As featured on p. 218 of "Bloggers on the Bus," under the name "a MyDD blogger."

Friday, August 21, 2009

Meanwhile In The Real Economy

We could deliver health care and add a second stimulus and do a host of other things to improve the economy, but if numbers like this continue to be the norm, we're not going to get very far in fixing things.

The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.24 percent of all loans outstanding as of the end of the second quarter of 2009, up 12 basis points from the first quarter of 2009, and up 283 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.
The delinquency rate breaks the record set last quarter. The records are based on MBA data dating back to 1972.

The delinquency rate includes loans that are at least one payment past due but does not include loans somewhere in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the second quarter was 4.30 percent, an increase of 45 basis points from the first quarter of 2009 and 155 basis points from one year ago. The combined percentage of loans in foreclosure and at least one payment past due was 13.16 percent on a non-seasonally adjusted basis, the highest ever recorded in the MBA delinquency survey.

What's more, a separate report says that foreclosures will peak at the end of 2010. That's when a certain set of midterm elections will be held.

Foreclosures hurt the economy really badly. But banks and lenders have made the calculation that it costs them less to foreclose than it does to modify terms of loans. Because if they reduce principal on the loans, their solvency would once again come into question. I know that the government's smiling because they didn't have to dip into an expected $250 billion earmarked in the budget to cover bank losses further, but that's only because reality has been papered over. The Federal Reserve and the FDIC and other government entities have basically covered the banks. But mass loan mods would expose them.

Which is why it isn't happening. And as a result, people suffer. And so does the real economy. As long as foreclosures continue, which leads eventually to higher unemployment and more foreclosures ina kind of death spiral, the American consumer will simply not have the wherewithal to spend at the rates necessary for recovery.

When you look at Obama's poll numbers, think in the context of the economy. It's always been the greatest predictor of national political performance. He inherited a mess, but if he cannot work it out over four years or give people a credible reason to believe he's acting in their interests, he'll be gone.

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