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Blog of Mass Destruction

Let's Talk About The Foreclosures

By The Reverend Published: August 21, 2007


So here's the bad news about mortgage foreclosures......

Foreclosure filings rose 9 percent from June to July and surged 93 percent over the same period last year, with Nevada, Georgia and Michigan accounting for the highest foreclosure rates nationwide, a research firm said Tuesday.

...The figures are the latest measure of the ailing housing market, which has seen defaults and foreclosures soar as financially strapped borrowers have failed to make payments or find buyers.

In all, 179,599 foreclosure filings were reported during July, up from 92,845 in the year-ago month, according to Irvine-based RealtyTrac Inc.


"While 43 states experienced year-over-year increases in foreclosure activity, just five states.... California, Florida, Michigan, Ohio and Georgia.... accounted for more than half of the nation's total foreclosure filings," RealtyTrac Chief Executive James J. Saccacio said.Link

We should probably ask why this is happening. Right? The Yahoo piece saves the 'why' for the last paragraph....

Loan types seeing higher delinquencies and defaults in general are home equity loans or second mortgages used to cover a downpayment, subprime loans to people with shaky credit histories, and Alt-A loans, which can include interest-only and adjustable rate mortgages sold with little or no documentation.


Home equity loans, because the interest rates used to be 3.75 and 4% and now mine, for example, is 8.25%. Covering a down payment, because the borrowed money was often times used to finance another real estate venture. Subprime loans, we'll get to this later. Alt-A loans(for those who like to gamble) interest only and adjustables, ARM's.

It used to be against the rules to finance a construction or real estate project with borrowed money as collateral. Within the last few years I've been told in a seminar that I can get 107% of the value with nothing down. Now it's probably more.

I submit that a good portion of what has happened is a direct result of deregulating the big three: insurance, banking and brokering, so that each could sell one anothers "products". It was a more free market approach to shuffling paper. More layering of people collecting more and higher fees. Fewer checks and balances. Lower thresholds. You know, let the market work its magic. Less restricted and free to fill those demands.

Conservatives I've listened to, predictably, blame most of this on the buyer's unscrupulousness when applying for money. There is, of course, some truth in that, only it's not the whole or even the half of the problem.

It is the job of the lender to make sure the loan they are making is copestetic. But with loan brokers who are only in it for the fees and then quickly sell the mortgages to others...why would they care if the loans went sour? But you see....they were given an incentive to cheat, as it were. That's what deregulation usually brings with it, an incentive to cheat. Fewer checks, more paper shufflers, less oversight, lower thresholds.

The very reason conservatives love deregulation so much is because it gives more opportunities to cheat and game. I mean, consider the Rubber Stamper Republicans in Congress who refused to "regulate" the Codpiece through oversight. It just gave him more opportunity to cheat, opportunity he took full advantage of. Same thing with the people responsible for money dealings.

It is a fact that there are only so many people who can buy and own a home, yes, birth rate, yes, immigrants, yes.....but it still remains...the "market" is only so big and attempting to force the market bigger brings risk. What deregulation does, I think, is artificially inflate the market through players gaming the 'fewer rules, less checks,' system.

In my view there should be a call to stiffen regulations, you know, stifle that free market paper shuffling a bit more. Conservatives, perhaps, would like to have Commander Guy declare the mortgage applicants "enemy combatants" and then float a new IPO, with totally borrowed, government guaranteed money of course, in order to fill the new demand for detention centers and services, followed by the awarding by The Dick of a no-bid contract and then later, after the demand lessened for detention centers and services, they would call for government tax dollars to prop up their failed "vital to national security interests" enterprise. Something like that.

Oh and by the way...gotta love those 39 year house mortgages I'm seeing and in addition, what I believe will be the next big thing to come along where folks will ask the question, "I wonder why they let them do that?"...... it comes with it's own brand name too..... Reverse for those in a news story coming your stories that might include the word 'fraud' in them. Just sayin'.



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