New Year and New Issues
Image by niallkennedy via Flickr
CNBC is a fickle news source. They have people predicting US Dollar-centric attitude and investments. The housing issue has bottomed, people are flocking to stores, restaurants and other delights. However, take away the platitudes for their anchors’ favorite stocks and investment strategies, and a different set of issues are overlooked.
I am an optimist for investing and making money. Unfortunately, the US will be the strongest economy in a global economic system. Not a single person can predict or assume the right investment strategy or choices. There is one prediction that I can state with a clear understanding and knowledge. Real estate still is the core of the US economy. It always has an affect on credit availability and liquidity. We saw this in 2007-08.
In the next six months, many people who wish to obtain a loan modification will be denied. Many banks will offer either a short sale with cash for moving or deed in lieu before forcing a foreclosure. Why? FHA loans, under the new federal rules, become unmodifiable due to stricter income requirements. Also, previously modified loans requiring a subsequent modification are being denied under the FHA modification rules.
The next phase is the crucial. The moratorium on foreclosures being lifted will see foreclosures previously halted, or postponed, be processed and enter the statistical data sets. This is due to the tighter guidelines on how foreclosures are processed and executed. Once the foreclosures enter the economy, many will believe it is a second recession, and not a recovery.
These critical issues listed above is due to the public’s demand for restrictions on banks and lenders, and made a reality by Washington D.C. Now, instead of allowing the market do what is normal, i.e. clear the bad transactions at the normal time, the US postponed the reality of the situation. Basically, what was basically postponed by the moratorium, backlog of paper, and new income guidelines required by the Federal Reserve, FHA, Fannie Mae and Freddie Mac, modifications and foreclosures will increase and resort in a devaluation in the real estate market.
Again, I blame not the banks and lenders, but the American people and government who forced the banks and lenders to lend to people who really could not afford homes. It was banks and lender who created the lending programs; this is true. However, the US Government, with the Community Redevelopment Act of 1996, forced banks and lenders to provide loans, or be charged with Title VIII (Civil Rights Act of 1968) penalties. These threats of prosecution under Title VIII, regardless of ability of people to afford the loan, required banks and lender to create the programs that helped trigger the economic collapse.
- 5 Events That Rocked Housing in 2011 (mmejocelyne.wordpress.com)
- Fannie Mae Stops Foreclosures - Temporarily - Real Estate - Foreclosures (rawbusinesslaw.com)
- Foreclosures Rise, Delinquencies Stable (blogs.wsj.com)
- Goldman’s Hatzius: The American Housing Market Is Almost Out Of The Hole (businessinsider.com)
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