NY Times Editorial: As Housing Goes, So Goes the Economy

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EDITOR’S NOTE: Where were they three years ago? Well it is still a good thing that the lead editorial connects the dots. The housing market is continuing to decline and it will continue as long as we regard the foreclosures as having any color of legitimacy. For decades housing has been the bell-weather of our economy, the driving force for jobs and innovation. This farce, wherein the banks are pretending to have securitized loans to cover up simple theft of historically huge sums of money draining the life out of the economy, must end or we are condemned to servitude with the Banks as our Masters.

NY Times editorial May 25, 2011:

The Great Recession began with the bursting of the housing bubble. Today, nearly two years after the recession officially ended, the housing market is still in trouble.

At times, it has looked as if things were improving, like last year’s jump in sales because of a temporary homebuyer’s tax credit or the recent rise in new-home sales from near-record lows. But, over all, sales and construction have been flat for two years, while prices, driven down by foreclosures, are plumbing new depths.

Even a recent drop in foreclosure filings isn’t a reason for optimism. April was the seventh straight decline in monthly filings — which include notices of default, auction and bank repossessions — according to RealtyTrac, a real estate data provider. But the decline appears to be largely the result of banks slowing the foreclosure process in order to keep properties off the market until prices recover. The catch is that prices are unlikely to recover as long as millions of foreclosures are imminent.

This isn’t just bad news for homeowners. Selling and building of houses are one of the economy’s most powerful engines. Until the market recovers, the entire recovery is imperiled. Falling home equity dents consumer confidence, making things even worse.

Since the problems in housing are not self-curing, a government fix is in order. But the Obama administration’s main antiforeclosure effort has fallen far short of its goal to modify three million to four million troubled loans.

Its basic flaw is that participation by the banks is voluntary. Most have joined the program but face no real pressure to meet its goals. Another big problem is that banks often do not own the troubled loans; rather, they service the loans for investors who own them. As servicers — in charge of collecting payments and managing defaults — banks can make more from fees and charges on defaulted loans than on modifications. Not surprisingly, defaults proceed and modifications lag. Banks win. Homeowners and investors lose. The economy suffers.

That does not have to be the end of the story. In a recent hearing in a Senate banking subcommittee, witnesses proposed new laws and regulations to change loan-servicing standards in ways that would prevent banks from putting their interests above those of everyone else.

For starters, various government guidelines on loan servicing would be replaced with tough national standards. Among the new rules, homeowners would be evaluated for loan modifications before any foreclosure — or foreclosure-related fee — is initiated. The bank analysis used to approve or reject modifications would be standardized and public, and failure by the bank to offer a modification when the analysis indicates one is warranted would be grounds for blocking any attempt to foreclose.

National servicing standards could succeed where antiforeclosure programs have failed, namely, in compelling banks to help clean up the mess they did so much to create.

In the Senate, Democrats Jack Reed and Sheldon Whitehouse of Rhode Island and Sherrod Brown of Ohio have introduced bills to establish standards. The new Consumer Financial Protection Bureau can also impose servicing rules. The Obama administration should champion national standards, and Congress and regulators should act — soon.

18 Responses

  1. This is great and all, but this does absolutely nothing for those who have been forced into bankruptcy because the banks (like Wells Fargo) sucked them dry for a year while they kept losing paperwork for a modification until they could no longer pay their mortgage…only to end up with a modification that leaves them in a worse position. And no money to fight all the fraud involved in bogus assignments, etc.

  2. carie

    Fed Res — knows far more than revealing.

  3. The A Man,

    Agree. Has anyone being paying attention to the consumer retail reports??— all buying being done at the top. Bernanke has just continued larger shift of wealth to the top — the gap is widening faster and deeper than ever.

    I have no bad feelings against the wealthy — have many very wealthy friends. Just — no fraud, no manipulating, no speculating on the backs of Americans, and no blaming the American people if your fund/trust does not meet it’s goal. We are onto to it.

  4. Regarding the Attorney General of California

    Today approximately 20+ properties will be auctioned off by Recontrustco in Los Angeles County alone.

    What is going on?

  5. You know I can understand when you invest in the Stock market, Gold investments and they play tricks on you so you loose some of your investment. I can understand but do not agree.

    But when they do this to most of the American People. Dont forget people who are still paying their Mortgages. They are loosing a fortune too. The equity in their houses has been eliminated and they are making inflated payments. This has been done to Millions of Americans approximately 64 Million. This is economic Genocide this should be a Crime against Humanity. The Banksters are no different than this Guy

    http://www.huffingtonpost.com/2011/05/26/ratko-mladic-arrested-key_n_867307.html

    We are at War. A war of Attrition.

    NEVER AGAIN.

  6. Pamela Edwards- one of the reasons the subprime market has reared its ugly head, lending to FICO 500 borrowers: as ANONYMOUS has explained repeatedly, ad infinitum, subprime mortgages were just a revolving credit account, and refinances were just changing the numbers on the original loan. So if the homes that the new subprime borrowers are buying are those taken by “credit bid”, the person selling the home still doesn’t have a penny in it, so why not give a subprime mortgage to a new buyer and start the whole thing over again? And if these are re-remics, bundled and packaged from the detritus of the Fed’s Maiden Lane TALF program, the cost was still negligible. Another great deal for the pretend-lenders.

  7. Looks like the Banksters are starting to get squeezed from all sides…

    I am working with a producer in Hollywood on a under ground documentary called

    “Smoke and MERS”

    its about foreclosure Fraud, robo, BS, etc?

    The Producers are looking for homeowner to tell their story on camera…

    If interested email me uprootedone@gmail.com

  8. They got rid of Elizabeth Warren who could make a difference. I pray she will resign and begin mass joinders so I can work for her!

    The Attorney General in CA said she will be pursuing cases under False Claim Act –

    This inquiring mind wants to know how she will help consumers from unlawful seizure of property denied due process by substantive omissions of material facts, fraud, intent to take property by deception, third party taking possession of property in larcenous manner.

    Every consumer foreclosure in hands of a national bank under visitorial powers of OCC !!!

    Attorney General with Jurisdiction over unlawful business acts if OCC allows them to proceed.

    The False Claims Act (31 U.S.C. Sections 3729-33) allows a private individual or “whistleblower”, with knowledge of past or present fraud on the federal …

    There is no one – absolutely no one – who is going to help so we have to take care of business ourselves.

    Thank God for Living Lies Team Members

  9. The only people buying houses are paid to do so as REO Brokers

    Who in their right mind with money would want a mortgage? and from who would someone want a mortgage? Which institution? All of the national consumer retail brands lied and led the fall of the economy.

    Renting sounds good to me.

  10. EXcellent editorial, thanks for posting this, Neil. So refreshing to read the good stuff along with the bad. Lets thank the congressmen who are proposing these new standards and encourage the others to get in line with this. The more we keep at them, the better. And Bravo to the CA AG…again, we need more like her. Send emails, make calls, keep letting your representatives know how you feel. If we don’t, we don’t have a right to complain.

  11. i SAID THIS BEFORE, DURING THE HOUSING BOOM THERE WERE MULTIPLE BIDS ON HOUSES, AND PRICES WENT UP, SKY ROCKET UP. NOW, WHERE ARE THE BUYERS, PRICES ARE LOWER, NO. SO BUYERS SHOULD BE BUYING. DOESN’T MAKE SENSE. WHERE DID ALL THE BUYERS GO? I DOUBT HIGHLY THEY, THE SO CALLED BUYERS OF 5 YEARS AGO, ARE SAVOY TO MBS ABS STUFF SO THEY ARE STAYING AWAY. DOESN’T MAKE SENSE.

  12. “At times, it has looked as if things were improving, like last year’s jump in sales because of a temporary homebuyer’s tax credit or the recent rise in new-home sales from near-record lows. But, over all, sales and construction have been flat for two years, while prices, driven down by foreclosures, are plumbing new depths.

    WELL IT SEEMS TO ME THAT A DATUM IS ONLY AS GOOD AS YOU CAN COMPARE IT TO ANOTHER. SO SALES ARE DOWN, FORECLOSURES UP. WHAT DOES IT ALL MEAN. WELL, COMPARE TO POPULATION GROWTH OVER THE LAST 50 YEARS. ALL THE NUMBERS WE ARE GIVEN DON’T ACTUALLY MAKE SENSE WHEN YOU LOOK AT WHO CAN BUY. THE WHOLE STAT ANALYSIS IS BS.

    “U.S. population has grown by 1.2% per year over the last 50 years. This “low” growth rate means it has taken only 58 years for our population to double. We can expect this doubling to continue, drastically magnified by the impact of unrealistically high levels of mass immigration.”

    http://www.susps.org/overview/numbers.html

  13. nothing has been cured, the housing market is not at the bottom yet , the banks will only propagate the same predatory bullshit that has become the status quo.
    on a cheerier note, litton loan & the goldmens sack gets probed by da feds! …yea!!!
    http://www.reuters.com/article/2011/05/25/goldman-mortgage-probe-idUSN2518599420110525

  14. If what is being bandied about is true then the subprime market is once again growing and rearing its ugly head.FICO score of 500 is now being accepted.So how did all of this cure anything if were just going to go through it again? I know you can’t save people from themselves but this is abject stupidity at its finest.

  15. “The bank analysis used to approve or reject modifications would be standardized and public, ”

    They need this sort of common reference system linked into real estate records and images—-so the record is clear—-search for FMV——

    But that “bank model” sounds ominous to me—who is going to review the operation of this model algorhthms? What happens if they alter the model either overtly or covertly.

  16. The house of cards is coming down! Resistance is victory!

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