Media Still Taking Their Queues from Wall Street

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Editor’s Comment: If you read the mainstream media instead of the actual complaints being filed by agencies and consumers, you get the message that it is foreclosures that are dragging the economy down because of how slow they are in judicial states. They present a compelling case consisting of half truths about diminishing property values, lower lending, overwhelming servicer capacity, resistance to modifications, and delays in the “inevitable” foreclosure caused by judicial backlog.

The message is clear — let’s get this over with and move on with our economic recovery. With consumer purchasing weakening and the threat of huge lawsuits against the banks that caused this mess, the spin is that if we just forget about the whole mess, everyone would be better off.

My message is that the foreclosure mess is the result of compounded fraud, Ponzi schemes and unethical behavior by the Wall Street banks — and that the victims of that fraud deserve restitution just like any other fraud case.

Those victims include almost every part of the economy but the focus is on investors (pension funds providing lifeblood to people on fixed incomes) and homeowners who were coerced, enticed and deceived by the values used at their loan closing certified by appraisers who under threat of coercion (never working again) gave the banks the values as instructed.

Both sides of the transactions — the investors who loaned their money and the homeowners who borrowed money were deceived and economically devastated by the same lies and false documentation created to give the appearance of a proper mortgage-backed bond, a proper mortgage and then a proper foreclosure.

None of it was true. The bets were made against those mortgages because the banks knew the loans were bad and that even if they were not bad, they had unconditional power (through the Master Servicer) to declare that the “pool” was impaired. The fact that the pool was never funded and never received any of the loans escaped the attention of most people.

Neither the investors nor the homeowners ever had a chance. And the “burden” now placed on the banks of coughing up hundreds of billions (trillions) of dollars for their fraudulent behavior is said to endanger our economy. My message is that the economy, the dollar and our standing in the world is far more endangered by letting it be known that if your fraud is big enough you will never be prosecuted. It creates an uncertainty in the marketplace where trust and reliance on such checks and balances as appraisers and rating agencies is used as a principal measure as to whether to get involved in a deal.

If the banks were using the investor (pension) money, why did the banks get the bailout and other  forms of relief totaling more than all the mortgage loans put together, whether “in default” or or completely current in payments? Why didn’t that money go to the investors and the resulting credit inure to the borrowers whose loans were improperly priced by fraudulent and deceptive means?

My message is that the economy will recover far more quickly when people recognize that the government and the judicial system requires that everyone play by the same rules. If you have a case, then prove it. That is why I keep harping on Deny and Discover as the principal strategy for foreclosure and mortgage litigation.

The facts are that most of the loans were bad — defective as to who they named as payee on a loan the borrower never received, and defective as to the principal due based upon fraudulent appraisals. The borrowers received loans from third parties in table funded loans that were not only not disclosed, they were hidden from the borrower and the source of the loan money, the investors (pension funds).

The loans that were funded were undocumented intentionally because the banks wanted a window of time within which they could claim the loans were the asset of the bank instead of the investors. The documentation enabled the banks to pretend to be the lender and therefore reap the benefits of large bets against loans that increasingly were doomed from the start. After they made their money they pitched the loans, contrary to the express terms of the Pooling and Servicing Agreement, over the fence and told the investors that THEY had lost money while the banks had made trillions of dollars.

The reason why foreclosures proceed more slowly through those states requiring a judicial process is that the banks don’t have the goods. Most of the loans were never funded by the party whose name was placed on the note and mortgage. And it is no different but easier to circumvent in the non-judicial states.

The borrowers, completely ignorant of what was done to them at closing and completely ignorant of the trillions paid on the loan liability and received by the banks assume that they owe the amount demanded by the bank — when in fact the overpayment received by the banks as agent for the investors might well be an overpayment that is due back to the borrower after the investor is paid.

The only reason things that gone so far astray is that the bank strategy is working — blame the borrower and admit to some negligence and some paperwork problems. But forgery, robo-signing, powers of attorney, false endorsements, false beneficiaries, false substitutions of trustees and false affidavits are not “paperwork problems.”

False documents would not be necessary if the loans were real secured loans in a real fair and free market. If the investors and borrowers knew what was really being done with the documents and the money, they never would have entered the deal in the first place.

These are crimes that should be prosecuted. THEN the economy will recover when restitution is given to investors and homeowners, the banks assets are written down to true market value (excluding loans they never funded or purchased).

PRACTICE TIP: Attack the lien first without regard to the outstanding obligation to avoid appearing that you are seeking a “free house.”

Don’t limit your Discovery to the Subservicer. You are only getting a small slice of the pie of the information that way. Demand the same discovery from the Master Servicer and the “Trustee” of the “trust.”

Only the Master Servicer has access to information regarding third party payments. And only the Investment Banker (the brokerage that sold the bogus mortgage bonds) can account for the bets they made using insurance and credit default swaps.

And don’t forget to ask the Trustee why the “trust” was not administered through their trust division or trust subsidiary. You might well find that that no trust account was ever created for the trust and that the “trustee” did not administer the affairs of the trust because there was nothing to administer and the trustee’s powers are claimed by Deutsch, Mellon, and U.S. Bank to actually be that of agent rather than trustee with fiduciary responsibility — when it comes time to assess damages against the losing pretender lender.

Upshot of the Foreclosure Backlog

Shadow Inventory: 1 in 5 homes are underwater and current on payments

HOME PRICES SET TO DROP AGAIN!

Editor’s Comment: You can spin this anyway you want, but the facts speak for themselves. People are worn out living under mountains of debt, some need to move for job purposes, and some need to reduce their payments because they are running out of resources to pay a mortgage balance that is based upon a valuation that was never valid in the first place.

With no proper redress of grievances from government despite thousands of cases showing that the banks were engaged in the largest economic crime in human history, these people will be forced to make the decision of strategic default — albeit on loans that are probably invalid starting at origination for reasons expressed in most of recent articles.

As pensions get slashed, household income continues to drop, wages are cut and expenses rise, it is fantasy to think or believe that most of these people won’t eventually walk from their homes, grieving over their loss of lifestyle and loss of social networks built up over years or even decades where homeowners were scammed into refinancing their homes based upon fraudulent appraisals.

The goal of the banks in pushing foreclosures is obvious. They are not stupid. The lower they can get housing prices, the less it will cost to buy them and the more profit they will get when they sell or rent them. Where they are mistaken is that they seem to believe that the bottom is near, and that their profits from these foreclosures will materialize anytime soon. True, since they were neither the lender who funded the loan nor were they the purchaser who bought the obligation, note and mortgage, whatever they get is profit — the ultimate “free house.”

When you combine the huge numbers of homes where the homeowners are declared delinquent or in default and combine those with the even larger number of homes where the owners simply cannot stay, there is nothing other than an over-abundance of supply and an underwhelming number of people who are willing or able to buy.

lps-underwater-borrowers-face-challenges-if-prices-drop-again

BOA DEATH WATCH: Ironic Twist for Zombie Banks

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CITI and BOA Headed for Extinction

Editor’s Notes and Analysis:  

The bottom line here is that I have yet another prediction and I am just as certain of this as the ones Brad Keiser and I issued in September, 2008. Actually it is the same prediction all over again and for pretty much the same reason. I am not just boasting when I say that every single prediction, description and process I have been writing about has turned out to be dead on right despite the jeers it received when published. I actually have some people running through the books and the more than 3,000 Blog Articles to list those predictions, give you the cite, and describe the outcome.

In, 2007 when the DOW was around 14,000 I predicted that it would crash with a low in the 5,000 range, a rebound and then equilibrium in the 7,000 range. If you don’t want to wait for our article on our predictions and their accuracy, go look it up for yourself right here on this blog. And the reason was that the banks were playing a trick on the market and our society. They were merely the conduit for a financial transaction between investor lenders and the homeowner borrowers. They had forced appraisals into uncharted territory that we won’t see again for at least 30-40 years.

The trick was that they created a paperwork trail that they controlled absolutely, and financial trail of self-dealing that remains hidden to this day. Those deals are now dead branches hanging off of a dead tree. By originating the loans with “bankruptcy remote” vehicles the banks made it appear as though the transaction was set in stone (or rather on paper) and the appearance of the documents was like any other real estate transaction — so even seasoned professionals (at first) didn’t have a clue what was going on).

The paperwork was all about a story of a financial transaction that never happened. With very few exceptions none of the terms, conditions and recitals in the promissory note, mortgage (Deed of Trust), Settlement statement (HUD-1), Good Faith Estimate (GFE) or other disclosures  had any basis in fact. There was no financial transaction between the named parties. Consumers take out loans all the time with the assumption that the originator of the loan is the creditor in the transaction and that they are getting money or value from that originator.

Consumers also assume that the terms of repayment offered to the lender were the same as the terms offered to the borrower. And therefore the consumers assume that if the “Loan” is secured on personal property or real property, that the collector calling them  has every right to demand payment and enforce the repossession of the personal property or the foreclosure of the real property. But this wasn’t the case.

The investor lenders took it as an article of faith that banks with reputations dating back into the 1800’s wold want to keep that reputation intact. In fact the quasi public rating agencies made the same assumption. And everyone assumed that NOBODY would want to make a loan that was required to fail in order for the banks to make the ungodly amounts of money they made.

As we predicted over the last 3 years, the ratings of the big banks that led the way down the securitization rabbit hole, are headed toward junk status. As one article in the New York Times puts it, think about what would happen to your life if your credit rating went from 850 to 600 or lower. The debts of the major banks have now been reduced to near junk status and they are still headed down.

The reason these rating agencies have struck down the ratings is that they too were tricked at the front end when they gave investment grade ratings for pension funds to invest — without such ratings, the pension funds, City operating funds, sovereign wealth funds, were not allowed to make the purchase. So the game was on at the beginning to buy their way into the agencies with fishing trips and other inducements and threats, to get the rating necessary in order to receive money from public and private pension funds and trusts.

Now those rating companies have done what they should have done at the beginning. If they had done the due diligence, the entire scheme would have failed on the front end, and if the appraisers were more strictly regulated under threat of huge penalties and liabilities, the transactions would have failed on the back end.

As stated on these pages for months, these big banks are neither big nor banks. They claimed ownership of loans for the sole purpose of trading an ever widening tree of what were once legitimate hedge products wherein an investor protects themselves as to risk of loss by paying a premium that will reduce the return they’re getting but virtually eliminates the possibility of risk.

With loans, it was a simple proposition. Armed with a Triple A rating from the ratings companies, investment bankers sold loans, bundles and bonds forward when there was nothing to sell. Armed with fraudulent appraisals, documents, and disclosures, originators would offer fictitious loan products that bore no relationship to the loans offered to the lenders.

Now the rating companies have examined the books, records and process of these loans and arrived at the same conclusion we reached in 2008. None of these loans were owned by the banks, none of the obligation was subject to any documentation in favor of the actual lenders, and the “assets” on the books are pure fairy tails because they never owned the loans or the bonds. And because of a rule that allows banks to report markdowns for assets held in the United Stated states, but allows them to ignore the write-downs for “foreign” investments, they are able to lie about the assets nd ignore the incredibly huge liabilities facing these banks.

BOA is  dead man walking masquerading as what was once a bank. It cannot recover. Neither can Citi, and there is a big question mark over JP Morgan Chase. Two Banks are about to fall like the twin towers — BOA and Citi. Besides a total loss for the shareholders and most of the creditors, it will release millions of homes from the threat of foreclosure and allow for recovery of millions of homes that were illegally foreclosed. The rating agencies have realized that the foreclosures were merely a device to mask the loss and throw it onto investor lenders. But the rating agencies understand fully now that the pension fund would be violating law and contract by taking loans already declared in default. So for the lawyers out there — there was an offer, no acceptance (nor any possibility of acceptance), and no consideration for the transaction the banks want to use to pitch the loss onto the investor.

That loss cannot be thrown onto the investors because the deal the investors bought was not executed. They didn’t get a good loan within 90 days. Now when a Judge enters a foreclosure order or judgment, the Judge doesn’t realize that he has opened a can of worms. because the main interest (the loss of real creditors) was just litigated without notice or the ability to appear. And the implication of each such order and judgment is that the loan actually made it into a pool, when there were no pools, there are no pools, and the money the dealers took from the government (a) should have been paid to the investors (b) should have been paid only to the extent of their loss — not a multiple payment when the loan or “pool” failed and (c) and those payments (over leveraged in every case) exceeded the amount of the loan to the borrower or the obligation to the investor.

By entering that order, the Judge is saying to investors that THEY are deadbeats unworthy of due process. By entering that order, the Judge has ruled that contrary to the provisions of the pooling and servicing agreement, prospectus and the Internal revenue Code, he is making a factual and permanent finding that the investor must NOW accept and did accept a defaulted loan that would have been rated below junk.

There is an old expression that applies here. “You can’t pick up one end of the stick without picking up the other.” You can’t screw the homeowner borrowers also without screwing the investors — pension funds etc.. The rating agencies have come to what is a startling conclusion for them — the assets are not real and the liabilities are grossly understated. The rating for these “banks” is about to be cut to junk status or below. Citi and BOA are headed for extinction sometime in the next 6 months (last time we said 6 months it was 6 weeks, when we predicted the fall of the banks, and the order in which they would fall).

So that is the prediction — no matter who is elected to the White House or Congress or legislatures or state law enforcement the banks and the regulators stepped on a rake in 1998 and it is now coming up to bash their head into tiny pieces that more than 7,000 performing and conforming banks are ready and willing to clean up. BOA and Citi are done.

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EDITOR’s comment: Everyone seems to agree that nobody really knows the identity of the creditor in the millions of mortgage transactions that were created from 2001 to 2008. Yet the general consensus from the administration and the media is that these transactions should be enforced anyway. The idea of enforcing a transaction in which only one of the parties is known is enough to  make the authors of any of the major legal treatises turn over in their graves. It is so obviously ridiculous that one need not consult the United States Constitution on due process, nor any statute or case in common law. Nevertheless this elephant continues to sit in our living rooms claiming ownership of our home. Thus a fictional character is prevailing over the rights of real people owning real homes who were tricked into fraudulent loan products based inflated appraisals that created the reasonable assumption on the part of the borrower that the “experts” had verified the fair market value and validated the viability of the loan product.


Most people understand that these homeowners were victims of fraud more than they were borrowers of money for a legitimate transaction. These title twisting transactions continue to become increasingly convoluted as the “ownership” of the “loans” becomes increasingly blurred by a continuing process of transfers,  “sales,” auctions without creditors or bona fide bidders, and the continuation of the strategy of moving the goal post every time anyone wants to examine it.


In the article below the Obama administration is described as having exhausted all possible remedies and is now faced with the untenable choice of future homeowners versus current homeowners. This is delusional thinking based on business dogma. The “experts” are now all raising their voices in a growing chorus of “let the market collapse.” It is only natural for these so-called experts to suggest such a dark scenario.

Under the business dogma currently driving the limp choices being made by the administration and by Congress, a crash in home housing prices from current levels would produce the foundation for a bull market in housing prices that would be reduced to oversold levels. This so-called bull market could only be fueled by speculators who are sitting on piles of money. It certainly won’t be fueled by the average consumer whose median income is dropping, whose wealth has been drained through Wall Street speculation, whose savings do not exist, and whose credit has been exhausted. In short, this brilliant strategy of giving up on the housing market can only result in a further widening between those who have money and wealth and those who do not and now have no prospects.


I know that most people do not have the time to be students of history. But a little time spent on Google or Wikipedia will show you that no society in human history has ever been sustained on a status quo that excluded  an expanding and vibrant middle class, with abundant opportunities for improvement in the financial condition of anyone in any class of that society. There is an answer to this problem but it is being ignored for political reasons. We cannot instantly raise median income for tens of millions of people. We can and we should lay the foundation for abundant opportunities for improvement in their economic and social condition, but this will not solve the current situation.


The current situation is that we are sitting on the abyss. And it seems that the general consensus is to see no evil, hear no evil and therefore ignore the only realities that must be addressed. We cannot escape the fact that in our current situation our economy is driven by consumer spending. We cannot escape the fact that consumer spending cannot rise in the short term by an increase in median income. We cannot escape the fact that consumer spending can only rise by presenting the consumer with a proposition that is acceptable––one in which both real and apparent consumer wealth is increased. Unless the deal is real, the current lack of confidence in the economy, our society and our government will prevent any increase in consumer spending and therefore prevent any improvement in our current economic decline.


Consumers have made it clear that they do not trust the housing market, they will not accept a continuation of credit driven spending, and that they are alone in fending for themselves and future generations. Therefore the savings rates on what little money consumers are receiving as income are increasing at unprecedented rates. This money is not going to come out of savings and into the marketplace and a general rush towards spending that will revive the old consumer driven economy unless the basic and real concerns of consumers are directly addressed with reality and conviction. The perception (delusion) is that consumers are a bottomless well from which  infinite sums of money can be withdrawn by way of taxes, insurance, subsidies to big business, and a government that is primarily concerned with the appearance of stability on Wall Street rather than the reality of amends that need to be offered.


I am not a pundit. I am only seeking to apply common sense to a situation that seems to be wallowing in dogma, and political maneuvering. In my view they are arranging the deck chairs on the Titanic. In my view the worst is yet to come. In my view under the worst-case scenarios our way of life, our society, our economy and our government will be destabilized unless we open our eyes. It’s true that we don’t have a lot of tools left in the box. But then again we never did have a lot of tools in the box.

A great fraud has been committed on American and foreign taxpayers and investors as well as American and foreign buyers of real estate, commercial and residential. The perpetrators of this great fraud were intermediaries between the people who had money and the people who didn’t. If an honest attempt was made to do the right thing, we would do more to improve the confidence of our own consumers as well as foreign investors than any of these of exotic and creative plans to shore up an economy based on illusion and delusion.


If we already know that the identity of the creditor is in doubt, then we already have a perfectly legitimate legal reason to stop foreclosures. If we already know that the prices that were used in many fraudulent loan transactions were not equal to any sustainable measure of fair market value and that neither the borrower nor the actual lender (investor) was aware of this misrepresentation, then we already have a perfectly legitimate and legal reason to restructure all the affected loans, especially since most of them are controlled through guarantees of federal agencies if not outright ownership by those federal agencies. If we already know that somebody probably exists who has actually lost money on these transactions, or some of them, then it shouldn’t be hard for them to come forward, provide the necessary accounting and proof of ownership, and be included in the restructuring of these mortgage loans.


What is stopping the use of common sense is that we are relying on the very intermediaries who caused the problem in the first place and who have everything to gain by a continuation of the foreclosures, by a continuation of the free fall in housing prices, by a continuation of the charade of modifications, and by the speculative bull market that is currently being constructed right under the nose of this administration. That bull market may have a temporary effect on the economy (or at least the indexes that  measure economic results) and of course the stock market, but in reality it is easy to see that such a bull market will only be another bubble which will cause more devastation and further undermine confidence in the American economy and the American government.

HERE IS WHAT A FAIR RESOLUTION WOULD LOOK LIKE:

  1. ALL HOMES ELIGIBLE (INCLUDING REO). Forget the blame game
  2. ALL MORTGAGE BONDS ELIGIBLE. Forget the blame game
  3. REGULATE SERVICING COMPANIES LIKE UTILITIES OR REPLACE THEM WITH COMPANIES THAT WILL DO THE JOB
  4. SUSPEND ALL FORECLOSURES, SALES, JUDICIAL AND NON-JUDICIAL. SUSPEND MORTGAGE PAYMENTS, ALL MORTGAGES 90 DAYS.
  5. OFFER INTEREST RATE ONLY RE-STRUCTURE TO HOMEOWNERS THAT REDUCES FIXED INTEREST RATE TO 2%
  6. OFFER PRINCIPAL REDUCTION TO 110% OF FAIR MARKET VALUE WITH 5% FIXED INTEREST RATE, TOGETHER WITH AN EQUITY APPRECIATION CLAUSE OF 20% FROM REDUCED PRINCIPAL.
  7. OFFER CERTIFICATION OF OWNERSHIP FROM FEDERAL AGENCY TO THE HOMEOWNER.
  8. CREATE FAST TRACK QUIET TITLE ACTIONS TO RESOLVE ALL TWISTED TITLE ISSUES RESULTING FROM SECURITIZED LOANS
  9. OFFER TO SERVICE THE NEW LOANS FOR INVESTORS WHO PROVE OWNERSHIP.
  10. CREATE CUT-OFF DATE: HOMEOWNERS WHO DON’T TAKE THE DEAL  EITHER STAY WITH EXISTING TITLE AND MORTGAGE SITUATION OR GO THROUGH FORECLOSURE. INVESTORS WHO DON’T TAKE THE DEAL EITHER STAY WITH EXISTING TITLE AND RECEIVABLE SITUATION OR SUE THEIR INVESTMENT BANKERS.

I KNOW. WHO HAS THE POWER TO DO THIS? OBAMA, THAT’S WHO. NO NEW REGULATIONS ARE REQUIRED. STATE AND FEDERAL LEGISLATION TO PUT A “CAP”ON THIS IS UNNECESSARY, BUT IF THEY WANT TO DO IT THEY COULD DO IT AFTERWARD. The immediate result is that the downward pressure on housing would vanish. The upward mobility of consumers would instantly appear. The confidence by consumers that the government cares more about them than the oligopoly of banks who appear to be running the country would soar, as would their spending. World-wide confidence in the American financial system would soar because they would see the end of illusion and delusion.

And let’s not forget that the American moral high-ground would be restored, which is the only real basis for the consent of the governed here and around the world.
—————–

Housing Woes Bring New Cry: Let Market Fall

By DAVID STREITFELD

The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.

Over the last 18 months, the administration has rolled out just about every program it could think of to prop up the ailing housing market, using tax credits, mortgage modification programs, low interest rates, government-backed loans and other assistance intended to keep values up and delinquent borrowers out of foreclosure. The goal was to stabilize the market until a resurgent economy created new households that demanded places to live.

As the economy again sputters and potential buyers flee — July housing sales sank 26 percent from July 2009 — there is a growing sense of exhaustion with government intervention. Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.

When prices are lower, these experts argue, buyers will pour in, creating the elusive stability the government has spent billions upon billions trying to achieve.

“Housing needs to go back to reasonable levels,” said Anthony B. Sanders, a professor of real estate finance at George Mason University. “If we keep trying to stimulate the market, that’s the definition of insanity.”

The further the market descends, however, the more miserable one group — important both politically and economically — will be: the tens of millions of homeowners who have already seen their home values drop an average of 30 percent.

The poorer these owners feel, the less likely they will indulge in the sort of consumer spending the economy needs to recover. If they see an identical house down the street going for half what they owe, the temptation to default might be irresistible. That could make the market’s current malaise seem minor.

Caught in the middle is an administration that gambled on a recovery that is not happening.

“The administration made a bet that a rising economy would solve the housing problem and now they are out of chips,” said Howard Glaser, a former Clinton administration housing official with close ties to policy makers in the administration. “They are deeply worried and don’t really know what to do.”

That was clear last week, when the secretary of housing and urban development, Shaun Donovan, appeared to side with current homeowners, telling CNN the administration would “go everywhere we can” to make sure the slumping market recovers.

Mr. Donovan even opened the door to another housing tax credit like the one that expired last spring, which paid first-time buyers as much as $8,000 and buyers who were moving up $6,500. The cost to taxpayers was in the neighborhood of $30 billion, much of which went to people who would have bought anyway.

Administration press officers quickly backpedaled from Mr. Donovan’s comment, saying a revived credit was either highly unlikely or flat-out impossible. Mr. Donovan declined to be interviewed for this article. In a statement, a White House spokeswoman responded to questions about possible new stimulus measures by pointing to those already in the works.

“In the weeks ahead, we will focus on successfully getting off the ground programs we have recently announced,” the spokeswoman, Amy Brundage, said.

Among those initiatives are $3 billion to keep the unemployed from losing their homes and a refinancing program that will try to cut the mortgage balances of owners who owe more than their property is worth. A previous program with similar goals had limited success.

If last year’s tax credit was supposed to be a bridge over a rough patch, it ended with a glimpse of the abyss. The average home now takes more than a year to sell. Add in the homes that are foreclosed but not yet for sale and the total is greater still.

Builders are in even worse shape. Sales of new homes are lower than in the depths of the recession of the early 1980s, when mortgage rates were double what they are now, unemployment was pervasive and the gloom was at least as thick.

The deteriorating circumstances have given a new voice to the “do nothing” chorus, whose members think the era of trying to buy stability while hoping the market will catch fire — called “extend and pretend” or “delay and pray” — has run its course.

“We have had enough artificial support and need to let the free market do its thing,” said the housing analyst Ivy Zelman.

Michael L. Moskowitz, president of Equity Now, a direct mortgage lender that operates in New York and seven other states, also advocates letting the market fall. “Prices are still artificially high,” he said. “The government is discriminating against the renters who are able to buy at $200,000 but can’t at $250,000.”

A small decline in home prices might not make too much of a difference to a slack economy. But an unchecked drop of 10 percent or more might prove entirely discouraging to the millions of owners just hanging on, especially those who bought in the last few years under the impression that a turnaround had already begun.

The government is on the hook for many of these mortgages, another reason policy makers have been aggressively seeking stability. What helped support the market last year could now cause it to crumble.

Since 2006, the Federal Housing Administration has insured millions of low down payment loans. During the first two years, officials concede, the credit quality of the borrowers was too low.

With little at stake and a queasy economy, buyers bailed: nearly 12 percent were delinquent after a year. Last fall, F.H.A. cash reserves fell below the Congressionally mandated minimum, and the agency had to shore up its finances.

Government-backed loans in 2009 went to buyers with higher credit scores. Yet the percentage of first-year defaults was still 5 percent, according to data from the research firm CoreLogic.

“These are at-risk buyers,” said Sam Khater, a CoreLogic economist. “They have very little equity, and that’s the largest predictor of default.”

This is the risk policy makers face. “If home prices begin to fall again with any serious velocity, borrowers may stay away in such numbers that the market never recovers,” said Mr. Glaser, a consultant whose clients include the National Association of Realtors.

Those sorts of worries have a few people from the world of finance suggesting that the administration should do much more, not less.

William H. Gross, managing director at Pimco, a giant manager of bond funds, has proposed the government refinance at lower rates millions of mortgages it owns or insures. Such a bold action, Mr. Gross said in a recent speech, would “provide a crucial stimulus of $50 to $60 billion in consumption,” as well as increase housing prices.

The idea has gained little traction. Instead, there is a sense that, even with much more modest notions, government intervention is not the answer. The National Association of Realtors, the driving force behind the credit last year, is not calling for a new round of stimulus.

Some members of the National Association of Home Builders say a new credit of $25,000 would raise demand but their chances of getting this through Congress are nonexistent.

“Our members are saying that if we can’t get a very large tax credit — one that really brings people off the bench — why use our political capital at all?” said David Crowe, the chief economist for the home builders.

That might give the Obama administration permission to take the risk of doing nothing.

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