6 million foreclosures in the next two months?

Yesterday, I spoke with a gentleman who is by profession a contractor specializing in refurbishing homes. This is what he had to say about the current foreclosure crisis:

Mortgage mitigation and short-selling aren’t working. Short-selling tends to bring down the real-estate values for a given neighborhood. Sell a $50,000 house for $20,000 and this has the same effect on all the other houses on the block. This affects the real-estate portfolios negatively for banks..

The next step to bring us out of this recession is foreclosure. Apparently, foreclosures have been put on “hold,” but now “something needs to be done.” And apparently that “something” is to foreclose on "6,000,000 homes" in the next two months (the number he quoted).

He and other home-refurbishing specialists have spoken with a big-wig at the Federal Reserve (we have one here in KC) and here’s the plan:
1) Instigate foreclosures. 6,000,000 in the next two months(???)
2) Refurbish these homes with energy-saving features
3) Sell homes to home-buyers who couldn’t have bought a house otherwise. He explained that energy-efficient homes would be more affordable since the banks would take into consideration that monthly expenses would be much less (gas, for example, if you had solar-powered water heaters and improved insulation), and upkeep would be minimized (no rusty water heater to replace). This would enable the new home-buyers to afford a loan since they would have lower monthly expenses and lower expenses for upkeep.
4) This in turn would raise the real-estate values, which, in turn, would strengthen the real-estate portfolios of banks.
5) And stronger real-estate portfolios will help small businesses since they are linked to the strength of the real-estate industry

He talked quite a bit and seemed to have a “this better work” attitude, alluding that we are in “deep shit” if it doesn’t. He said this recession could turn into a depression.

This program will come out of DC, and he wonders when the media will announce it.

Anyone else heard about this? Or was this fellow just someone who liked to “shoot the breeze.”

Selling homes to home-buyers who can't afford them, even with energy efficient upgrades, sounds very much like the way we got into this mess. Sounds like these people are trying to pump up the housing bubble again.

We'll see what happens, but the bigger tsunami that is coming starts hitting in about a month when all those commercial real estate loans bought with ARM's start to reset at a higher rate. That could get really ugly.

SHADOW INVENTORY; There's a 9-year backlog of distressed homes

Here's another stunner from the Wall Street Journal. The article is titled "Number of the Week: 103 Months to Clear Housing Inventory" by Mark Whitehouse. Here's an excerpt:

"How much should we worry about a new leg down in the housing market? If the number of foreclosed homes piling up at banks is any indication, there’s ample reason for concern. As of March, banks had an inventory of about 1.1 million foreclosed homes, up 20% from a year earlier....

Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That “shadow inventory” was up 30% from a year earlier. Based on the rate at which banks have been selling those foreclosed homes over the past few months, all that inventory, real and shadow, would take 103 months to unload. That’s nearly nine years. Of course, banks could pick up the pace of sales, but the added supply of distressed homes would weigh heavily on prices — and thus boost their losses." ("Number of the Week: 103 Months to Clear Housing Inventory" Mark Whitehouse, Wall Street Journal)

Got that? There's a 9-year backlog of distressed homes. The banks are deliberately fudging the numbers to hide how bad things really are. The number of homes in late-stage foreclosure is not 1.1 million, but nearly 6 million--- 5X more than the banks are admitting. Housing will be in the doldrums for a decade or more. It's shameful that people can't get basic information like this to help them make their investment decisions. The banks couldn't pull off this type of information warfare without the help of government officials pulling strings from inside. Bernanke and Geithner must be involved.

http://www.informationclearinghouse.info/article25402.htm

from a cousin in the foreclosure industry.
She said the shit was going to hit the fan in a couple of months.Especially in what she called the non-judicial states.

:shrug: What did she mean by this?

I got the impression that they are states that do not require a court order for the foreclosure to proceed.

Thanks...:hi:

I sort of really, seriously doubt that.

But he seemed to indicate his role would take him into several states around KC.

I had a difficult time breaking away and wondered if he just liked to talk.

But he did seem to be informed...

In 20 years I know that I have spent more money on keeping this house maintained than I paid for it. I have the receipts to prove it.

There is the catch. Keeping a house is one huge expense. Even without worrying about the cost of utilities something is breaking or wearing out all the time. If someone is handy they can cut back on that expense but not all of it. Home ownership is not for everyone. I couldn't afford to maintain a house until I was in my 30's. Even if someone had given it to me. And I was making good money when I wasn't laid off.

Don

Perhaps the big banks have earned enough though the zero-interest/proprietary loan program to be able to finally admit they're flush with non-performing loans.