HousingStorm.com

This is pretty funny.

You can follow the performance of this asset at: Tracking Our Toxic Asset

Planet Money is committed to following the financial crisis to the bitter end. And what better way to do that than to own a piece of it. We bought one of those things that no one wanted, one of those things that almost brought down the global economy: our very own toxic asset. This one has more than 2,000 mortgages in it. We paid $1,000, with our own money, for our piece. It used to be worth more like $75,000. Click on the timeline and roll over the states to watch a disaster in progress.

This post originally appeared on the Irvine Housing Blog.

Other governments around the world take steps to curb lending and warn citizens of the perils of excessive mortgage debt. Why don’t we?

My friends feel it’s their appointed duty
They keep trying to tell me all you want to do is use me
But my answer yeah to all that use me stuff
Is I wanna spread the news that if it feels this good getting used
Oh you just keep on using me until you use me up

Bill Withers — Use Me

Lenders with encouragement from the US Government want to use you to pay for their mistakes; they want to use you, and they want you to feel good about it. Buy now, it doesn’t matter if you go underwater; lenders don’t care as long as you make your rent payments on the money.

Recently, I wrote about Canadian finance minister Jim Flaherty preventing further inflation of Canadian housing bubble.

Allow me to recap and interpret:

(1) He is forcing qualification at a higher payment rate. If he had stated 30-year fixed rather than a 5-year fixed, It would be better, but it is a step toward stable financing. I wish the statement clarified whether or not interest-only ARMs are permitted there. I believe the qualification standard he is imposing is based on a 30-year amortizing mortgage with only a 5 year fixed rate.

(2) Twenty percent down payments? I would like to see this on all property, but common sense says investment properties and second homes should require a significant down payment — people don’t hesitate to walk away from investment properties.

(3) And limiting cash-out refinancing to 90% LTV is identical to the proposal I made. I like this requirement because it provides an equity cushion that stabilizes markets and prevents walkaways.

“We do want to discourage the tendency by some to use their home as an ATM machine, the tendency by some to buy three or four condominiums by way of speculation,” Flaherty said. “This will discourage the kind of mortgage refinancing that can create unsustainable debt levels as interest rates go up.”

Our government actively encouraged us to borrow, spend and be happy while Canadians are being warned about excessive debt and spending their equity foolishly. The contrast is conspicuous.

It isn’t just the Canadians who exercise better control over lending and warn their citizens of the perils of buying and borrowing today. The Swiss, long known for their banking prowess, do not cave in to banking interests.

The Swiss Central Bank sends warning on excessive mortgage borrowing

By Catherine Bosley

The Swiss National Bank warned banks and borrowers on Thursday about taking on too much debt while interest rates were still very low, indicating it is concerned about a possible housing bubble.

…”The SNB is warning banks and borrowers to be extremely cautious,” the central bank said in its quarterly policy statement. “The fact that interest rates are exceptionally low by historical standards must be taken into account.”

…”What they wanted to avoid is house prices going up too much in response to a slightly brighter economic outlook. That would mean another bubble,” said Henrik Gullberg of Deutsche Bank. “One way of doing that is to keep sending these verbal warning shots while policy is still very expansive.”

The Swiss government is openly concerned about its citizens financial well being, and they post warnings about mortgage borrowing to help people. Why is it only bloggers like me who issue these warnings here in the US?

The US Government wants its citizens to borrow as much as possible to help out ailing banks even if that destroys the borrower. Shameful.

Some analysts have argued that the central bank may raise borrowing costs earlier than the market currently predicts, and despite the strong Swiss franc, due to the housing concerns.

The SNB said it was conducting an in-depth investigation into banks’ mortgage-granting practices and that it would work with regulators to see if any corrective steps were needed.

SNB statistics show that prices for single family homes in Switzerland rose by some 4 percent last year.

SNB vice-chairman Thomas Jordan warned as early as autumn last year of a possible bubble in the private housing market.

Why is the US Government out to screw us?

Hasn’t it become obvious that our government does not care about the people? As a citizen of this country, you should be outraged by the way your government puts your interests last. Our government openly advocates destructive policies that transfer wealth from you to the lenders.  The US Government as ruled today is completely captured by money interests; they feed us a steady stream of bullshit bailouts and false hopes to convince us to take on more debt and keep the Ponzi Scheme alive.

It wasn’t always that way.

Andrew Jackson and the Second Bank of the United States

AIG was not the first institution that was too big to fail. Andrew Jackson waged a personal war against the banking behemoth of his era, and as a former general, he knew how to win a battle. From Wikipedia:

The Second Bank of the United States was authorized for a twenty year period during James Madison’s tenure in 1816. As President, Jackson worked to rescind the bank’s federal charter. In Jackson’s veto message (written by George Bancroft), the bank needed to be abolished because:

• It concentrated the nation’s financial strength in a single institution.
• It exposed the government to control by foreign interests.
• It served mainly to make the rich richer.
• It exercised too much control over members of Congress.
• It favored northeastern states over southern and western states.

Following Jefferson, Jackson supported an “agricultural republic” and felt the Bank improved the fortunes of an “elite circle” of commercial and industrial entrepreneurs at the expense of farmers and laborers. After a titanic struggle, Jackson succeeded in destroying the Bank by vetoing its 1832 re-charter by Congress and by withdrawing U.S. funds in 1833.

Does Jackson’s reasoning sound familiar to you? Isn’t most of what he identified as problems exactly what we have with too-big-to-fail institutions? Who will be our modern Andrew Jackson who will crush our banking cartel? Our current crop of politicians are hopeless or worthless completely captured by banking interests and too fearful to do anything to help the people. We are lost, and we need a real leader like Andrew Jackson to help us find our way.

Credit Suisse has released an updated version of their popular Mortgage Reset & Recast Chart.

Here is the new one:

Here is last year’s chart:

And, here is the original:

There are some thoughts to consider:

1. There are about 2.5 years of huge resets and recasting ahead.  Because the foreclosure pipeline is already so backlogged, people who stop making payments during this stretch could easily end up waiting another 1-2 years before their homes are actually foreclosed upon.  Even without all of the foreclosures still to come from unemployment, it is easy to see this foreclosure crisis being with us well into 2014-2015.
2. Because mortgage interest rates are low, “resets” are less of a problem right now. Today, “recasts” are the real threat.  A recast refers to the changing of payment options for Option-Arm loans.  Many borrowers bought the biggest home they could “afford”, using minimum payments to qualify. When the minimum payment option disappears, their monthly expense will “recast” to a substantially-higher amount, regardless of what interest rates do.
3. Most Option-Arm loans were concentrated in higher-income areas and generally used to buy more expensive homes.  Banks that are holding lots of these on their books, like Wells Fargo, have been fairly proactive in modifying these loans now, while long term rates are low.  It will be interesting to watch, however, if many of these high-end borrowers will walk away from their mortgages as high-end prices continue to fall.
4. Though rates are currently low, you can see how sensitive the market would be to rate hikes.  The Fed’s MBS repurchase program, the Euro, Greece, Spain, China’s Treasury holdings…all of these factors will likely weigh on mortgage rates in the coming years and have profound effects on our overall economy.
5. Note the volume of Agency, Alt-A, and Prime loans that will be resetting over the next few years.  These were generally to more qualified buyers with good credit.  If this crowd begins to feel that walking away from their mortgages is socially acceptable, then the housing market will suffer substantially.

The GSEs no longer buy or insure interest-only loans; the last vestige of Ponzi financing washes away.

Hooked into this deceiver
Need more and more
Into the endless fever
Need more and more

New consequence machine
Burn through all your gasoline
Asylum overtime
Never mind
You reach the end of the line

Metallica — The End Of The Line

Interest-only loans have reached the end of the line. I discussed interest-only adjustable rate mortgages in Conservative House Financing – Part 1:

The advantage of IO ARMs is their lower payments. Or put another way, the same payment can finance a larger loan. This is how IO ARMs were used to drive up prices once the limit of conventional loans was reached (somewhere in 2003 in California). A bubble similar to the last bubble would have reached its zenith in 2003/2004 if IO ARMs had not entered the market and inflated prices further. In any bubble, the system is pushed to its breaking point, and it either implodes, or some new stimulus pushes it higher: the negative amortization mortgage (Option ARM).

Besides the low interest rates, the continued use of these products has helped support our market at 2003/2004 prices despite the still inflated price levels. Will removing this form of financing cause prices to fall?

(Federal Citizen Information Publication link)

Freddie Mac Will Cease Purchases of Interest Only Mortgages

For Immediate ReleaseFebruary 25, 2010
Contact: corprel@freddiemac.com
or (703) 903-3933

McLean, VA – Freddie Mac (NYSE: FRE) announced today that on or about September 1, 2010, the company will cease purchasing and securitizing interest only mortgages, including Freddie Mac Initial Interest^SM fixed-rate and adjustable-rate mortgages.

Freddie ends buying of all interest-only mortgages

By Lynn Adler

NEW YORK, Feb 26 (Reuters) – Freddie Mac (FRE.N), the second largest purchaser of U.S. residential mortgages, said on Friday that it would stop buying and securitizing all interest-only mortgages because of the poor performance of those loans.

Interest-only mortgages, or IOs, including Freddie Mac’s Initial Interest mortgages, provide only interest payments for a specified period starting with the first monthly payment, and then principal and interest for the rest of the loan term.

In its fourth quarter results this week, Freddie Mac said the unpaid principal balance of IO loans was almost $130 billion at the end of December, or 7 percent of its total portfolio.

Nearly 18 percent of those loans were seriously delinquent, meaning at least 90 days late.

“This change is another step in our efforts to refine our mortgage credit and purchase requirements to promote responsible lending and sustainable homeownership,” Freddie Mac spokesman Michael Cosgrove said.

About 14 percent of the loans had credit enhancements, according to the company. The average unpaid principal balance per loan was $254,601, Freddie Mac said.

“Our decision to stop purchasing all interest-only type mortgages — through all flow and bulk purchase paths — and to retire our Initial Interest fixed-rate and adjustable-rate mortgage products in the coming months is a result of continuing poor performance of these products in aggregate,” Cosgrove said.

Freddie Mac said it would end its IO purchase and securitization activity on or about Sept. 1.

When you cut through the BS, Freddie Mac bailed on interest-only mortgages because they are losing too much money — we were losing too much money. As the guarantor, taxpayers should be happy this program is being eliminated.

The impact this will have on the housing market is yet to be seen, but eliminating affordability products, by definition, harms affordability. In a rising market, this is a speedbump, but in a weak market, it is another reason for continued price weakness. Many marginal buyers who would have used this unstable financing option must now reduce their bids.

Freddie Mac: Final Nail in the Coffin of Interest Only Mortgages?

For those unfamiliar with interest only loans, in general it is a mortgage that the borrower agrees to only pay the interest on the debt for a set period of normally five or ten years.  At the end of the interest-only period, the mortgage payment “balloons” because the borrower must begin paying off the principal as well as interest.  Many times, the purpose for such a loan is for a person who wants to buy a house and believes their future income will increase to cover the payments that otherwise they would not be able to afford.  It is easy to understand why these loans get a lot of the blame for inflating the housing bubble.  Obviously, the problem arises when the borrower’s income does not meet their expectations, or as is all too common these days it disappears entirely.  Furthermore, this type of loan can be particularly destructive when the housing market falls because there has been no dent made in the principal amount, so a home owner can be “underwater” more quickly.

….  Underwriting standards have necessarily become stricter since the housing bubble burst, and borrowers are often required to have substantial down payments.  However, if the GSE’s are no longer willing to buy up these IO mortgages on the secondary market, there are certainly few banks willing to take the risk on getting stuck with more non-performing loans.  This is not to say that the IO loan is dead and gone forever, but at least for now Freddie Mac is doing its part in killing this relic of a bygone era.

Good riddance. Interest-only financing is the Ponzi limit. Once this threshold is reached, there is no turning back. Option ARMs crossed this limit, and they disappeared about 2 years ago,and now financing at the Ponzi limit is dead as well. If you want a sign we are ready to inflate the next housing bubble, wait for this form of financing to reappear. Perching on the cliff is the last stop before the abyss.

The Federal Reserve under Ben Bernanke is continuing the policy of fostering moral hazard through implied guarantees. The Bernanke Put applies not just to the stock market, but directly to the home mortgage market as well.

You don’t tug on Superman’s cape
You don’t spit into the wind
You don’t pull the mask of the old Lone Ranger
And you don’t mess around with Jim

Jim Croce — You Don’t Mess Around With Jim

Maybe that song should be, “You Don’t Mess Around with Ben.” Arguably, Ben Bernanke is a powerful man in Washington because decisions he makes have major impact on citizen’s lives. His most consequential recent decisions concern the Federal Reserve’s program of buying agency debt and what under what circumstances the program would be continued.

Analyst: Pressure Will Build on Fed To Extend Mortgage Program

By Nick Timiraos

With the Federal Reserve set to wind down its purchases of mortgage-backed securities in a little more than 30 days, there’s growing uncertainty about what will happen to mortgage rates. Already, rates bumped up last week after the Fed said it would raise the discount rate by quarter point to 0.75% last Thursday.

But the elephant in the room is the Fed’s planned exit from the mortgage market, and analysts expect rates to rise by anywhere from a quarter-point to a full percentage point or more. Bob Eisenbeis, the chief economist at Cumberland Advisors, has a provocative commentary piece on Wednesday morning arguing that there’s a growing chance that the Fed will have to come back to buy mortgage-backed securities because of ongoing concerns over the fragility of the housing market. Two indicators out Wednesday morning underscore that softness: the MBA reported that loan applications for home purchases was at a 12-year-low last week, and new home sales plunged 11.2% in January.

“What we expect is that toward the end of the first quarter political pressure on the Fed will increase from both [Fannie and Freddie] and Congress to temporarily extend the program because of the concern about hurting a still struggling housing and mortgage markets,” Mr. Eisenbeis writes. “But if this fails to persuade the FOMC to change its mind, the program stops, and interest rates jump up significantly, then the Fed itself will decide that the risks of another downturn are too great, and the program will be restarted.  In either case, the most likely outcome is that there will be some form of extension of the MBS purchase program.”

In testimony on Wednesday, Federal Reserve Chairman Ben Bernanke said that while they anticipate ending the purchase program by the end of March, the Fed “will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets.” The statement seems to leave open the possibility for an extension.

Leave open the possibility? Does anyone believe the government will exit the mortgage market on schedule? Will they exit at all? Leaving open the possibility is implicit backing to markets. The Federal Reserve will intervene if problems become too big.

What is the threshold of the Bernanke Put?

So what would it take to have the Federal Reserve restart buying agency paper again? Some analysts have suggested that current interest rates a full point below market value due to market manipulation. An increase of one percentage point would reduce future loan balances by 10% and take prices down commensurately.

My guess is that the Federal Reserve will not permit interest rates from moving 100 basis points or 1% from current levels, and they will maintain this 1% backstop over the next several years. Interest rates will be allowed to rise during this time, but only in proportion to increasing incomes so that house price levels are maintained.

Don’t spit into the wind.

Basically, the Fed determined further price declines would wipe out the remnant capital in our banking system; therefore artificially low interest rates – a necessity to support artificially high prices — will remain in place to prevent significant future price declines. You can’t fight City Hall. With an unlimited balance sheet an a direct financial conduit to the housing market through the conservatorship of the GSEs, our government in cooperation with the Fed can make financing available and inexpensive and inflate a housing bubble as large as they wish.

Will this policy be effective? I have my doubts, particularly at the high end where denial rules and high-end house sellers lower their sights only when they must, and anyone selling mansion can expect to wait 3 years. Supply is also artificially low due to the lack of discretionary sellers and an abundance of shadow inventory and unlisted foreclosures. The instability of the  cartel should result in slowly declining prices, but anything is possible.

If Fed policy is successful, prices will behave like the ice scenario for the post Fire and Ice:

How fast can interest rates rise?

In the post Real Estate’s Lost Decade we explored how quickly interest rates could rise if wage growth compensated for the lost borrowing power, and the results are in the chart below:

As you can see, interest rates can only rise about 35 basis points (0.35%) per year or prices will fall.

Calculating the Bernanke Put

Using the above chart as a basis and adjusting for actual performance, I developed the chart below. Mortgage interest rates from 2006-2009 are actual, and the maximum allowable increase to hold pricing is projected from 2010-2018. Further, if we assume 1% is a reasonable buffer from point-in-time interest rates, the red line in the drawing represents the interest rate threshold where I believe the Federal Reserve would step in and begin buying agency debt once more.

If mortgage interest rates rise above the red line, house prices will drop significantly, and both the Federal Reserve and the US taxpayer will absorb significant losses on the numerous loans they have purchased and insured over the last few years; therefore, the Federal Reserve will hold mortgage interest rates below the red line with the Bernanke Put.

Central banking puts and moral hazard

The discussion above reflects what I believe to be the most likely course of action for the Federal Reserve with respect to its purchase of agency debt to support the housing market. This wrongheaded policy will foster greater levels of moral hazard. How many idiotic bulls have you encountered that base their bullishness on the unprecedented level of government intervention in the markets? How much speculation is occurring due to buyer’s beliefs in perpetual government supports? How is that a good thing?

Yikes.

From the Fannie Mae Press Release:

Fannie Mae (FNM/NYSE) reported a net loss of $15.2 billion in the fourth quarter of 2009,
compared with a net loss of $18.9 billion in the third quarter of 2009.

…

For the full year of 2009, Fannie Mae reported a net loss of $72.0 billion, compared with a loss of $58.7 billion for 2008.

…

“Through this prolonged stress in the housing market, we are helping homeowners across the country, supporting
affordable housing, and providing financing to keep the residential markets functioning,” said Fannie Mae President and
CEO Mike Williams. “Our homeownership assistance initiatives grew significantly in 2009, reaching more than 3 million
borrowers. We continue to work closely with our industry partners and the government to reach every borrower we can
and to address rising foreclosures. Our overriding objective is keeping people in their homes whenever possible.”

On HAMP:

Because of the unprecedented nature of the circumstances that led to the Making Home Affordable Program, we cannot
quantify what the impact would have been on Fannie Mae if the Making Home Affordable Program had not been
introduced. We do not know how many loans we would have modified under alternative programs, what the terms or
costs of those modifications would have been, or how many foreclosures would have resulted nationwide, and at what
pace, and the impact on housing prices if the program had not been put in place.

On Foreclosures:

Although there have been signs of stabilization in the housing market and economy, we expect that our credit-related expenses will remain high in the near term due in large part to the stress of high unemployment and underemployment on borrowers and the fact that many borrowers who owe more on their mortgages than their houses are worth are defaulting.

….

Although we have expanded our initiatives to keep borrowers in their homes, we expect our foreclosures to increase in
2010 as a result of the weak economy and high unemployment and their effect on the financial condition of borrowers.

Freddie’s On Crack – A Cautionary Tale

It was a cold winter’s day, more than 20 below,

When Freddie first saw that his balance was low.

Beg, borrow & steal, he tried all the old tricks,

But this time was different, no one would help him get his kicks.

So he dug in his pockets, but he found only lint,

Things sure got rough on ole Freddie for a stint.

But then Freddie realized, and then Freddie knew,

Where he could borrow & borrow till his fat face turned blue.

So he put on his suit, and walked in, hat in hand,

And went to the people with an outrageous demand.

He said, “I need some more money, and I might never repay it”

The people all gasped, they were shocked to hear him say it.

“Has Freddie gone mad?!?! Has he been smoking crack!?!?”

Still they gave him the money, on a big golden rack.

Knowing for certain he’d never pay them back.

Because this Freddie’s not any Freddie,

This Freddie, was Freddie Mac!

Is Freddie Mac Smoking Crack?

The inspiration for this poem came from a quote I read in an Associated Press article that was featured on mercurynews.com this morning about Freddie Mac and its financial woes. The article said, and I quote:

“And while Freddie Mac didn’t ask for any more bailout money last quarter, the company said it is likely to need more financial aid and might never repay it.”

Which conjured up an image in my head, and that image bubbled into a full on thought…

Even the most low down, degenerate crack head in the world would at least have the decency to humor you and  give you some story about how they’re gonna be able to pay you back before asking you to give them money!

I mean, can you imagine what would happen if you or I, or 99.99999% of the citizens of this country – of this planet even – went to a bank, or mortgage broker, or even a mafia loanshark, and asked for 100 grand with the words “and I might never repay it” attached to your request? You would be laughed out onto the street – at best! Would you lend money to a friend, or probably more accurate, a deadbeat neighbor, if you knew they were utterly insolvent and had little to no chance of ever paying you back? Even parents of deadbeat children are encouraged to “stop being enablers” by constantly giving their kids what they want so they can indulge in whatever lifestyle vices that they see fit.

But somehow, our society has morphed into some twilight zone-esque version of itself, where somehow, as long as you’re a member of the good old boys club known as the “Too Big Too Fails”, you now officially have a license to steal from the taxpaying citizens while the majority of them struggle to pay their bills, keep their homes, and put food on the table. Isn’t it time for us to put our foot down already, to stop being enablers and start practicing some good old fashioned “Tough Love”?

At least a homeowner has collateral against their loan from the bank.  In the event they can’t or don’t want to pay it back, they can at least re-coup some of the money that was lent.  It is preposterous to judge a homeowner that is walking away, when a government bank has a different standard.  Where is the collateral for the money the tax payers have leant to Freddie Mac? What happens when they can’t pay it back? Tough luck I guess.

According to FreddieMac.com, they were established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets.  I think it’s fair to say that they have failed miserably on all 3 counts.

But, to give Freddie Mac and the rest of the club some credit, at least they’re honest… But come on! Really? Is that the future of lending? And why would I (the taxpayer) be ok with this. They’ll probably get the $$$$ and laugh all the way to the bank… Wait. I thought they were the bank?!  Hmmmmm…..

To be continued…

Here is an interesting snip about mortgages and the housing situation both in the US and Canada by Dave Rosenberg in Monday’s Breakfast with Dave.

Once again, this Houdini recovery has involved a situation where mortgage rates have plunged and yet Treasury bond yields have been rising — 30-year fixed rate mortgages have fallen to 4.93% and are sitting are record-tight spreads over long Treasury bonds (see Chart 7). Historically, the average spread is 150bps and this differential is now 20bps. This is remarkable and our concern is that investors who may be exposed to mortgages are at serious risk because there is a considerable chance that these rates will be moving higher over the intermediate term — notwithstanding continued support from Uncle Sam’s pocketbook.

Investors must be reminded time and again that mortgages are callable, Treasuries are not; and we are now in a situation where net of fees, which average 70bps, anyone buying mortgage paper today is receiving a rate that is less than what the borrower is paying, How nutty is that?

Remember — despite all the ridiculous comparisons to the Weimar Republic, the long bond is THE risk-free benchmark interest rate in the U.S. and with State taxes going up, Treasuries are an even further bargain because of their tax status.

The stretch for yield is just as evident in Canada where provincial bonds now trade at a tight 42bps over the Government of Canada (the spread exceeded 100bps at the end of 2008); and Nova Scotia (Canada’s second smallest province) just issued a 30-year bond that has since tightened to a mere 7 bps over Ontario government debt (perhaps this is a market comment on Ontario’s fiscal strategies of overspending and over-borrowing as much as it is a comment on investor risk appetite at the current time. Both messages make us uncomfortable).

CANADIAN CONSUMER LESS ROBUST THAN MEETS THE EYE

All of a sudden, the Canadian economic data are coming a tad below expectations, including the 0.4% MoM advance in December retail sales, which just came up short from recouping the 0.5% decline the month before (revised from down 0.3%). Excluding autos, sales are running at a 2.1 % annual rate over the past three months, which can only be described as tepid in view of all the rampant monetary and fiscal stimulus percolating through the system.

Not only that, but the supply response in the Canadian housing market is beginning to, at the margin, alter the inventory balance. The number of new listings surged 4.0% in January and has risen sharply now in three of the past four months. After outpacing new listings over 90% of the time between January and October of 2009, sales has now lagged in each of the past two months and this has taken the sales-to-listing ratio down to 0.614x from 0.634x in December and the nearby October high of 0.683x (and now stands at its lowest level in eight months). Pricing is sure to follow suit. Better buying opportunities lie ahead for the fence-sitters, in our view.

Even without the caution about callable securities, why anyone would be rushing into mortgages with the Fed about to pull the plug on buying is certainly a mystery. Are pension funds chasing yield to ridiculous extremes again? Can the Fed’s purchasing account for 100% of that silliness?

Assuming the answer to the second question is no, this is yet another one of those reflation risk trades that just will not die, until it does, more than likely all of a sudden, and more than likely sooner rather than later.

Just over 116,000 Hamp Loan Modifications are now permanent.

From the Treasury Press Release:

More than 116,000 homeowners now have permanent modifications, nearly doubling the number from December, which also marked record progress. An additional 76,000 permanent modifications have been offered, and are waiting only for the borrower’s signature. In total, over 1 million homeowners have started trial modifications and nearly 1.3 million offers for trial modifications have been extended to homeowners.

Here are some of the charts and graphs:

Here is a letter we received in response to our last weekly newsletter. If you haven’t yet, make sure to sign up for our newsletter on the http://youwalkaway.com/ homepage, we’ll send you insightful commentary from the front lines of the foreclosure crisis as well as some great resources to help you weather the storm.

For authenticity purposes no spelling or grammatical corrections were made to the original email.

“What category do I fit in?….I walked away because of divorce…my realtor could not get one looker…over a yr, not one single person looked…I walked away in order to be a father for my sons, they moved 1200 miles away…my choices were…pay child support, pay mortgage..pay all the credit card bills..pay all medical, dental and vision care..live on potted meat, spam and crackers…drive  94 escort with 200,000 miles…leave my heat at 50 degrees during the winter in minnesota…or….walk away, save money, find a job near my sons,  cash out my 401 k…pay all credit cards and medical bills off…and see my sons all the time, and every weekend…you tell me…what was the rite thing to do?….pay  bailout citi bank company and sacrifice my sons lives with out a father?..or walk away..and be near them to raise them….the banks and wall street are soulless demons Hell bent on money..not me…..Im a father first…I will never borrow again. From anyone..I will  not pay anyone for pipe dreams….Im sure this will not be posted or used……”

I’m always heartbroken to hear about the personal problems and situations that often times lead people to walk away from an upside down mortgage.  Many times, it’s not just a financial decision… people face all sorts of problems in their personal lives that can act as a catalyst or force people to default on their mortgage. Illness, job loss, divorce, death – there are often very serious issues, and very good reasons leading people to stop paying the mortgage.  It’s easy to feel sorry for someone like this and say it’s OK to walk away, but be angry at the man who strategically defaults though he can afford his home.  Even if it would be financially irresponsible to his family if he kept putting money into a home that he once thought would be a great investment and now is going to burden his family for the rest of their lives.  The decision to keep the underwater home could mean no college for the kids, no life insurance or that daddy can’t make it to his sons baseball game because he has to work a 2nd job on Saturdays.

With that being said, it’s always nice to hear from someone who “Gets It”.

Are the banks, lenders & credit card companies of the world gonna be there for you when times get tough? Offer to help you find a new job? Help pay your kids’ tuition? Pay for the healthcare that’s not covered by your health insurance when you get sick? Of course they’re not… you can rest assured that they’ll do exactly what they have always done – Ask you where their payment is and when they can be expecting it.

Not that there’s anything inherently wrong with that. After all, this is America and at the end of the day, they are a “for profit” business trying to make a buck (or billions of bucks). It just illustrates the fact that there are two very distinct realities at play here… the reality of business world and that of the personal world. In the business world, we can’t reasonably expect compassion, handouts, or leniency.  Every decision is based on cost effectiveness and the bottom line, and if your needs don’t fit in with a businesses bottom line, sorry to say but most of the time, that’s tough sh*t for you.

In the reality of our personal lives, however, we are often faced with less cut & dry decisions.. especially in tough economic times as we face today. At our core, the vast majority of us are upstanding people who wouldn’t think of missing a mortgage payment, defaulting on a credit card, etc.

But the fact remains that sometimes life puts us in situations where we are forced to choose between the lesser of two evils, most of the time due to no fault of our own. Banks & corporations do this all the time. Do we lay off 5,000 workers so we don’t have to report a quarterly loss to our shareholders? Do we make risky real estate bets just because our less reputable competitors are doing it, risking long term growth for short term profits? Do we hold off on foreclosing on millions of homes, prolonging the recession, so we can make our balance sheets look good and get more taxpayer bailout money, or just face the music and say “We screwed up and we’re prepared to suffer the consequences?”

In many cases, these “lesser of two evils” cases on a macro scale have led to millions of cases just like the one we read about in our email inbox the other day. The risky bets, the huge bonuses, and the “tough decisions” on a corporate level do have trickle down consequences, but that doesn’t seem to stop any of them from coming. The fact is that there is no remorse or sympathy in the boardroom or on Wall St. The banks that caused the housing crash, the credit cards charging 29% interest, the crooked healthcare system and insurance lobbyists, surely couldn’t care less if this man gets to see his sons or has heat on in his home, so why should society look down upon him for making the tough, but correct decision, to live his life the best way he can and be the best father to his children that he can be?

I applaud you sir, for your ability to make the tough decision for the good of your family. Sometimes your personal life can be serious business, and needs to approached with a business like mindset. Perhaps when it comes to issues of personal survival and family, we can all take a page from the book of the banks that got us into this mess.

Jon Maddux

CEO

www.YouWalkAway.com