Government Lies UNDERSTATE the Ongoing Housing Crash – Wall Street Underground

By Nick Guarino | February 3, 2010

Remember the bad old days of real estate insanity? No money down. Adjustable rate mortgages, where within a few years you spend 50-75% of your income on your house payment. People buying houses for far more than they’re worth.

Incredibly, those days are back. FHA, Freddie Mac and Ginnie Mae are still doing exactly the same thing that created the problem to begin with!

In desperation they are financing homes with no money down…to unqualified borrowers…whose payments are far too high for their income. It will take trillions more to bail them out. Trillions the U.S. does not have.

Thank Barney Frank, Nancy Pelosi and the Democratic Congress for this. They are forcing lenders to give these mortgages. Guaranteed disaster. The vast majority of people receiving these mortgages go broke in six months. A year later the banks get the houses back. They lose even more money. Or i should say the tax payer does.

Why would anyone pay 50-75% of their income, just to make a house payment each month? The old rule of thumb was 25 percent. Max.

Only one possible reason someone would give 75% of their income for a mortgage payment. They think their house will go up in value, and make them money.

But what happens when home prices plunge, as we are seeing now? As they have the past two years, and will keep doing for many years to come?

For the past decade, the U.S. savings rate has been around zero. So people have no savings to fall back on. How long will they struggle? How many lunches will they skip? How long do they let their kids go with threadbare clothes?

How many sacrifices are they going to make, for a house that eats up nearly all their income…and that falls in value month after month?

Here’s the sad (but correct) conclusion more and more people are coming to: It’s better to simply walk away from their homes and their insanely large mortgages. They are telling the bank, “Take this house and stick it. I don’t want to pay on it anymore.” People are mailing in the keys in droves and walking away.

Millions of others stopped making payments, but still live in their homes. They are in default, waiting final foreclosure. Yet the bank doesn’t kick them out.

Why? Same reason as before. Banks are too terrified to start the foreclosure process on all their bad loans at once. That would let the cat out of the bag: that they are dead broke, completely wiped out.

So they put off foreclosing. They “forget” to record the fact that payments haven’t been made for months. That gives them the appearance of solvency.

Please do not believe the government statistics about the number of homes for sale. They heavily understate the real number. Millions more homes will be foreclosed on in 2010. They will keep flooding the already over-saturated market. Bankers are rationing out the hugh backlog of homes they got to get ride of.

Here’s another game that goes on. Some 30% to 40% of all home sales these days take place at auction. They go for depressed prices. But government has stopped recording the sale prices. They say, “Those are distressed sales. They do not accurately reflect the market price.”

What crap. The whole market is distressed. Distressed is the name of the game in most all U.S. markets. But government does not count the auction prices. Because that would prove housing has collapsed even more than the official stats show.

In many cases the brokers are told to flat-out lie. They are ordered to show a much higher price than has actually been paid.

Even with all these sick games, new home sales fell another 11.3% in November. A staggering decline. The wipeout keeps getting worse. Because people without a job can’t pay for their home, no matter how much they may want to. And record numbers of people are losing their jobs… and record numbers more don’t want to pay when they can.

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