Busted: Bankers and The Global Economy

July 25, 2008

Everybody Talking About U.S. Foreclosures

Everybody is into reporting foreclosures, but little is being done about the foreclosure frenzy until October 1st. Matters are made worse by the fact that system is not easily reformable in its current configuration. The best answer rests in trying to cleanse the market of problem loans through refinancing, which the U.S. government has taken on as their task. 220,000 homes were lost to bank repossessions in the second quarter as the banking and mortgage securities collapse continues.

A report form the National Association of Realtors revealed that existing home sales had declined again as the number of homes for sale continued to rise. The U.S. government reported home prices dropped again in May. Congress struggles to pass a housing rescue bill that will make FHA-insured loans available to many at-risk borrowers through Fannie Mae and Freddie Mac, putting the government on the line for any continued failures. Hopefully, Fannie and Freddie will no longer involve themselves in securitized mortgage loans. However, the Fed and U.S. Government have declined to state that these kinds of securities should be avoided by the industry and like it or not, they are part of the industry.

The measure in Congress is expected to be enacted quickly since President Bush no longer opposes it. There is a lot of collateral damage that the economy and home buyers must endure before October 1. The country still has this quarter to go with few realistic provisions to avoid foreclosure. Securitized or collateralized loans will continue to impact investors and the industry. Bankers are now running on automatic as houses are snatched from home buyers, many that are no longer employed because of the ailing economy, punctured by the banking and mortgage industry themselves. The vicious cycle is without compare.

The talking heads in Congress encourage lenders and mortgage servers to delay taking action against delinquent borrowers before the new law takes effect. Of course, we still live in a free country. There is no law against foreclosure under proper and legal circumstances. Perhaps, that is the real key to this debacle. If a banker has any concerns about the legitimacy of any given loan, he’d better cool his heels on foreclosure. Unfortunately, there is a question as to whether the industry is savvy enough to know the difference in the short-term. The FBI is watching the backs of bankers with keen interest. Could mortgage services be far off from review as the latest vogue in FBI action?

* For more details on the topic of foreclosure, input the word “foreclosure” in the search box in the right column of this website.

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1 Comment

  1. First rate.

    Comment by Gabriella Barrera — July 28, 2008 @ 8:09 pm


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