It was the most atrocious bubble in U.S. history, pushing tens of millions of Americans into financial misery.
Even today, the last of the lawsuits have yet to be filed.
But five years later it's finally coming back.
The housing market has bottomed and there's money to be made on its return.
Foreclosures
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U.S. Housing Market Forecast: How to Profit as Real Estate Rebounds
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New Wave of Foreclosures Will Sink the Housing Market Rebound
The long-anticipated housing market rebound will hit a speed bump this year as the number of foreclosures rises again.
With January's mammoth $26 billion settlement between five major banks and a group of state attorneys general, foreclosures that had been held up for a year or more are now moving forward.
The spike in foreclosures will arrive just as other data, such as the 5.1% increase in new construction permits reported on Tuesday, had begun to point to a housing market rebound.
"We expect to see foreclosure-related sales increase in 2012, particularly pre-foreclosure sales, as lenders start to more aggressively dispose of distressed assets held up by the mortgage servicing gridlock over the past 18 months," Brandon Moore, CEO of RealtyTrac, told CNN Money.
RealtyTrac's February report showed new default notices - the first step in the foreclosure process - were up 1% from January. Default notices increased dramatically in some states, such as Pennsylvania (35%), Florida (33%) and Indiana (37%).
"The pig is starting to move through the python," Daren Blomquist, director of marketing for RealtyTrac, told CNN Money.
Distressed sales already account for about one out of three U.S. home sales.
The National Association of Realtors (NAR) reported this week that 20% of home sales in February were foreclosures and 14% were short sales.
In a short sale, an owner who owes more on their home than it's worth agrees to sell for less, with the bank agreeing to accept the loss.
That's a far cry from a normal housing market, when distressed sales are less than 5%.
For 2012, RealtyTrac predicts a 25% increase in foreclosures, which will push the portion of distressed sales even higher.
And the picture doesn't figure to improve for quite some time. Paul Dales of Capital Economics estimates as many as an additional 3 million foreclosures over the next several years.
All of the states that saw increases in new default notices were those in which the courts play a role in foreclosures. The robo-signing issues addressed in the bank settlement occurred almost exclusively in such states.
States that don't use a judicial foreclosure process didn't accumulate a backlog. In fact, foreclosure activity in those states was down 5% in February from the previous month, and down 23% from the February 2011.
But among the 26 states that use a judicial foreclosure process, activity rose 2% in February from the month before. Foreclosure activity was up 24% from the previous year.
That leaves little room for optimism in hard-hit states such as Florida.
With January's mammoth $26 billion settlement between five major banks and a group of state attorneys general, foreclosures that had been held up for a year or more are now moving forward.
The spike in foreclosures will arrive just as other data, such as the 5.1% increase in new construction permits reported on Tuesday, had begun to point to a housing market rebound.
"We expect to see foreclosure-related sales increase in 2012, particularly pre-foreclosure sales, as lenders start to more aggressively dispose of distressed assets held up by the mortgage servicing gridlock over the past 18 months," Brandon Moore, CEO of RealtyTrac, told CNN Money.
RealtyTrac's February report showed new default notices - the first step in the foreclosure process - were up 1% from January. Default notices increased dramatically in some states, such as Pennsylvania (35%), Florida (33%) and Indiana (37%).
"The pig is starting to move through the python," Daren Blomquist, director of marketing for RealtyTrac, told CNN Money.
Distressed sales already account for about one out of three U.S. home sales.
The National Association of Realtors (NAR) reported this week that 20% of home sales in February were foreclosures and 14% were short sales.
In a short sale, an owner who owes more on their home than it's worth agrees to sell for less, with the bank agreeing to accept the loss.
That's a far cry from a normal housing market, when distressed sales are less than 5%.
For 2012, RealtyTrac predicts a 25% increase in foreclosures, which will push the portion of distressed sales even higher.
And the picture doesn't figure to improve for quite some time. Paul Dales of Capital Economics estimates as many as an additional 3 million foreclosures over the next several years.
The Uneven Impact on the Housing Market
However, the impact of this wave of foreclosures will be felt unevenly.All of the states that saw increases in new default notices were those in which the courts play a role in foreclosures. The robo-signing issues addressed in the bank settlement occurred almost exclusively in such states.
States that don't use a judicial foreclosure process didn't accumulate a backlog. In fact, foreclosure activity in those states was down 5% in February from the previous month, and down 23% from the February 2011.
But among the 26 states that use a judicial foreclosure process, activity rose 2% in February from the month before. Foreclosure activity was up 24% from the previous year.
That leaves little room for optimism in hard-hit states such as Florida.
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Cash for Keys: Avoid Foreclosure, Pay the Bank Less Than What You Owe... and Get $30,000
U.S. banks have a deal for underwater homeowners: Avoid foreclosure by selling your house for less than what you owe... and they'll pay you $30,000 or more to close the deal. It's called Cash for Keys, and it's working. Banks typically hate short sales because they lose money. The alternative, however, is even more costly […]
The "Mortgagegate" Scandal: Congratulations America, You're Now in the Title-Insurance Business
U.S. taxpayers already own pieces of such problem-plagued companies as General Motors Corp., Chrysler LLC, American International Group Inc. (NYSE: AIG), Fannie Mae (OTC: FNMA) and Freddie Mac (OTC: FMCC). Now the increasingly problematic "Mortgagegate" saga could land American taxpayers in the trouble-ridden title-insurance business.
On Oct. 8, Bank of America Corp. (NYSE: BAC) indemnified Fidelity National Financial Inc. (NYSE: FNF) against any losses that Fidelity might sustain in litigation over title insurance it writes on foreclosed homes - the same homes, coincidentally, that Bank of America wants to sell to new buyers.
This arrangement amounts to U.S. taxpayers, who are the ultimate backers of the Federal Deposit Insurance Corp. (FDIC), backstopping a giant, publicly held title-insurance company, which is backstopping a huge commercial bank, so that the bank can sell properties that it might not have proper title to.
It sounds like a Wall Street version of the "Six Degrees of Kevin Bacon," but it's no game - it's a daisy-chain scheme that once again sets American households up as the biggest losers.
On Oct. 8, Bank of America Corp. (NYSE: BAC) indemnified Fidelity National Financial Inc. (NYSE: FNF) against any losses that Fidelity might sustain in litigation over title insurance it writes on foreclosed homes - the same homes, coincidentally, that Bank of America wants to sell to new buyers.
This arrangement amounts to U.S. taxpayers, who are the ultimate backers of the Federal Deposit Insurance Corp. (FDIC), backstopping a giant, publicly held title-insurance company, which is backstopping a huge commercial bank, so that the bank can sell properties that it might not have proper title to.
It sounds like a Wall Street version of the "Six Degrees of Kevin Bacon," but it's no game - it's a daisy-chain scheme that once again sets American households up as the biggest losers.
To understand the latest "Mortgagegate" developments - and see the steps to take - please read on...
Question of the Week: Mortgagegate Makes Investors Wary of U.S. Banking Industry
A potentially crippling crisis is flashing through the banking industry and threatening to derail the already struggling housing market and U.S. economic recovery.
But Gilani said the headlines aren't telling the full story.
Dubbed "Mortgagegate" - a nod to the earlier scandal-ridden crisis touched off by Watergate - this latest crisis involves such big lenders as Bank of America Corp. (NYSE: BAC), Citigroup Inc. (NYSE: C) and GMAC LLC (NYSE: GMA), which are alleged to have conducted negligent foreclosure practices.
Money Morning Contributing Editor Shah Gilani warned about the allegedly fraudulent business practices employed by lenders and their hired "robo-signers" that led to thousands of questionably reviewed foreclosure documents.
But Gilani said the headlines aren't telling the full story.
Dubbed "Mortgagegate" - a nod to the earlier scandal-ridden crisis touched off by Watergate - this latest crisis involves such big lenders as Bank of America Corp. (NYSE: BAC), Citigroup Inc. (NYSE: C) and GMAC LLC (NYSE: GMA), which are alleged to have conducted negligent foreclosure practices.
Money Morning Contributing Editor Shah Gilani warned about the allegedly fraudulent business practices employed by lenders and their hired "robo-signers" that led to thousands of questionably reviewed foreclosure documents.
We Want to Hear From You: Will "Mortgagegate" Affect You?
A potentially crippling crisis is flashing through the banking industry and threatening to derail the already struggling housing market and U.S. economic recovery.
Dubbed "Mortgagegate" - a nod to the earlier scandal-ridden crisis touched off by Watergate - this latest crisis involves such big lenders as Bank of America Corp. (NYSE: BAC), Citigroup Inc. (NYSE: C) and GMAC LLC (NYSE: GMA), which are alleged to have conducted negligent foreclosure practices.
Money Morning Contributing Editor Shah Gilani reported last week about the allegedly fraudulent business practices employed by lenders and their hired "robo-signers" that led to thousands of questionably reviewed foreclosure documents.
But Gilani warned that the headlines aren't telling the full story.
Dubbed "Mortgagegate" - a nod to the earlier scandal-ridden crisis touched off by Watergate - this latest crisis involves such big lenders as Bank of America Corp. (NYSE: BAC), Citigroup Inc. (NYSE: C) and GMAC LLC (NYSE: GMA), which are alleged to have conducted negligent foreclosure practices. Money Morning Contributing Editor Shah Gilani reported last week about the allegedly fraudulent business practices employed by lenders and their hired "robo-signers" that led to thousands of questionably reviewed foreclosure documents.
But Gilani warned that the headlines aren't telling the full story.
What You Don't Know about "Mortgagegate" Could Crush the U.S. Banking System
What most Americans don't know about " Mortgagegate" is that "robo-signing" of foreclosure documents is the tip of the iceberg.
The breadth and depth of this newest mortgage crisis is so dangerous that the U.S. Federal Reserve last month pre-announced another potential round of quantitative easing (pundits are calling it "QE2") to address "potential negative shocks."
In fact, the fallout potential is so numbing and the actions that birthed it so scandalous that commentators have given the crisis the Watergate-esque title of " Mortgagegate" (or, as some prefer, "Mortgage Gate").
Here's what the news-story headlines aren't telling you.
The breadth and depth of this newest mortgage crisis is so dangerous that the U.S. Federal Reserve last month pre-announced another potential round of quantitative easing (pundits are calling it "QE2") to address "potential negative shocks."
In fact, the fallout potential is so numbing and the actions that birthed it so scandalous that commentators have given the crisis the Watergate-esque title of " Mortgagegate" (or, as some prefer, "Mortgage Gate").
Here's what the news-story headlines aren't telling you.
For an investment strategy that will protect your portfolio from "Mortgagegate," please read on...
Foreclosures Continue to Stymie Housing Recovery
Banks seized more homes in August than in any month since the housing bubble burst in 2007, even as the number of homes entering the foreclosure process dropped for the seventh month in a row, according to data compiled by RealtyTrac Inc.
In all, banks repossessed 95,364 properties last month, up 3% from July and an increase of 25% from August 2009, RealtyTrac said. August was the ninth month in a row that the rate of homes seized by banks increased on an annual basis. The previous high was in May.
Additionally, almost one-quarter of all U.S. home closing transactions involved properties that were in some stage of mortgage distress and sold at a 26% discount on average in the second quarter.
In all, banks repossessed 95,364 properties last month, up 3% from July and an increase of 25% from August 2009, RealtyTrac said. August was the ninth month in a row that the rate of homes seized by banks increased on an annual basis. The previous high was in May.
Additionally, almost one-quarter of all U.S. home closing transactions involved properties that were in some stage of mortgage distress and sold at a 26% discount on average in the second quarter.
Moribund Housing Market Threatens to Kill Economic Recovery
The weak housing market, which has traditionally led the U.S. economy out of recent recessions, this time may put an end to the economic recovery.
Existing home sales plummeted by a record 27% to their lowest level in 15 years in July and inventories soared, the National Association of Realtors (NAR) reported yesterday (Tuesday). Home re-sales, which account for 90% of the total market, dropped to an annual rate of 3.83 million in July. And inventories rose to 12.5 months from 8.9 months in June, putting them at their highest level in more than a decade.
"Historically, July is the peak inventory month in any given year," NAR Chief Economist Lawrence Yun told The Wall Street Journal. "The question is whether this pause is a temporary pause."
Existing home sales plummeted by a record 27% to their lowest level in 15 years in July and inventories soared, the National Association of Realtors (NAR) reported yesterday (Tuesday). Home re-sales, which account for 90% of the total market, dropped to an annual rate of 3.83 million in July. And inventories rose to 12.5 months from 8.9 months in June, putting them at their highest level in more than a decade.
"Historically, July is the peak inventory month in any given year," NAR Chief Economist Lawrence Yun told The Wall Street Journal. "The question is whether this pause is a temporary pause."
The Housing Market Still Wobbly Despite May's Home Price Improvement
The S&P/Case-Shiller index of home prices increased more than forecast in May, but the combination of a now-expired government tax credit, skyrocketing foreclosures and deteriorating consumer confidence is expected to keep a lid on the housing market in the second half of 2010.
Home prices in 20 major U.S. cities climbed 4.6% from May 2009, the biggest year-over-year gain since August 2006. However, analysts say the increase was artificially buttressed by seasonal factors and the residual impact of the homebuyers' tax credit.
"While May's report on its own looks somewhat positive, a broader look at home price levels over the past year" doesn't show that the housing market "is in any form of sustained recovery," David M. Blitzer, chairman of S&P's index committee told The Wall Street Journal. "Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level."
Home prices in 20 major U.S. cities climbed 4.6% from May 2009, the biggest year-over-year gain since August 2006. However, analysts say the increase was artificially buttressed by seasonal factors and the residual impact of the homebuyers' tax credit.
"While May's report on its own looks somewhat positive, a broader look at home price levels over the past year" doesn't show that the housing market "is in any form of sustained recovery," David M. Blitzer, chairman of S&P's index committee told The Wall Street Journal. "Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level."
Taxpayers' $3.7 Trillion Bailout Hasn't Saved the U.S. Housing Market
The amount of taxpayer dollars directed at the Troubled Asset Relief Program (TARP) continues to grow but with little economic progress being made, particularly in the housing market.
Total taxpayer support for the mortgage market rose by $700 billion in the past year to $3.7 trillion, Neil Barofsky, the Special Inspector General for TARP, said his quarterly report to Congress.
"Indeed, the current outstanding balance of overall Federal support for the nation's financial system...has actually increased more than 23% over the past year...the equivalent of a fully deployed TARP program - largely without congressional action, even as the banking crisis has, by most measures, abated from its most acute phases," said Barofsky.
Total taxpayer support for the mortgage market rose by $700 billion in the past year to $3.7 trillion, Neil Barofsky, the Special Inspector General for TARP, said his quarterly report to Congress.
"Indeed, the current outstanding balance of overall Federal support for the nation's financial system...has actually increased more than 23% over the past year...the equivalent of a fully deployed TARP program - largely without congressional action, even as the banking crisis has, by most measures, abated from its most acute phases," said Barofsky.
Housing Market Wobbling without Tax Credit Crutch
The housing market has struggled to rebuild since its 2007 collapse, and its recovery is on even shakier ground now that a tax credit for first-time homebuyers has expired.
Nearly one-third of all U.S. home sales in the first quarter involved properties that were in some stage of mortgage distress, according to RealtyTrac Inc.. And homes on the market that were in the process of foreclosure sold at an average discount of 27% in the first quarter, which does not bode well for new inventory coming onto the market.
"We're clearly creating more properties that will be sold at distressed prices than the market is absorbing," Rick Sharga, RealtyTrac's senior vice president for marketing, told Bloomberg News in an interview. "The discount will probably stay between 25% and 30% as lenders carefully manage the number of new foreclosure actions in order to avoid flooding the market."
Nearly one-third of all U.S. home sales in the first quarter involved properties that were in some stage of mortgage distress, according to RealtyTrac Inc.. And homes on the market that were in the process of foreclosure sold at an average discount of 27% in the first quarter, which does not bode well for new inventory coming onto the market.
"We're clearly creating more properties that will be sold at distressed prices than the market is absorbing," Rick Sharga, RealtyTrac's senior vice president for marketing, told Bloomberg News in an interview. "The discount will probably stay between 25% and 30% as lenders carefully manage the number of new foreclosure actions in order to avoid flooding the market."
Are You Worried About Stocks? The U.S. Housing Market Should Be Your Real Concern
According to the latest reports on the U.S. housing market, the 96,400 homes hit with default notices last month were 7% less than in April and 22% less than in May 2009.
And that's not all. Foreclosure auctions were scheduled for the first time on 132,680 properties last month - 4% fewer than the month before and 16% fewer than in May a year ago, according to the Irvine, California-based RealtyTrac Inc.
In fact, foreclosure filings of all types - default notices, scheduled auctions and bank repossessions - were reported on 322,920 U.S. properties in May, a decline of 3%. All told, this latest report seems to have painted a picture of a gentle and steady recovery for the embattled U.S. housing market.
Unfortunately, these figures are quite deceptive - as is the reassuring portrait they helped create. Despite the apparent improvement in the foreclosure figures, there exist some dangerous undercurrents that threaten to further drag down U.S. housing prices - as well as U.S. investors.
To discover the "real" state of the U.S. housing market, read on...
And that's not all. Foreclosure auctions were scheduled for the first time on 132,680 properties last month - 4% fewer than the month before and 16% fewer than in May a year ago, according to the Irvine, California-based RealtyTrac Inc.
In fact, foreclosure filings of all types - default notices, scheduled auctions and bank repossessions - were reported on 322,920 U.S. properties in May, a decline of 3%. All told, this latest report seems to have painted a picture of a gentle and steady recovery for the embattled U.S. housing market.
Unfortunately, these figures are quite deceptive - as is the reassuring portrait they helped create. Despite the apparent improvement in the foreclosure figures, there exist some dangerous undercurrents that threaten to further drag down U.S. housing prices - as well as U.S. investors.
To discover the "real" state of the U.S. housing market, read on...
Surge in Strategic Defaults Threatens Housing Market Recovery
A growing number of homeowners who owe more on their mortgages than their property is worth are opting for "strategic default," which means walking away from their homes, even though they can afford to make their monthly payment.
If the trend accelerates, it could put more empty houses on a market that's already overburdened with vacancies and snuff out any recovery in the moribund housing market.
Right now, more than 10% of borrowers are 25% or more underwater on 4.9 million mortgages. The total valuation could saddle banks with as much as $656 billion of bad loans, according to the latest report from Corelogic.
If the trend accelerates, it could put more empty houses on a market that's already overburdened with vacancies and snuff out any recovery in the moribund housing market.
Right now, more than 10% of borrowers are 25% or more underwater on 4.9 million mortgages. The total valuation could saddle banks with as much as $656 billion of bad loans, according to the latest report from Corelogic.
Obama Reveals $14 Billion Housing Program Aimed at Unemployed and Underwater Homeowners
The Obama administration on Friday announced a $14 billion program to shore up the housing market by giving lenders incentives to slash some mortgage debt and reduce mortgage payments for the unemployed. As the housing market struggles under the weight of an epidemic of foreclosures there was disturbing evidence last week that the malaise is […]