Goodbye Blue Monday

Discussion in 'Wall St. News' started by dearinfinity, Apr 16, 2009.

  1. I told everyone here three months ago a second, bigger wave of foreclosures was building, based on conversations with a friend who is now a full partner (was a junior partner uo until three months ago) at a large Miami law firm, who works in their foreclosure department (residential and commercial properties).

    Second wave of foreclosures bearing down
    Drew Voros, Business editor
    Posted: 04/14/2009 03:01:32 PM PDT
    Updated: 04/14/2009 05:27:12 PM PDT

    While the term tsunami generally refers to one gigantic tidal wave, there is an expectation that subsequent destructive waves will follow the Big One.

    That is the scenario shaping up in the rough seas of our housing market. Just when we thought stabilization was taking root in residential real estate, a second powerful wave of foreclosures, called the shadow market, is poised to come crashing down on our housing shores.

    For the past two months or so, and in some cases longer, the country's biggest banks, mortgage giants Fannie Mae and Freddie Mac, and others have been honoring voluntary moratoriums on foreclosures for different reasons and time periods.

    Most were giving President Barack Obama time to air his war strategy for the reeling housing market, which we now know unfortunately favors refinancing over foreclosure prevention. Safe for the long term, but dangerously weak in stemming the next tide of foreclosures.

    The beginning of April marked the end of the timeout, and you can expect the business of foreclosures to commence in earnest.

    With a two-month respite in a year that should see more foreclosures than last year's 3 million, lost time will have to be made up. Instead of having those new foreclosure listings hitting the market over 12 months, it will be spread in two-thirds of the time. Five million foreclosed homes in 2009 is highly likely.

    Another factor that will push more foreclosures onto the market is a sweet plan for banks that will see the federal government subsidizing private equity in buying their toxic assets, which generally are related to residential real estate. When that happens, there will be defaulted mortgages, mortgage-backed securities and even hard assets such as homes that banks have been sitting on suddenly being sold and resold.

    The end of the moratoriums coupled with the buying of mortgage-related assets by taxpayers could easily flood housing markets like the Bay Area with more foreclosures in a shorter amount of time than anything we have seen before.

    But we allowed two presidential administrations and Congress to take their eye off the foreclosure ball, the one that former Treasury Secretary "Hank" Paulson teed up for us.

    Remember how we were told that Congress had to pass that first round of $700 billion in bailout money as Wall Street melted at our feet? The primary reason was the same foreclosure problem we're talking about now, but Paulson quickly took earmarked-bailout money from it like Lucy snatching away the football as Charlie Brown attempts a kick.

    We traded dealing with toxic mortgage-related assets in exchange for things like $200 billion in pirate's ransom to pay for the sins of AIG, BofA, Citigroup.

    The housing recovery is primed with a bevy of tax credits, low financing, great prices and a sense that we may be at the bottom of this fall. But because the mounting foreclosure problem has been fumbled by our elected leaders in Washington, D.C., it is poised to come back and haunt us.

    With some 600,000 people losing their jobs every month, the shadow supply of potential foreclosures will be reloaded monthly for some time to come. Until we tackle this straight on, the economy will remain grounded.
  2. Yeah-- I read this post of yours. Well, I'm interested to see if JPM's cooked books will be able to offset the shrinking Chinese GDP and the end of the mortgage moratoriums. Regardless, I'm intending to play some strikes @ the 48 level for SRS.
  3. Bloomberg article:

    800k+ foreclosures for Q1 with 1 million possible in Q2 based on March totals.