10%


Inquiring minds are reading The Contra Costa Times and seeing lots of red. Red as in foreclosures. A new report is out saying that 1 in 10 homes with a mortgage face foreclosure:

One in 10 American households with a mortgage was at risk of foreclosure this summer as the government’s efforts to help have had little impact stemming the housing crisis.

About 9.9 percent of homeowners had missed at least one mortgage payment as of June 30, the Mortgage Bankers Association said Thursday.

And it is trending worse:

In a worrisome sign, the number of homeowners starting to have problems with their mortgages rose after trending downward last year. The number of homes in the foreclosure process fell slightly, the first drop in four years.

More than 2.3 million homes have been repossessed by lenders since the recession began in December 2007, according to foreclosure listing service RealtyTrac. Economists expect the number of foreclosures to grow well into next year.

The number of Americans missing payments and falling into foreclosure has followed the upward trend in unemployment, which has been near double digits all year and has shown no sign of dropping soon.

“Ultimately the housing story, whether it is delinquencies, homes sales or housing starts, is an employment story,” Jay Brinkmann, the trade group’s top economist, said in a statement. “Only when we see a consistent increase in employment will we see an increase in sales and starts, and a sustained improvement in the delinquency numbers.”

In the last downturn, the foreclosure rate was an unprecedented 6%. This time, it looks to be extrapolating out to 13.5-17%.

Truly financial Armageddon.

Commercial Real Estate Failures Easier to Spot Than Residential Woes


Inquiring minds are looking toward The Dallas Morning News and a wonderful article by Sheryl Jean:

Ann Strain walks Junebug, a Boston terrier, past a ghost town – hundreds of abandoned apartments with broken windows and weeds.

Neighbors think squatters have lived at times at the Signature Pointe apartments on Lovers Lane, just east of North Central Expressway. The Dallas police SWAT team trains there.

The apartments were emptied of tenants at least 2 ½ years ago to make way for new rental units and retail, but that never happened. Now a bank owns the 13 acres.

“It’s pulling the value of the neighborhood down,” said Strain, a condo owner who has lived across the street for 10 years. “I’ve seen lights at night, but I don’t know if it’s cops or crime.”

Neighbors’ concerns are an invisible consequence of landlords and investors across the country being unable to make their mortgage payments or secure new loans on commercial property that ends up foreclosed or forfeited to a bank.

Skeletons of unfinished buildings, weed-infested vacant lots for projects that never got off the ground and for-sale signs are the more visible remnants of an overextended commercial real estate market caught in the jaws of the biggest financial crisis and economic downturn since the Great Depression.

It goes on…and on, and on…

Nationally, distressed loans on office buildings, apartments, retail stores and warehouses totaled $170 billion. Despite recent signs pointing to an improving commercial real estate market, those numbers are expected to increase.

The more than $1.4 trillion in commercial mortgages coming due this year through 2014 will be difficult to refinance and could derail economic recovery.

“It’s the silent thing out there that everyone talks about,” said Dan Busch, president of Structure Tone Southwest in Dallas, one of the area’s biggest general contractors and one with no debt. “We all understand that it’s a big system and we’re all tied to it.”

(…)

A new wave of defaults could trigger more property vacancies and more bank failures. Commercial mortgage defaults contributed heavily to the nation’s 255 bank failures in the past 20 months, including six in Texas, with more than $37 billion in losses. A congressional panel projects that bank commercial mortgage losses could hit $300 billion.

The entire article is well worth the time.

Foreclosure Relief: Good & Lousy


Inquiring minds are reading how President Obama HAS united the country:

Criticized both by those who argue for more aid and those who think the lackluster program only delays a needed bank reckoning, HAMP stumbles along, more often simply prolonging the pain of foreclosure than providing a solution. The dismal new housing numbers — sales of existing homes are 27% lower than a year ago, new-home sales have fallen even more — underline just how little demand there is for all the properties that banks are foreclosing on.

Not exactly what our President probably wanted, but hey, he can still say it is a campaign promise he kept.

And it seems the electorate is just now beginning to figure out that HAMP is being used by lenders to make sure that homeowners are making payments for as long as possible:

In extending the process, foreclosure relief in many cases simply stretches out borrowers’ slow bleed of resources. By keeping borrowers in limbo while letting lenders delay repossessing houses they can’t sell, foreclosure aid is now benefiting borrowers less than the lenders who created the mortgage mess. For lenders, mortgage modification is the waiting room in the mortuary, a convenient place to hold borrowers while the banks deal with the overflow of houses already repossessed.

This is going to be a very interesting campaign season. Uneasy is the head that wears an incumbent crown.

Economic Outlook per The Fed: Ouch!


Would an intelligent person push a string?

Inquiring minds are reading the article by Fed Chairman Ben Bernanke on the Economic Outlook. As always, it was a stunning display of pride and narcissism rivaling only the POTUS:

In many countries, including the United States and most other advanced industrial nations, growth during the past year has been too slow and joblessness remains too high. Financial conditions are generally much improved, but bank credit remains tight; moreover, much of the work of implementing financial reform lies ahead of us. Managing fiscal deficits and debt is a daunting challenge for many countries, and imbalances in global trade and current accounts remain a persistent problem.

Did you catch that? “Managing fiscal deficits and debt is a daunting challenge…” So, the deficits and debts are okay just not easy to manage! Gee, Ben, most would say that running deficits is WRONG! In a few paragraphs down, Poor Ben shows his inability to notice that grove of trees over there is actually a forest:

At best, though, fiscal impetus and the inventory cycle can drive recovery only temporarily. For a sustained expansion to take hold, growth in private final demand–notably, consumer spending and business fixed investment–must ultimately take the lead. On the whole, in the United States, that critical handoff appears to be under way.

That first sentence is unbelievable admission. WOW! Simple Ben almost has an intelligent thought. But then follows it up with a following sentence that forces the reader to realize it was just those 10,000 monkeys happening to hit a certain set of keys in a certain sequence. Where, pray tell, does Goofy Ben believe consumer spending coming from since record numbers of people have lost or are losing homes and/or jobs? And with all the bad loans, where are the banks going to get money to lend?

50,000 watts of willful ignorance. If you enjoy black comedies, you might enjoy the article in its entirety.

Beginning of a Joke? No, but…How Bad is the US Economy?


This really is backwards

Inquiring minds thought it was the lead into a joke when the article’s headline was “How Bad is the US Economy?” The tagline:

Russian Students Are Begging for Change to Go Back to Russia…

The new Glasnost:

…they are Russian students (evident by their very thick Russian accents [not detectable in this picture]) who were lured to the United States and Austin with the promise of lucrative jobs in the fascinating field of Life Guarding, only to be swindled and cheated by an unsavory employer…

And now a word from our Governor…


Actually inquiring minds are reading an entire article from Governor Schwarzenegger:

Recently some critics have accused me of bullying state employees. Headlines in California papers this month have been screaming “Gov assails state workers” and “Schwarzenegger threatens state workers.”

roughly 80 cents of every government dollar in California goes to employee compensation and benefits. Those costs have been rising fast. Spending on California’s state employees over the past decade rose at nearly three times the rate our revenues grew, crowding out programs of great importance to our citizens. Neglected priorities include higher education, environmental protection, parks and recreation, and more.

Much bigger increases in employee costs are on the horizon. Thanks to huge unfunded pension and retirement health-care promises granted by past governments, and also to deceptive pension-fund accounting that understated liabilities and overstated future investment returns, California is now saddled with $550 billion of retirement debt.

The cost of servicing that debt has grown at a rate of more than 15% annually over the last decade. This year, retirement benefits—more than $6 billion—will exceed what the state is spending on higher education. Next year, retirement costs will rise another 15%. In fact, they are destined to grow so much faster than state revenues that they threaten to suck up the money for every other program in the state budget…

Biggest Threat to National Security to Joint Chief?


Inquiring minds are nodding approvingly that Admiral Mike Mullen got it right but also feel incredibly fearful. America’s ‘Top Soldier’ told a Detroit group:

The national debt is the single biggest threat to national security, according to Adm. Mike Mullen, chairman of the Joint Chiefs of Staff. Tax payers will be paying around $600 billion in interest on the national debt by 2012, the chairman told students and local leaders in Detroit.

“That’s one year’s worth of defense budget,” he said, adding that the Pentagon needs to cut back on spending.

He is a very brave man to say that with his boss…who may be petty but no officer.