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...
Mortgage-backed security
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Are You Worried About Stocks? The U.S. Housing Market Should Be Your Real Concern
Cost to Fix Fannie Mae and Freddie Mac May Reach $1 Trillion
The cost to fix Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), the government-backed mortgage companies that bought or guaranteed three-quarters of all U.S. home loans last year, could run as high as $1 trillion, according to a report by Bloomberg News released yesterday (Tuesday).
The minimum amount required to keep them afloat will be $160 billion, or $15 billion more than they have already drawn from an unlimited line of government credit granted to keep the home mortgage market functioning. That exceeds the amount already spent on bailouts for American International Group Inc. (NYSE: AIG), General Motors Co. or Citigroup Inc. (NYSE: C).
"It is the mother of all bailouts," Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry told Bloomberg.
Fannie and Freddie own or guarantee 53% of the nation's $10.7 trillion in residential mortgages, according to a June 10 Federal Reserve report. Their books are loaded with millions of bad loans, and delinquencies are on the rise.
The minimum amount required to keep them afloat will be $160 billion, or $15 billion more than they have already drawn from an unlimited line of government credit granted to keep the home mortgage market functioning. That exceeds the amount already spent on bailouts for American International Group Inc. (NYSE: AIG), General Motors Co. or Citigroup Inc. (NYSE: C).
"It is the mother of all bailouts," Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry told Bloomberg.
Fannie and Freddie own or guarantee 53% of the nation's $10.7 trillion in residential mortgages, according to a June 10 Federal Reserve report. Their books are loaded with millions of bad loans, and delinquencies are on the rise.
New Banking Regulations ... Same Old Story
U.S. banks, drunk with greed, drove the nation's economy to the brink of financial Armageddon.
To save U.S. banks from losing their license to dangle the nation's economy over a cliff, the U.S. Federal Reserve and the country's elected elite threw them a bailout party and gifted them with the accounting- world's version of "Transformers. "
Unfortunately, new banking regulations aimed at solving these problems are little more than the same old song and dance that forced the bailout - and stuck U.S. taxpayers with a multi-trillion-dollar tab.
To see how reformers have failed to fix the banking system,
To save U.S. banks from losing their license to dangle the nation's economy over a cliff, the U.S. Federal Reserve and the country's elected elite threw them a bailout party and gifted them with the accounting- world's version of "Transformers. "
Unfortunately, new banking regulations aimed at solving these problems are little more than the same old song and dance that forced the bailout - and stuck U.S. taxpayers with a multi-trillion-dollar tab.
To see how reformers have failed to fix the banking system,
Warning: This is Not Another Wall Street Conspiracy Theory, These are the Facts
Just last week, the House Committee on Oversight and Government Reform held a hearing on the U.S. Federal Reserve's decision to directly pay billions of dollars to banks as part of its scheme to bail out insurance giant American International Group Inc. (NYSE: AIG).
According to committee Chairman Dennis Kucinich, D-Ohio, the testimony that congressmen heard just didn't "pass the smell test."
What really stinks about the whole mess is not only the cover-up of what really happened and why, but the inability of anybody in Congress to actually do their homework and be able to frame pointed questions and get to the truth.
It's not complicated, but it is convoluted. Here are the facts and some questions that Congress needs to ask - and that the American people deserve straight answers to.
According to committee Chairman Dennis Kucinich, D-Ohio, the testimony that congressmen heard just didn't "pass the smell test."
What really stinks about the whole mess is not only the cover-up of what really happened and why, but the inability of anybody in Congress to actually do their homework and be able to frame pointed questions and get to the truth.
It's not complicated, but it is convoluted. Here are the facts and some questions that Congress needs to ask - and that the American people deserve straight answers to.
For the inside story on AIG's collapse, read on...
Mortgage Investments Offer Both Opportunity and Risk: Making Sense of Conflicting Reports
Recently, I finished reading an engaging book that explained in detail how John Paulson generated more than $20 billion betting on a crash in the housing markets. Many wise investors could see the writing on the wall months ahead of the panic period, but since you can't exactly short an individual house, it was difficult to figure out the best way to profit from the coming crash.
After months of studying and more than one false start, Paulson eventually determined that the best strategy was to buy protection on mortgage securities. I'll spare you the tedious details, but the concept of mortgage securities is very interesting (and potentially very lucrative). Essentially, many of the loan originators - the companies actually lending money for home purchases - didn't want to keep these loans on their books. Instead, they bundled the loans together in a pool and sold these "securitized" loans to investors.
Over time, the process got very complicated, with the pools being sliced up into different categories - some with more risk and potentially greater returns, and some with much lower risk and consequently lower profits. Leading up to 2007, there was so much investor demand for these securities that the loan originators couldn't keep up with all the buyers. Eventually, new derivative markets emerged, allowing more investors to bet on these pools of mortgages.
After months of studying and more than one false start, Paulson eventually determined that the best strategy was to buy protection on mortgage securities. I'll spare you the tedious details, but the concept of mortgage securities is very interesting (and potentially very lucrative). Essentially, many of the loan originators - the companies actually lending money for home purchases - didn't want to keep these loans on their books. Instead, they bundled the loans together in a pool and sold these "securitized" loans to investors.
Over time, the process got very complicated, with the pools being sliced up into different categories - some with more risk and potentially greater returns, and some with much lower risk and consequently lower profits. Leading up to 2007, there was so much investor demand for these securities that the loan originators couldn't keep up with all the buyers. Eventually, new derivative markets emerged, allowing more investors to bet on these pools of mortgages.
It Was a Wonderful Life - And Then Came Securitization
Massachusetts Land Court judge Keith C. Long recently ruled that foreclosure sales of two properties with securitized mortgages were invalid, a decision that ties up thousands of Massachusetts real-estate transactions.
If nothing else, this landmark court case should make one thing very clear: Securitization - the product of the finest brains of Wall Street for more than two decades - doesn't work as advertised.
Historically, mortgage loans were made by small local institutions, which knew the borrowers personally and took the credit risk themselves.
If nothing else, this landmark court case should make one thing very clear: Securitization - the product of the finest brains of Wall Street for more than two decades - doesn't work as advertised.
Historically, mortgage loans were made by small local institutions, which knew the borrowers personally and took the credit risk themselves.