging borrowers.

Now, as the mortgage boom of the last few years unravels, Mr. Miller is leading another multistate campaign to help consumers. This time, he is not threatening major litigation — at least not yet. Rather, he is trying to stem what most experts say will be a surge of foreclosures by cajoling and pressuring mortgage servicing companies to modify loans before borrowers fall too far behind.

“It’s not an obvious law-enforcement attitude,” Mr. Miller, 63, said in early November in his office in Des Moines. “But we view ourselves as consumer protectors and we see an avalanche of foreclosures sitting out there and you have to learn from experience.”

The preference of Mr. Miller, a Democrat, for prevention over prosecution sets him apart from a newer, younger crop of attorneys general in other states. His counterparts in New York, Ohio and Massachusetts, all of whom are also Democrats, have filed lawsuits or publicly discussed their intention to bring cases against mortgage lenders, investment banks and credit rating agencies.

The difference between Mr. Miller and his peers highlights the challenges facing policy makers as they decide how to respond to the mortgage crisis. Should they look to mete out punishment, try to stem rising foreclosures or focus on enacting new standards for future lending?

–
Q: What can you predict from “digidollars” and various Money Supply numbers?

George Ure: “Did I mention that digidollars are still being created at a 17% annual rate while paper currency/real money (M1) is being created as a 1-10th of one percent rate (NSA) per the latest YoY money stock numbers? Oh, and that means currency is disappearing as remember the population of the US has gone up more than 1-10th of one percent in the past year, so less paper for each of us…”

http://www.urbansurvival.com/week.htm

OK, what can you predict from “digidollars” and various Money Supply numbers?

Can you predict the future direction of the economy and inflation rate from growth in M3 or other measure of “money?” Why there are, or were, more than five money supplies measures? Also, did you know that Greenspan admitted that in early 1990s (following the recession) the money supply numbers stopped working? He said that we put buckets of money out there but it didn’t do anything. He said that only after Wall Street created CDO products and took debt off the banks did banks started to lend more money, i.e., increase in money supply didn’t do anything by itself.

Money supply is an effect and not a cause. Money is created via credit, or more accurately, increase in debt. The money supply numbers say nothing more than what they measure, i.e., it is counting goats, pigs, horses, beef, etc., on a farm.

Total Household Debt (THD) is the single best predictor of the economy and the future direction of the inflation rate. For example, since 1950 when the YoY growth in THD fell below 5.5% the economy was already in recession. Also, as the THD growth falls it signals future fall in the inflation rate. I can guarantee outright deflation within months of THD growth falling to zero, i.e., Peak Debt would guarantee deflation within months. The music would stop when the desperate act of pushing more debt on the households by the Fed stops to work. And there is nothing like massive debt defaults to accomplish that. Oh, BTW, now we have already gone wild with the CDO products and they are now going to “stop to work” as did the “buckets of money that ‘we’ put out there.”

Just as all good things come to an end, all bad things (pushing debt) will come to an end too. It will be painful like withdrawal symptoms.

Jas

A Subpar Plan to Save Subprime Borrowers

By Michelle Singletary — Washington Post
Sunday, December 9, 2007; Page F01
http://www.washingtonpost.com/wp-dyn/content/article/2007/12/08/AR2007120800007.html

How timely that just as President Bush was announcing a deal to help homeowners struggling with their mortgage payments, new data were released showing that foreclosure starts set a new record.

In a news conference Thursday, Bush trumpeted a private-sector plan that would help some struggling subprime borrowers by freezing their current teaser interest rates for five years. Eligible homeowners would be those who got adjustable-rate subprime mortgages between Jan. 1, 2005, and July 31 of this year — and whose rates would jump by July 31, 2010.

Bush said the relief for borrowers will come in one of three ways: by refinancing an existing loan into a new private mortgage, by moving borrowers into an FHA Secure loan, or by freezing borrowers’ current interest rate for five years.

Although I’m glad some homeowners are getting interest rate relief, this plan doesn’t help enough people and doesn’t address the systemic problems that led to this mess. The fact is, too many people are in homes they can’t afford today, tomorrow or probably five years from now. The bad lending practices that prompted people to buy homes they could ill afford won’t go away by helping the worst-case situations.

“While we certainly all hope this will be a shot in the arm for the housing slump, it is hardly a panacea,” said Sen. Charles E. Schumer (D-N.Y.), the chairman of the Joint Economic Committee. “There are too many families who may be left out, too much left up to the voluntary willingness of the private sector, and too little disclosure and transparency to ensure families who do qualify are being helped.”

Schumer pointed out that the Hope Now plan excludes borrowers who are not current on their payments, which immediately disqualifies 22 percent of subprime loan holders from receiving relief.

When asked what happens after the five-year rate freeze ends and people’s interest rates significantly jump, Paulson said, “This plan is not a silver bullet.”

DEAN CALBREATH
Bush’s plan on mortgage problems isn’t enough
December 9, 2007

The White House ambulance belatedly arrived at the scene of the subprime mortgage crash last week, with President Bush and some banking industry paramedics trying to stanch the bleeding of the battered housing market.

But Bush’s proposed remedy is only a small bandage on a gaping wound. It may lessen or slow but will not halt the economic problems associated with the mortgage crisis. And there’s even a chance that it could make matters worse.

Over the next two years, nearly 2 million adjustable-rate subprime mortgages – designed for people who lack the credit history needed for cheaper, more conventional prime loans – will reset from their low “teaser” rates into much higher rates.

Many borrowers were stretching to make ends meet with the teaser rate and will be unable to pay their bills once the rates go up. Analysts fear that the problems emanating from the resulting spike of foreclosures could push the economy into a major slowdown or even a recession.

The foreclosure threat is particularly serious in places like San Diego County, where adjustable rate mortgages helped push prices into the stratosphere before the market peaked two years ago.

http://www.signonsandiego.com/uniontrib/20071209/news_1b9dean.html

My mortgage broker friend is losing about 5k a month. She pulled 60k out of the house she lives in that saw massive appreciation to put down on a condo. She waled away and lost 60k that SHE has to pay back.

Her friend rents a house from her for $1500 a month. The friend who owns the house and is renting it to them told them she would give them 10k if they bought the house. She said, “It will take them 2 years to throw you out so you don’t have to make any payments.”

It’s sad I say she is a friend because her profession? She is a mortgage broker. Who would prosecute her for fraud? No one, the government wants to bail people like her out. She also told her friends that the Gov’t was moving forward with a plan to make it even harder for them to be foreclosed on and it might be 3 years before they have to move out. She said she can STILL get them in a mortgage even with all the tightening.

Why is a “cost” of $6.4 m even worth discussing in print when aggregate subprime debt-related writedowns have already reached the neighborhood of $50,000 m with more in the pipeline, and some top managers at home builders bagged hundreds of millions in personal stock sales right as the bubble began to bust? At a glance, $6.4 m sounds like a slap on the wrist.

I am also curious about the mention of First American in the article; isn’t it one of their affiliates that was named along with WaMu, Fannie Mae and Freddie Mac in Andrew Cuomo’s appraisal fraud investigation?

NATION’S HOUSING
KENNETH HARNEY
Kickback scheme costs builders $6.4 million
December 9, 2007

WASHINGTON – Rigged appraisals, lax underwriting and toxic loan products may dominate the headlines, but they are hardly the only issues causing problems in residential real estate. The federal government and state regulators are targeting other housing-related misdeeds that can cost consumers big money – especially involving under-the-table kickbacks among builders, real estate brokers, loan officers, mortgage bankers and title insurers.

The largest settlement was announced the week before Thanksgiving. First American Title Insurance Co. agreed to shut down 84 “affiliated partnerships” formed in Florida with real estate brokers, mortgage brokers, banks and home builders. Federal and state investigators charged that while the affiliates claimed to be title companies, they were actually referral conduits that performed few, if any, title services. Officials said they existed primarily to steer lucrative title insurance business to First American, which split consumers’ insurance premiums with participating “partners.”

In effect, according to the investigators, home builders, lenders and realty firms could pocket part of home buyers’ closing costs without their customers’ knowledge. On paper, the partnership affiliates appeared to be ordinary title agencies, carrying names such as Security First Title, USA Title Partners, Discount Title Services LLC and the like.

But investigators from the federal Department of Housing and Urban Development (HUD) and Florida insurance regulatory agencies found that “all regular title services required to effect title insurance were performed by First American, not the limited partnership agency,” which was essentially a shell entity constructed “to compensate (participants) for the referral of the business.”

http://www.signonsandiego.com/uniontrib/20071209/news_1h09harneyy.html

Santa’s bag of home equity filled with coal
By Mike Meyers
MINNEAPOLIS-ST. PAUL STAR TRIBUNE

December 9, 2007

In every holiday shopping season from 1995 through 2005, Christmas was on the house.

Not this year.

The housing downturn that started last year and has accelerated this year has barred the chimney to Santa in many homes, as owners find they no longer have the growing equity that can be tapped again and again to finance spending.

For the first time in years, ready cash from home financing won’t be fattening the wallets of shoppers prowling the mall this season. Home equity loans in the past have been seen as a kind of personal ATM to pay off holiday bills.

“People have been using their home as a very large ATM for a number of years,” said Keith Leggett, senior economist at the American Bankers Association in Washington. “With housing values declining, rising defaults and greater concern about excess of risks, clearly we’ve seen banks pull back on underwriting. They’ve tightened their terms of credit.”

http://www.signonsandiego.com/uniontrib/20071209/news_1h09equity.html

Meltdown Panel:

Angelo Mozillo, Mark Zandi, Robert Toll, and Maria Bartoromo.

http://www.paperdinero.com/BNN.aspx?id=464

Caveat underwriter.

Foreclosure pattern points to loan fraud, experts say
By Tom Brown
REUTERS
December 9, 2007

JOE SKIPPER / Reuters
(The 643-unit condo building known as the Club at Brickell has the highest number of foreclosure proceedings involving any single south Florida property.)

MIAMI – At first glance, the 43-story building in Miami’s international banking district seems little different from other high-rise condominiums overlooking the turquoise waters of Biscayne Bay.

But the 643-unit condo building known as the Club at Brickell is a leader in mortgage foreclosures and it appears also to stand at ground zero in a blizzard of fraud that may lie behind many of the failed loans threatening to bury the U.S. property market.

America’s subprime mortgage crisis is partly due to predatory, or aggressive, lenders, hard-sell tactics by mortgage brokers and an easing of underwriting standards in the $10 trillion home-loan industry.

But fraud accounts for a sizable share of the bad bets on mortgages, according to many industry experts, and lenders may have been victimized as much as anyone else.

“The lenders are holding the bag now; that’s what we’re finding out,” said Glenn Theobald, head of a mortgage fraud task force formed in Miami-Dade County in September.

http://www.signonsandiego.com/uniontrib/20071209/news_1h09fraud2.html

In response to Aqius yesterday, “yes, there is an A-train”. We take it all the time from 3rd Street near the old rat-infested Taco Bell. They are doing some work on the Bell. It will be funny if they reopen it as a food joint. The A and C run together on the blue line. The A is the express train and goes all the way out to Far Rockaway. I have never taken it that far.

http://tinyurl.com/hhfs

Editorial
No hope now
Sunday, December 9, 2007

President Bush announced his HOPE NOW program to ease the nation’s mortgage crisis last Thursday. The plan is neither “hope” nor “now,” nor will it ease the nation’s mortgage crisis.

It’s baffling why an administration that believes in the free market as much as this one does would attempt to intrude on an inevitable economic correction. There are two possibilities, both of them desperate: 1) 2008 is coming up, and both parties need to look like they’re doing something for Americans who are losing their homes, and 2) The administration is panicked about what might happen should those who invested in mortgage debt start calling off their deals with the banks that sold them.

Desperation rarely leads to good policy. (To be fair, the Democratic counters to the Bush plan are equally irresponsible.)

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/12/09/EDEITOQAD.DTL

Paulson the snowman knew

The sun was hot that day

So he said

Let’s avoid a bank run and

we’ll have some fun

now before I melt away…

Alan, from Arizona writes:

“Mr. Paulson Do you anticipate bank failures like England saw with Northern Rock?”"

Henry Paulson

“Alan – I’m glad you asked this. The U.S. banking system is thoroughly regulated and well capitalized. We have a strong deposit insurance system that provides good coverage for the savings of hard-working Americans. Another thing to remember as we work through this mortgage market turmoil is that we’re confronting these challenges against the backdrop of a strong global economy and a fundamentally healthy U.S. economy. Business investment has expanded in recent months, our exports are being boosted by the strong economic growth of our trading partners and the healthy job market has helped consumer spending continue to grow. But I have also been very clear that the housing decline is still unfolding, and I view it as the most significant current risk to our economy.”

http://www.whitehouse.gov/ask/20071207.html

Paulson, the snowman…

Pretty much just told us to get ready for bank failures, including the runs.

just hear nytimes david leonhardt, as commentator on npr’s ‘morning edition’ say (during extended discussion of the housing bust):

“it’s not clear that we want too big a bailout because in spite of many people getting hoodwinked into bad loans, the truth was many got loans for houses they simply couldn’t afford and had no business getting into in the first place.”

it was refreshingly contra the attempt to set up the fb’s as victims by show host.

Here’s a new name for the financial titans, birds of a feather one and all…

Jackdaw - a bird noted for thievery

Around my neighborhood not as many people have Christmas lights up. I asked my neighbor if he thought I was making it up, but he agreed. We’ve had plenty of fine weather to get them up, too. I can only think people are trying to save on their electric bills. Anybody else notice the same thing?

I think 100k will do.
http://chicago.craigslist.org/chc/rfs/503610900.html

Global bankers seek to raid taxpayers over subprime fiasco

http://www.augustreview.com/news_commentary/global_banking/global_bankers_seek_to_raid_taxpayers_over_subprime_fiasco_2007113081/

Now that people are looking for someone to blame for this debacle, the banking community, including even the Federal Reserve, is shifting the blame to the consumer for having made poor borrowing decisions in the first place. After all, nobody forced them to submit an application for a loan that they couldn’t afford. They should have known better.

Yet, it was the banking community that structured the loan offers that lured unsuspecting borrowers into their lair. For years, TV ads for mortgages and credit cards dominated the airwaves. Many consumers received dozens of credit card offers by mail each week. Is it right for the bankers to say that they were merely responding to market conditions, to give the foolish consumers what they demanded? In fact, the average person looks to his banker as an “expert adviser”, expecting knowledgeable answers that will be in the borrowers best interest.

Iran has taken the path that Saddam took for Iraq and has stopped selling their oil in USD.

Another war on top of the mortgage melt down would finish us off.

http://www.nasdaq.com/aspxcontent/NewsStory.aspx?cpath=20071208%5cACQDJON200712080440DOWJONESDJONLINE000007.htm&

I guess this would be why the Bush administration continues to beat the drum about Iran even though the CIA report said they stopped their nuclear program 4 years ago.
We seem to start wars in March.
Those who took their homes off the market to re list when things pick up in Spring may be in for yet another shock.

I don’t know who Sean Olender is, but I like the cut of his jib!

MORTGAGE MELTDOWN
Interest rate ‘freeze’ - the real story is fraud
Bankers pay lip service to families while scurrying to avert suits, prison

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/12/09/IN5BTNJ2V.DTL

But unfortunately, the “freeze” is just another fraud - and like the other bailout proposals, it has nothing to do with U.S. house prices, with “working families,” keeping people in their homes or any of that nonsense.
The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value - right now almost 10 times their market worth.
The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.
…
The catastrophic consequences of bond investors forcing originators to buy back loans at face value are beyond the current media discussion. The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail, resulting in massive taxpayer-funded bailouts of Fannie and Freddie, and even FDIC.

OT–

Amendment 1 - Freedom of Religion, Press, Expression. Ratified 12/15/1791.

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

It will be interesting to see how the chinese markets react, they have been very resilient up until now.
http://www.marketwatch.com/news/story/china-lifts-bank-reserve-requirement-full/story.aspx?guid=%7BDF2C3708%2D1986%2D4FF0%2D9525%2DFBDADD97608C%7D&dist=hplatest

My sister and I finished moving our mother into her appartment this weekend. Big stress for her downsizing from the “house” (sold amazingly). Her vision has deteriorated and she keeps moving her chair closer to the little TV. So I went to buy her one of those large LCDs. She can see this puppy from across the room!

So, I was in an electronics megastore in affluent North Jersey in the middle of the day on Saturday a couple weeks before Christmas. Twelve salespeople in suits watching me and two other customers like starving vultures. Parking lot for hundreds of cars. I guess they drew straws or something to see who got to help me. I asked the guy “How’s the holiday shopping season holding up for you guys?” He said it was “dead, pathetic, awful”.

Interesting footnote; He wasn’t a pushy salesman until it came to checkout. He resisted my paying cash, wanted me to sign up for the store credit card, teaser interest rate and all. Very pushy about that. He finally relented when I told him that I had gotten rid of all my credit cards and the woman who used them. lol.

I’m safely back in my mountain retreat watching the snow fall. It will seem a pretty ordinary Christmas for me, but I get the feeling it isn’t going to be so normal down in the city.

From Euro Pacific Capital’s website on rate freeze:

http://www.europac.net/externalframeset.asp?from=home&id=10965

The Mother of all Bad Ideas

Without question, the Bush administration’s mortgage rescue plan will exacerbate, not alleviate, the problems in the housing market. As the plan will sharply reduce the ability of new buyers to make purchases, it really amounts to a stay of execution and not a pardon.

Although there are mountains of uncertainty as to how the plan will be structured and implemented, there is no question that as lenders factor in the added risk of having their contracts re-written or of being held liable for defaulting borrowers, lending standards for new loans will become increasingly severe (higher down payments, mortgage rates, and required Fico scores, lower loan to income ratios, and perhaps the death of adjustable rate loans altogether). The result will be additional downward pressure on home prices, despite the fact that in the short term fewer homes will be sold in foreclosure than what might have been without the rescue plan.

Most homes temporarily saved from foreclosure will continue to depreciate as new buyers fail to qualify for loans. As a result, lenders will be on the hook for more losses than had the foreclosures taken place sooner. Of course, as these chickens will likely come home to roost after the next election, that’s a trade-off incumbent politicians will happily make.

Compounding the problem is that subprime borrowers with frozen payments on loans that exceed the values of their homes will likely choose not to pay property taxes, condo or homeowners fees, or maintain the condition of their properties. Were these properties to be sold in foreclosure now, at least their new owners would have financial incentives to maintain the value of their investments. Upside-down subprime borrowers will have no incentive to throw money down a rat hole: why make additional payments on properties in which they have no equity and which they will likely lose to foreclosure anyway? When these homes do go into foreclosure, back taxes and other fees on dilapidated properties will inflict even greater losses on lenders.

Also, subprime borrowers with frozen resets will be unable to either borrow additional money against their homes or sell them. As rising credit card payments, higher food and energy bills, and stagnating wage growth or unemployment make even paying the frozen rates increasingly more difficult, this lack of flexibility will prove fatal. Also, the moral hazard inherent in offering help to only those who can demonstrate an inability to afford the reset rates, or restricting the bailout to borrowers with low credit scores, guarantees that borrowers will alter their circumstances to qualify for the aid. Therefore more loans will be frozen than are currently forecast, and the financial circumstances of the borrowers will be that much more impaired as they endeavor to pile on added debt or reduce their incomes to conform to the requirements of the bailout.

Lost in current discussion is the fact that few subprime borrowers have any skin in the game in the first place. Having put nothing down or having extracted equity in previous refinances, most subprime borrowers will lose nothing if their homes go into foreclosure. In some cases the teaser rates were so low that borrowers actually paid less than what they might otherwise have paid in rent. In fact, those who have already extracted equity have received huge windfalls from their homes and will leave their lenders holding the bag.

Also missing from the dialogue is the fact that those individuals and companies that sold these homes to subprime borrowers in the first place pocketed large sums of money they never would have received if these exotic loans were not available. Is anyone going to ask them to give some of that money back in order to compensate the lenders for their losses?

Finally, it’s the camel’s nose under the tent that is the most troubling. Delinquencies on auto loans are now at record highs, and with no home equity left to extract and a weakening economy, this problem can only get worse. What is next, a moratorium on car payments? Of course if the government can “require” private parties to rewrite contracts, what about the government’s obligations to re-pay its debts? After all, the Federal government is the biggest subprime borrower of all and it has committed the American taxpayer to the mother of all adjustable rate mortgages. With the majority of our near 10 trillion dollar national debt financed with short-term paper, what happens when interest rates rise? Will the government extend the maturities of one-year treasury bills, tuning them into 10-year treasury bonds, forcing holders of government debt to accept below market returns for extended time periods? These are real risks that will not go unnoticed by a world already saturated with depreciating U.S. dollar denominated debt.

Ostensibly, this plan is being offered in an attempt to stem the tide of foreclosures that might otherwise cause further weakness in home prices. The reality of course is that current home prices are still too high, having been a function of the lax lending standards and rampant real estate speculation that got us into this mess in the first place. A return to prudence in lending also means a return to prudence in pricing. Everyone seems to agree that a return to traditional lending standards is a good idea, but no one seems willing to accept a return to rational prices as a consequence. The government’s attempt to orchestrate such an outcome is doomed to failure, as it is impossible to maintain bubble prices after the bubble has burst!

The final absurdity is the Government’s attempt to portray their plan as voluntary. Of course the authorities point out that if their “suggestions” are not adopted by lenders, much more draconian legislation will surely follow. Let freedom ring.

For a more in depth analysis of the tenuous position of the Americana economy and U.S. dollar denominated investments, read my new book “Crash Proof: How to Profit from the Coming Economic Collapse.”
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