New Home Sales: Lowest Since 1991

It's the Foreclosures Stupid... It's the Foreclosures

The root cause of our economic depression is real estate... To paraphrase James Carville... It's the foreclosures stupid... it's the foreclosures... Eighteen months ago FDIC Chairman Sheila Bair testified before "Barney the Magnificent's" finance committee and strongly advised congress... and the industry... that loan modification was required to halt the free fall in real estate values... real estate taxes... and along with it a plunge in the economy... The Emergency Economic Stabilization Act (understatement!) contains ONE page on the foreclosures... to date nothing that has been enacted that remotely addresses the issue... Interesting factoid... The FDIC seized Indymac Bank in July, and immediately commenced loan modifications... the default and foreclosure rate at Indymac have dropped off dramatically...

Fact... the mortgage industry wrote sub-prime loans through the end of 2007... these were virtually all 2 year ARM's... thus we will not finish the 1st adjustments on these loans until May 2009... then the defaults... foreclosures and REO fire sales running through 2010... In addition, the option ARM's (neg-am) loans that have yet to play into this fiasco, are about to... and in numbers that will make our heads spin... a preponderance of these loans are about to reach their maximum negative accrual, and with that, the unlimited adjustment... due to the plunge in values it will prove impossible for anyone to refinance these loans... not even the 800 FICO "perfect" borrower, with money in the bank, and the Suze Orman "Gold Star" for having done everything perfect... thus more defaults... foreclosures and REO fire sales!! Without loan modification and true mortgage relief, we are looking at a minimum of 3-5 more years of this crisis... and a full blown depression...

A man's home is his castle... and the castle is under siege... everything in our economy is tied to this issue... "Bob and Betty" are not going to run our and buy that new car when they don't know if they will have a garage, or a wall for that new wide screen TV next week... loire protection, emergency services, social services and public works... all critical factors in real estate sales... thus, any of us that is reveling in the REO sales, thinking just how great this is... is truly a short sighted fool...

Yet the Cacophony of Conceited Condescending Clueless Clowns of Congress continue to fail to understand the crisis... a levee fails from it base not from the top... throw all of the rocks (money) in the world on top of the levee (Wall Street and the banks)... but fail to address the erosion at the base (real estate) and the levee will still fail... It's the foreclosures stupid...

Stan Brody of CA @ Nov 28, 2008 02:01:19 AM