Fear of Foreclosure

By VALERIE COTSALAS

Published: April 22, 2007

WHEN Matilde Amico’s employer cut back her overtime in September, her working hours as a dispatcher for an alarm company fell from a high of 70 hours a week to about 40.

November she had missed two mortgage payments on the three-bedroomranch in Mastic that she had bought as a single mother in 1989, and hadkept by working either two jobs or long overtime hours. She received anotice from her lender threatening foreclosure.

“At that point, I didn’t know what I was going to do,” Ms. Amico said recently. She lives in the house with her 24-year-old son, whose own small business recently failed. “I could see the sheriff coming and putting all of my things on the street.”

Ms. Amico told her story at a news conference held on April 12 by Suffolk County officials to announce that there is help available for homeowners facing foreclosure.

The county at first said the number of foreclosures on Long Island in 2007 was expected to total 18,854, citing data received from the office of Senator Charles E. Schumer.

But the senator’s office later said that the county had misinterpreted the figures and that the 18,000 represented mortgages whose interest rates are likely to rise substantially this year.

It is a big step from rising mortgages rates to foreclosure, however. In all of 2006, 192 homes were lost through foreclosure on Long Island, according to RealtyTrac Inc., a firm that tracks foreclosures nationwide. (Other homes, of course, may have been sold to head off legal action.)

Foreclosure actions are often a result of illness or loss of income, as in Ms. Amico’s case. But many also result from risky loans given to home buyers during the recent real estate boom, officials say.

Higher payments have come due on large numbers of subprime mortgages, putting more borrowers in difficulty. Such mortgages — which often start with low “teaser” rates and then spike up to higher levels after a few years — are usually made to borrowers who have poor credit backgrounds or whose income may not be high enough to comfortably afford larger monthly payments.

As Steve Levy, the Suffolk County executive, said at the meeting, “Now we’re starting to see that these folks are starting to fall behind on mortgage payments.”

One recourse, a service set up by the county, refers those facing foreclosure to counselors certified by the United States Department of Housing and Urban Development. The counselors can help homeowners take one of several possible paths, depending on the severity of their financial plight: renegotiate monthly mortgage payments; provide bridge loans that don’t have to be paid back until the house is sold or refinanced; refinance the mortgage to a lower interest rate; or sell the house and find other living arrangements. Nassau announced a similar program the same day. In Suffolk, the telephone number is (631) 853-4800; in Nassau, (516) 571-4663. The counseling and assistance are free.

In the three days after the announcement, Suffolk received nearly 300 calls from homeowners. Nassau reported 260 calls.

The county can also provide limited financial assistance, up to $1,000 per homeowner, from a federally financed homeless prevention program. “This isn’t throwing good money after bad,” Mr. Levy said. “Foreclosed homes become eyesores in the community; they devalue other homes nearby.”

A day before the Suffolk press conference, the Joint Economic Committee of Congress proposed in a report released in Washington that the government provide funds ($3,300 per household) to help prevent foreclosures nationwide.

In the report, Nassau and Suffolk Counties ranked 37th among the 50 metropolitan areas with the highest foreclosure rates in 2006. (Detroit-Livonia-Dearborn, Mich., was first.) Across New York, 13 percent of subprime loans were 60 or more days delinquent as of the end of February, up seven percentage points since February 2005, with the highest increases in Long Island, Dutchess County and New York City, according to the report.

While Ms. Amico had a fixed-rate 30-year mortgage, her situation illustrated how quickly even a solid homeowner can fall into dire straits. In her case, help came by way of a friend who referred her to the Long Island Housing Partnership, a nonprofit organization that provides free counseling and garners public funds to help build affordable housing.

Kisha Wright, a counselor at the partnership, called the lender who held Ms. Amico’s mortgage and tried to restructure the loan. When the bank turned Ms. Amico down, the partnership lent her $13,500 in New York State grant money. Together with $4,000 that Ms. Amico had saved, the amount covered seven missed mortgage payments. Meanwhile, Ms. Amico was able to restore her overtime hours.

Ms. Wright said that 59 homeowners facing foreclosure had come to the partnership for help in the last three months. In previous years, there would typically have been “only a handful” of such cases in the same period.

By the time Ms. Wright sees them, homeowners have typically missed 3 to 12 months of payments.

The situation is likely to worsen on Long Island and elsewhere in the country, local and United States government officials say.

“Subprime loan foreclosures are expected to increase in 2007 and 2008 as 1.8 million hybrid ARMs — many of which were sold to borrowers who cannot afford them — reset in a weakening housing market environment,” the Congressional report read. (Hybrid adjustable rate mortgages have rates that climb, but only after an initial rate that can be locked in for, say, 3, 5, 7 or 10 years.)

Borrowers with interest-only mortgages may eventually be saddled with an additional payment against the principal amount of the loan. That could as much as double monthly payments, according to Pearl Kamer, chief economist of the Long Island Association.

With a glut of homes on the market, she added, prices are declining, particularly for homes listed for more than $500,000. And lenders have tightened requirements for borrowers, fewer of whom can thus qualify for mortgages.

She said she believed all neighborhoods on Long Island would be affected, not only the less affluent ones. When real estate was booming, less affluent buyers “got into these more expensive homes with subprime mortgages,” Ms. Kamer said, often to move to a better school district.

As home prices drop, she said, many homeowners are stuck owing more money than they can recover by selling the house, which could lead to foreclosure if they are unable to keep up with the monthly payments.

Ms. Amico of Mastic said she was initially embarrassed to face Ms. Wright, the counselor who helped her. “I thought, what was this woman going to think of me?” she said.

But she later told her story publicly in the hope that others would swallow their pride and seek help. “She really helped me save my house,” Ms. Amico said of Ms. Wright. “She was with me from Step 1 all the way to the end.”

ECONOMIX; A Word of Advice During a Housing Slump: Rent

April 11, 2007, Wednesday

By DAVID LEONHARDT (NYT); Business/Financial Desk

Late Edition - Final, Section A, Page 1, Column 2, 1176 words



DISPLAYING ABSTRACT - Analysis of housing costs reveals that people who bought over last two years have paid more for their housing than renters; housing prices may not yet have fallen far enough for buying to look better than renting, except for people who plan to stay in a home for many years; realtors insist that now is time to buy, but skeptics point to extended slump in housing prices in 1990s, following last boom, and argue that buying has never been quite as beneficial as realtors and others who make money off home purchases would have you believes

House flippers flop as market cools

By RYAN NAKASHIMA, AP Business Writer Sun Apr 29, 8:01 PM ET

LAS VEGAS - In the rampant real estate speculation of the Las Vegas valley three years ago, people lined up outside Pulte Homes sales offices overnight as if they were waiting for the release of the latest video game console or hot new movie.

Having seen his house in an upscale part of suburban Henderson, Nev. jump $200,000 in value in 18 months, Sam Schwartz felt he couldn't miss any part of the boom.

He spent the night in the parking lot with TV, snacks and drinks, along with about a hundred other people.

Schwartz intended to buy a new home and then quickly sell it within the year — for a huge profit. Most people waiting were flippers just like him, he said.

"We had seen real evidence of what was possible in this crazy, inflated market, and we just wanted to get a piece of that investment equity," Schwartz said.

But when home prices unexpectedly took a backward step, many investors seeking to cash in quickly were left "upside-down," or owing more on their mortgages than what their homes were worth.

The result was a glut of homes in the marketplace, communities spotted with empty houses and for sale signs — and a foreclosure rate in Nevada that leads the nation as owners unable to sell became saddled with unbearable debt payments.

Foreclosure filings across the United States rose 47 percent last month from a year ago to 149,150 — one for every 775 households, according to statistics from Realty Trac Inc., a foreclosure listing service. And for the third straight month, Nevada's foreclosure rate led the nation when it rose 220 percent from a year earlier to 4,738 filings, or one in every 183 households.

In Clark County, which encompasses Las Vegas, one of every 30 homes began the process toward foreclosure last year.

The day Schwartz reserved his home, the sales staff was raising prices $20,000 after every fifth buyer came inside. The $500,000 house he and his wife were eyeing had shot up to $540,000 by the time they sat down. Somehow, it still seemed like a good deal.

"Everybody was thinking, 'Hey it's not the end of the world, because the homes across town are selling for $720,000. We have almost $200,000 in equity in the house and it isn't even built yet,'" Schwartz said.

He and his wife put down $5,000 on a home that would end up costing $560,000 with upgrades.

While the Schwartzes were able to cancel before closing on a property that suddenly was worth only $490,000 — and recoup their deposit on a legal technicality — others were less fortunate.

Schwartz, a 44-year-old life coach, said he "narrowly escaped financial disaster." But the effects of the housing crunch would reverberate for years, he said, something he expects to see among the clients he coaches to succeed in their lives and careers.

"There's going to be a lot of depression, a lot of anger. A lot drinking, gambling, and desperate stuff going on."

More than other states hit by the mortgage lending crunch, the high foreclosure rate in Nevada, California and Florida was driven by speculation, said Rick Sharga, vice president of marketing for Realty Trac.

"It was a combustible mix of risky loans and risky real estate deals," he said.

Russ Valone, the chief executive of research firm MarketPointe Realty Advisors, said speculators in San Diego were putting deposits on downtown condo units under construction, assuming they could sell them at a profit when they were finished.

"There were guys out there that were rolling the dice just as if they were going to Las Vegas," Valone said.

When the market slowed, many buyers forfeited their deposits, or let their properties get repossessed by the banks. As a result, the inventory of unoccupied condo units downtown since early 2005 has soared fivefold, he said.

New home builders are slowing down the pace of new projects in Las Vegas and are giving agents commissions of up to 12 percent and up to $100,000 in upgrades such as pools, granite countertops and appliances.

"The speculators completely dried up," said Paul Murad, a real estate observer and author of "Manhattanizing Las Vegas."

In Miami, the rush of condo building and speculative buying has slowed to a crawl, said real estate agent Penni Hurley. Florida's foreclosure filings rose 54 percent from a year ago to 14,303 in March, or one filing for every 511 households.

"The market was on steroids and now it's going through a much-needed correction," Hurley said.

With forecasts of a nationwide 1 percent home price decline this year, there's no way to flip for a profit now, said Jay Brinkmann, vice president of research and economics with the Mortgage Bankers Association.

"One would have to logically assume that (flippers) are no longer in the market," he said.

But some are still feeling the pain.

Jason Beaver, a Sunnyvale, Calif.-based Apple Inc. programmer, got caught up in the talk of the hot housing market from friends who bought multiple homes in Las Vegas and made a killing.

His name was drawn in a buyers' lottery in the Solera subdivision and he put $35,300 down on a $353,000 home in February 2004. The community is restricted to people age 55 or older; the 37-year-old Beaver had no intention of moving in.

That summer, the housing market began to soften. He nervously put the house on the market for a break-even price the same day escrow closed. He got no offers.

A tight market had suddenly become flush with resale homes as investors sought to cash out. Pulte was one of several builders to slash new home prices, in some cases by as much as $80,000 in a single day. Beaver and others are suing, but the company has said it was simply reacting to new conditions in an overheated market.

Beaver has been renting the home out for about a $1,000 a month, despite monthly expenses around $2,000.

And the supply of available homes is growing.

In March, the number of resale listings for single family homes, condos and townhouses in the Las Vegas valley grew 30 percent from a year ago to 27,282, according to the Greater Las Vegas Association of Realtors. Sales and the value of homes sold were both down 38 percent from a year ago. About half the homes available have been on the market for more than two months.

"Two years ago, you'd set a price that looked right and you'd get offers that were $20,000, $30,000, $40,000 over your list price. You have to be more realistic today," said Devin Reiss, president of the Realtors association.

With Nevada's fast-growing population and an estimated 8,000 net new residents coming to Las Vegas every month, experts predict the glut of housing will be cleared in six months to more than a year.

State lawmakers are considering a range of bills that clamp down on the easy mortgage lending that helped heat up the market, including making it a crime for lenders to issue mortgages with little or no verification of a borrower's ability to pay.

"The biggest loan I ever saw, a person bought a $1 million property and only had to come up with $1,000 in cash," said Scott Bice, the state's commissioner of mortgage lending.

"I don't think anything will ever prevent speculation," he said, but added that new regulations and tighter credit requirements by lenders will eventually return the market to the good old days: "When it takes good credit and money in a transaction to close it."

For those caught up in the frenzy of a few years ago, the changes come too little, too late.

Beaver figures he has spent $50,000 on his investment home, and will have to come up with $30,000 more to pay off the mortgage after he sells it at a loss.

While he's not completely sworn off real estate investing, Beaver said next time he'll try a more traditional approach — to buy and hold for the long term.

"The fast-growth, make-a-quick-buck real estate investment, I don't think I'll try again," he said.

British banks told to plan for 40% crash in housing

By Patrick Hosking

The Times, London

Thursday, November 16, 2006



Banks in the United Kingdom have been ordered by financial regulators to assess how they would cope in the event of house prices crashing by 40 percent. The instruction to include a housing slump scenario in their stress-testing models comes after the Financial Services Authority found that some banks were failing to include gloomy enough assumptions in their modelling.



The FSA said yesterday that an "appropriate" benchmark was to assume property prices fell by 40 percent and that 35 percent of mortgages in default ended with homes being repossessed. It stressed that this was not a forecast but a "severe but plausible scenario" and one that banks should examine when deciding how robust their balance sheets were.



In a speech to the British Bankers' Association yesterday, Clive Briault, the FSA's managing director for retail markets, remarked on banks' differing views over the size and impact of a house market downturn, and hence the need for reference points.



He also warned bankers to ensure that they have properly stress-tested their mortgage portfolios in the wake of decisions by some to lend people greater multiples of their incomes.



In a letter to bank chief executives last month the FSA accused some of failing to consider scenarios in which they might be forced into losses, dividend cuts or capital shortfalls.



"We were struck by how mild the firm-wide stress events were at some of the firms we visited," wrote the FSA's director of major retail groups, David Strachan.



A few banks were "weak in all respects" in stress-testing.



House prices fell about 15 percent nationwide in, and in parts of East Anglia by 40 percent, leading to repossessions, write-downs, and bank losses.



Banks are obliged to stress-test hypothetical adverse movements in asset prices, interest rates, and exchange rates to ensure that they have a sufficient capital cushion. But stress-testing is only as robust as the assumptions made.



The FSA move came as UK house prices grew at their fastest for four years, according to new figures from RICS.

Enter your land price concerns as a quotable quote on the Site Rating Defence Alliance blog.

"Is It Too Late to Get Out?"

Housing Bubble Boondoggle

April 24, 2007 By MIKE WHITNEY Treasury Secretary Henry Paulson delivered an upbeat assessment of the slumping real estate market on Friday saying, "All the signs I look at" show "the housing market is at or near the bottom." Baloney. Paulson added that the meltdown in subprime mortages was not a "serious problem. I think it's going to be largely contained." Wrong again. Paulson knows full well that the housing market is headed for a crash and probably won't bounce back for the next 4 or 5 years. That's why Congress is slapping together a bailout package that will keep struggling homeowners out of foreclosure. If defaults keep skyrocketing at the present rate they are liable to bring the whole economy down in a heap. Last week, the Senate convened the Joint Economic Committee, chaired by Senator Charles Schumer. The committee's job is to develop a strategy to keep delinquent subprime mortgage holders in their homes. It may look like the congress is looking out for the little guy, but that's not the case. As Schumer noted, "The subprime mortgage meltdown has economic consequences that will ripple through our communities unless we act." Schumer's right. The repercussions of millions of homeowners defaulting on their loans could be a major hit for Wall Street and the banking sector. That's what Schumer is worried about---not the plight of over-leveraged homeowners. Every day now, another major lending institution unveils its plan for bailing out the housing market. Citigroup and Bank of America have joined forces to create the Neighborhood Assistance Corporation of America which will provide $1 billion for the rescue of subprime loans. This will allow homeowners to refinance their mortgages and keep them out of foreclosure. The new "30- year loans will carry a fixed interest rate one point below the prime rate, putting it currently at 5.5 percent. There are no fees, and the banks pay all the closing costs." But why are the banks being so generous if, as Paulson says, "the housing market is at or near the bottom." This proves that the Treasury Secretary is full of malarkey and that the problem is much bigger than he's letting on. Last week, Washington Mutual announced a $2 billion program to slow foreclosures (Washington Mutual's subprime segment lost $164 million in the first quarter) while Freddie Mac committed a whopping $20 billion to the same goal. In fact, Freddie Mac announced that it "would stretch the loan term to a maximum of 40 years from the current 30-year limit." 40 years!?! How about a 60 or 80 year mortgage? Can you sense the desperation? And yet, Paulson says he doesn't see the subprime meltdown as a "serious problem"! Paulson's comments have had no effect on the Federal Reserve. The Fed has been frantically searching for a strategy that will deal with the rising foreclosures. On Wednesday, The Washington Post reported that "Federal bank regulators called on lenders to work with distressed borrowers unable to meet payments on high-risk mortgages to help them keep their homes". Huh? When was the last time the feds ordered the privately-owned banks to rewrite loans? Never--that's when. That gives us some idea of how bad things really are. The details of the meltdown are being downplayed in the media to prevent panic-selling among the public. But the Fed knows what's going on. They know that "U.S. mortgage default rates hit an all-time high in the first quarter of 2007" and that "the percentage of mortgages in default rose to a record 2.87%". In fact, the Federal Reserve and the five other federal agencies that regulate banks issued this statement just last week: "Prudent workout arrangements that are consistent with safe and sound lending practices are generally in the long-term best interest of both the financial institution and the borrowerInstitutions will not face regulatory penalties if they pursue reasonable workout arrangements with borrowers." Translation: "Rewrite the loans! Promise them anything! Just make sure they remain shackled to their houses!" Unfortunately, the problem won't be "fixed" with a $30 or $40 billion bailout scheme. The problem is much bigger than that. There is an estimated $2.5 trillion in subprimes and Alt-A loans---20% of which are expected enter foreclosure in the next few years. Any up-tick in interest rates or unemployment will only aggravate the situation. Kenneth Heebner, manager of CGM Realty Fund (Capital Growth Management), provided a realistic forecast of what we can expect in the near future as defaults increase. Heebner: "The Greatest Price Decline in Housing since the Great Depression" (Bloomberg News interview) "The real wave of pain and foreclosures is just beginning.subprimes and Alt-A are both in trouble. A lot of these will go into default. The reason is, that the people who took these out never really intended to fully service the mortgage---they were counting on rising home prices so they could sign on the dotted line without showing what their income was and then 2 years later flip into another junk mortgage and get a big profit out of the house with putting anything down "There's a $1.5 trillion in subprimes and $1 trillion in Alt-A the catalyst will be declining house prices which is already underway. But as we get a large amount of these $2.5 trillion mortgages go into default, we'll see foreclosed houses dumped on an already weak market where homebuilders are already struggling to sell there houses. The price declines which have started will continue and may even accelerate in some of the hotter markets. I would expect that housing prices in "2007 will decline 20% in a lot of markets". "What you are going to see is the greatest price decline in housing since the Great Depression..The one thing that people should not do, is go near a CDO or a residential mortgage backed security rated Triple A by Moody's and S&P because these are going to get down-graded by the hundreds of millions---because they are secured by subprime and Alt-A mortgages where there'll be massive defaults". Question: "Will the losses in the mortgage market exceed those in the S&L crisis?" Heebner: "They're going to dwarf those losses because the losses could easily approach $1 trillion---that dwarfs anything that has ever happened. Enron was $100 billion---this will be far greater than that..The good news is that most of these loans are owned by Hedge FundsYou hedge funds buying these subprime and Alt-A loans and leveraging them at 10 to 1. They buy a pool of mortgages at 8% and they borrow against it in yen for 3% and then lever it at 10 to 1so you have a lucrative profit And the hedge fund you are running, the manager is going to get 20% of the gain---so even if it's a year before you go broke; you get rich until the fund is shut down". Heebner added this instructive comment: "The brokerage firms created "securitization" they know the products are toxic. I don't think they are going to suffer losses; they simply passed them on to everyone else. The only impact this will have is the profits that flow from it will get less.But it is less than 3% of revenues in even the most exposed brokerage firm so THEY'RE NOT GOING TO GET CAUGHT." Although Heebner believes the brokerage houses will do fine; the same is not true for the small investor. Nearly 70% of subprimes have been securitized. That means that the vast number of shoddy "no down payment, no document, interest-only" loans (that are headed for default) have been transformed into securities and sold to hedge funds. As the housing market continues to falter, these funds will plummet at an inverse rate to the amount of leverage that has been applied. That may explain why, (according to Bloomberg Markets) the "wealthiest Americans have been bailing out" of hedge funds at an alarming rate. A report in last Thursday's New York Times stated: "Americans with a net worth of at least $25 million, excluding the value of their primary homes, reduced their exposure to hedge funds in 2006"-- The amount of money held by wealthy investors in hedge funds has dropped dramatically-- "The average balance, which was $2.8 million in 2005, was just $1.6 million last year, a 43 percent decline". So, what do America's richest investors know that the rest of us don't? Could it be that the over-leveraged hedge funds industry is about to get hammered by the subprime implosion? If so, it won't be the brokerage houses or savvy insiders who get hurt. It'll be the little guys and the pension funds that take a drubbing. In Henry C K Liu's "Why the Subprime Bust will Spread" (Asia Times) the author states that the bursting housing bubble will trigger a major pension crisis. After all, who are the "institutional investors? They are mostly pension funds that manage the money the US working public depends on for retirement. In other words, the aggregate retirement assets of the working public are exposed to the risk of the same working public defaulting on their house mortgages". (Liu) The origins of the housing bubble are complex, but they are worth understanding if we want to know how things will progress. The housing bubble is not merely the result of low interest rates and shabby lending practices. As Liu says, "the bubble was caused by creative housing finance made possible by the emergence of a deregulated global credit market through finance liberalization. The low cost of mortgages lifted all US house prices beyond levels sustainable by household income in otherwise disaggregated markets". The deregulated cross-border flow of funds (via the yen low interest "carry trade" or the $800 billion current account deficit) have played a major role in inflating the US real estate market. Liu adds, "Since the money financing this housing bubble is sourced globally, a bursting of the US housing bubble will have dire consequences globally."Since nearly 50% of "securitized" mortgage debt is owned by foreign investors; the subprime meltdown is bound send tremors through the entire global financial system. The housing decline is further complicated by Wall Street innovations in derivatives trading which has generated trillions of dollars in "virtual" wealth and is affecting the Feds ability to control inflation through interest rate manipulation. As Kenneth Heebner said, "You have hedge funds buying these subprime and Alt-A loans and leveraging them at 10 to 1. They buy a pool of mortgages at 8% and they borrow against it in yen for 3% and then lever it at 10 to 1so you have a lucrative profit." In other words, low interest foreign capital has flooded US markets and contributed to distortions in housing prices. In her recent article "War Drags the Dollar Down", Ann Berg refers to Wall Street's "swirling galaxy of exotic finance" which has "worked magic for the government and the elite", but has yet to weather a severe downturn in the economy. But how will market deal with sudden downturn in the hedge fund industry? Will the dodgy subprimes and shaky collateralized debt obligations (CDOs) trigger a crash or has the risk been wisely dispersed through derivatives trading? No one really knows. As Berg says, "Derivatives numbers are staggering. The Bank for International Settlements estimates that the notional amount of derivatives traded on regulated exchanges topped a quadrillion dollars last year and that the outstanding unregulated off-exchange (called over-the-counter OTC) amount stood at $370 trillion in June 2006. Because the OTC market is composed of endless strings of bilateral transactions the systemic risk is unknown." The comments of the President of the New York Fed, Timothy Geithner, help to clarify the abstruse activities of the modern market: "Credit market innovations have transformed the financial system from one in which most credit risk is in the form of loans, held to maturity on the balance sheets of banks, to a system in which most credit risk now takes an incredibly diverse array of different forms, much of it held by nonbank financial institutions that mark to market and can take on substantial leverage." Geither's right. The markets now operate as unregulated banks generating mountains of credit through massively leveraged debt instruments---a monster credit bubble larger than anything in the history of capitalism. So, where is all this headed? No one really knows. But when the housing bubble crashes into Wall Street's credit bubble,; we can expect the "big bang". That may explain why America's wealthiest investors are running for cover before the whole thing blows. (A number of investors have already cashed out and put there holdings into foreign funds and currencies) One thing is certain ---time is running out. With $1 trillion in subprimes and Alt-A loans headed for default the system is facing its greatest challenge. US- GDP has been revised to a measly 1.8%, foreign investment is down, and the dollar is losing ground to the euro on an almost weekly basis. Falling home prices have already precipitated a number of other problems. For example, Gene Sperling reports in "Housing Bust Meets the Equity Blues" that "The Fed data showed an amazing expansion (in Mortgage-Equity Withdrawal). In 1995, active MEW had been $37 billion. By the fourth quarter of 2005, it soared to $532 billion annualized, a 14-fold expansion". These equity withdrawals have translated into consumer spending which accounts for at least 1 full percentage point of GDP. Declining house prices means that extra boast for the economy will now disappear. Foreclosures are soaring and expected to get worse for the next two years at least. In California foreclosure filings jumped 79% in March alone. Other "hot markets" are reporting similar figures. The glut of new homes for sale on the market has slammed sales of the nation's major builders; most are reporting profits are down by 40% or more. The collapse of the subprime mortgage market is also pushing some big U.S. homebuilders toward Chapter 11. According to Bloomberg News, "Some builders are staying out of bankruptcy by relying on the profits they made when sales boomed" in 2004 and 2005. Starting next year they must begin to repay $3.6 billion in public debt in what will certainly be a falling market. The prospects don't look good. Also, Credit card debt is way up (nearly 7% in one year) and economists are predicting that the trajectory will continue now that home equity is vanishing. Americans savings rate is in negative numbers and the steep increase in credit card debt (with its high interest rates) only compounds the problem. The American consumer has now compiled more personal debt than anytime in history. The Grim Reaper Meets the Housing Bubble Those who follow developments in real estatehave heard many of the wacky anecdotes related to the housing bubble. Stories abound of young people buying homes just to pay off tens of thousands of dollars of collage loans with their "presto"-equity ---or low paid construction laborers securing 105% loans without any proof of income and a poor credit history. One of the stories that got national attention was about Alberto and Rosa Ramirez, who worked as strawberry pickers in the fields around Watsonville each earning about $300 a week. They (somehow?) qualified for a loan of $720,000 which paid for a "new" four-bedroom, two-bath house in Hollister. It's sheer madness! Obviously, those days are over. The speculative frenzy that was generated by the Fed's low interest rates, the banks lax lending standards, and the deregulated global credit market is drawing to a close. The fallout from the collapse in subprime-loans will roil the stock market and hedge funds, but, as Heebner says, the investment banks and brokerage firms will escape without a bruise. Where's the justice? Despite Hank Paulson's cheery predictions, we are no where "near the bottom". In fact, a recent survey showed that only 1 in 7 Americans believe that house prices will go down. Even now, very few people grasp the underlying issues or the potential for disaster. We're on a treadmill to oblivion and they think it's a merry-go-round. As housing prices tumble, more homeowners will experience "negative equity", that is, when the current value of their home is less than the sum of their mortgage. This is the very definition of modern serfdom. We can expect to see an erosion of confidence in the market, a rise in inventory, and a steady increase in defaults.More and more people will walk away from their homes rather than be hand-cuffed to an asset that loses value every day. This could transform a "housing correction" into a nation-wide financial calamity. Many peoples' futures are linked directly to the "anticipated" value of their homes.It is impossible to determine how shocked they'll be when prices retreat and equity shrivels. The housing flame-out has all the makings of a national trauma"another violent jolt to the fragile American psyche. So far, we're still in the first phase of a process that will probably play out for 10 years or more. (Judging by Japan's decades-long decline) None of the bailout plans are large enough to make any quantifiable difference.The numbers are just too big. Housing prices are coming down and the real estate market will return to fundamentals. That much is certain. The law of gravity can only be ignored for so long. Just don't count on a "soft landing". Special thanks to (Housing Crash News) See entire Kenneth Heebner interview at http://patrick.net/housing/contrib/future.html Mike Whitney lives in Washington state. He can be reached at: fergiewhitney@msn.com

Sim City and John F. Kennedy

Signs of the Times for Tue, 07 Nov 2006

Laura Knight-Jadczyk

Conservatives are fond of telling us what a wonderful, happy, prosperous nation this is. The only thing that matches their love of country is the remarkable indifference they show toward the people who live in it. To their ears the anguished cries of the dispossessed sound like the peevish whines of malcontents. They denounce as "bleeding hearts" those of us who criticize existing conditions, who show some concern for our fellow citizens. But the dirty truth is that there exists a startling amount of hardship, abuse, affliction, illness, violence, and pathology in this country. The figures reveal a casualty list that runs into many millions. Consider the following estimates. In any one year:

* 27,000 Americans commit suicide.

* 5,000 attempt suicide; some estimates are higher.

* 26,000 die from fatal accidents in the home.

* 23,000 are murdered.

* 85,000 are wounded by firearms.

* 38,000 of these die, including 2,600 children.

* 13,000,000 are victims of crimes including assault, rape, armed robbery, burglary, larceny, and arson.

* 135,000 children take guns to school.

* 5,500,000 people are arrested for all offenses (not including traffic violations).

* 125,000 die prematurely of alcohol abuse.

* 473,000 die prematurely from tobacco-related illnesses; 53,000 of these are nonsmokers.

* 6,500,000 use heroin, crack, speed, PCP, cocaine or some other hard drug on a regular basis.

* 5,000+ die from illicit drug use. Thousands suffer serious debilitations.

* 1,000+ die from sniffing household substances found under the kitchen sink. About 20 percent of all eighth-graders have "huffed" toxic substances. Thousands suffer permanent neurological damage.

* 31,450,000 use marijuana; 3,000,000 of whom are heavy users.

* 37,000,000, or one out of every six Americans, regularly use emotion controlling medical drugs. The users are mostly women. The pushers are doctors; the suppliers are pharmaceutical companies; the profits are stupendous.

* 2,000,000 nonhospitalized persons are given powerful mind-control drugs, sometimes described as "chemical straitjackets."

* 5,000 die from psychoactive drug treatments.

* 200,000 are subjected to electric shock treatments that are injurious to the brain and nervous system.

* 600 to 1,000 are lobotomized, mostly women.

* 25,000,000, or one out of every 10 Americans, seek help from psychiatric, psychotherapeutic, or medical sources for mental and emotional problems, at a cost of over $4 billion annually.

* 6,800,000 turn to nonmedical services, such as ministers, welfare agencies, and social counselors for help with emotional troubles. In all, some 80,000,000 have sought some kind of psychological counseling in their lifetimes.

* 1,300,000 suffer some kind of injury related to treatment at hospitals.

* 2,000,000 undergo unnecessary surgical operations; 10,000 of whom die from the surgery.

* 180,000 die from adverse reactions to all medical treatments, more than are killed by airline and automobile accidents combined.

* 14,000+ die from overdoses of legal prescription drugs.

* 45,000 are killed in auto accidents. Yet more cars and highways are being built while funding for safer forms of mass transportation is reduced.

* 1,800,000 sustain nonfatal injuries from auto accidents; but 150,000 of these auto injury victims suffer permanent impairments.

* 126,000 children are born with a major birth defect, mostly due to insufficient prenatal care, nutritional deficiency, environmental toxicity, or maternal drug addiction.

* 2,900,000 children are reportedly subjected to serious neglect or abuse, including physical torture and deliberate starvation.

* 5,000 children are killed by parents or grandparents.

* 30,000 or more children are left permanently physically disabled from abuse and neglect. Child abuse in the United States afflicts more children each year than leukemia, automobile accidents, and infectious diseases combined. With growing unemployment, incidents of abuse by jobless parents is increasing dramatically.

* 1,000,000 children run away from home, mostly because of abusive treatment, including sexual abuse, from parents and other adults. Of the many sexually abused children among runaways, 83 percent come from white families.

* 150,000 children are reported missing.

* 50,000 of these simply vanish. Their ages range from one year to mid-teens. According to the New York Times, "Some of these are dead, perhaps half of the John and Jane Does annually buried in this country are unidentified kids."

* 900,000 children, some as young as seven years old, are engaged in child labor in the United States, serving as underpaid farm hands, dishwashers, laundry workers, and domestics for as long as ten hours a day in violation of child labor laws.

* 2,000,000 to 4,000,00 women are battered. Domestic violence is the single largest cause of injury and second largest cause of death to U.S. women.

* 700,000 women are raped, one every 45 seconds.

* 5,000,000 workers are injured on the job; 150,000 of whom suffer permanent work-related disabilities, including maiming, paralysis, impaired vision, damaged hearing, and sterility.

* 100,000 become seriously ill from work-related diseases, including black lung, brown lung, cancer, and tuberculosis.

* 14,000 are killed on the job; about 90 percent are men.

* 100,000 die prematurely from work-related diseases.

* 60,000 are killed by toxic environmental pollutants or contaminants in food, water, or air.

* 4,000 die from eating contaminated meat.

* 20,000 others suffer from poisoning by E.coli 0157-H7, the mutant bacteria found in contaminated meat that generally leads to lifelong physical and mental health problems. A more thorough meat inspection with new technologies could eliminate most instances of contamination--so would vegetarianism.

At present:

* 5,100,000 are behind bars or on probation or parole; 2,700,000 of these are either locked up in county, state or federal prisons or under legal supervision. Each week 1,600 more people go to jail than leave. The prison population has skyrocketed over 200 percent since 1980. Over 40 percent of inmates are jailed on nonviolent drug related crimes. African Americans constitute 13 percent of drug users but 35 percent of drug arrests, 55 percent of drug convictions and 74 percent of prison sentences. For non drug offenses, African Americans get prison terms that average about 10 percent longer than Caucasians for similar crimes.

* 15,000+ have tuberculosis, with the numbers growing rapidly; 10,000,000 or more carry the tuberculosis bacilli, with large numbers among the economically deprived or addicted.

* 10,000,000 people have serious drinking problems; alcoholism is on the rise.

* 16,000,000 have diabetes, up from 11,000,000 in 1983 as Americans get more sedentary and sugar addicted. Left untreated, diabetes can lead to blindness, kidney failure and nerve damage.

* 160,000 will die from diabetes this year.

* 280,000 are institutionalized for mental illness or mental retardation. Many of these are forced into taking heavy doses of mind control drugs.

* 255,000 mentally ill or retarded have been summarily released in recent years. Many of the "deinstitutionalized" are now in flophouses or wandering the streets.

* 3,000,000 or more suffer cerebral and physical handicaps including paralysis, deafness, blindness, and lesser disabilities. A disproportionate number of them are poor. Many of these disabilities could have been corrected with early treatment or prevented with better living conditions.

* 2,400,000 million suffer from some variety of seriously incapacitating chronic fatigue syndrome.

* 10,000,000+ suffer from symptomatic asthma, an increase of 145 percent from 1990 to 1995, largely due to the increasingly polluted quality of the air we breathe.

* 40,000,000 or more are without health insurance or protection from catastrophic illness.

* 1,800,000 elderly who live with their families are subjected to serious abuse such as forced confinement, underfeeding, and beatings. The mistreatment of elderly people by their children and other close relatives grows dramatically as economic conditions worsen.

* 1,126,000 of the elderly live in nursing homes. A large but undetermined number endure conditions of extreme neglect, filth, and abuse in homes that are run with an eye to extracting the highest possible profit.

* 1,000,000 or more children are kept in orphanages, reformatories, and adult prisons. Most have been arrested for minor transgressions or have committed no crime at all and are jailed without due process. Most are from impoverished backgrounds. Many are subjected to beatings, sexual assault, prolonged solitary confinement, mind control drugs, and in some cases psychosurgery.

* 1,000,000 are estimated to have AIDS as of 1996; over 250,000 have died of that disease.

* 950,000 school children are treated with powerful mind control drugs for "hyperactivity" every year--with side effects like weight loss, growth retardation and acute psychosis.

* 4,000,000 children are growing up with unattended learning disabilities.

* 4,500,000+ children, or more than half of the 9,000,000 children on welfare, suffer from malnutrition. Many of these suffer brain damage caused by prenatal and infant malnourishment.

* 40,000,000 persons, or one of every four women and more than one of every ten men, are estimated to have been sexually molested as children, most often between the ages of 9 and 12, usually by close relatives or family acquaintances. Such abuse almost always extends into their early teens and is a part of their continual memory and not a product of memory retrieval in therapy.

* 7,000,000 to 12,000,000 are unemployed; numbers vary with the business cycle. Increasing numbers of the chronically unemployed show signs of stress and emotional depression.

* 6,000,000 are in "contingent" jobs, or jobs structured to last only temporarily. About 60 percent of these would prefer permanent employment.

* 15,000,000 or more are part-time or reduced-time "contract" workers who need full-time jobs and who work without benefits.

* 3,000,000 additional workers are unemployed but uncounted because their unemployment benefits have run out, or they never qualified for benefits, or they have given up looking for work, or they joined the armed forces because they were unable to find work.

* 80,000,000 live on incomes estimated by the U.S. Department of Labor as below a "comfortable adequacy"; 35,000,000 of these live below the poverty level.

* 12,000,000 of those at poverty's rock bottom suffer from chronic hunger and malnutrition. The majority of the people living at or below the poverty level experience hunger during some portion of the year.

* 2,000,000 or more are homeless, forced to live on the streets or in makeshift shelters.

* 160,000,000+ are members of households that are in debt, a sharp increase from the 100 million of less than a decade ago. A majority indicate they have borrowed money not for luxuries but for necessities. Mounting debts threaten a financial crack-up in more and more families.

A Happy Nation? Obviously these estimates include massive duplications. Many of the 20 million unemployed are among the 35 million below the poverty level. Many of the malnourished children are also among those listed as growing up with untreated learning disabilities and almost all are among the 35 million poor. Many of the 37 million regular users of mind-control drugs also number among the 25 million who seek psychiatric help.

Powered by ScribeFire.