Housing Hasn't Hit Bottom
by Deacon Blues
For all those folks, like Ben Bernanke, who thought that we might have seen the bottom of the housing crater, we haven't. We still have a ways to go, probably through most or all of 2009. There will be more carnage in the homebuilding industry, more bailouts in the mortgage banking industry, and now commerical real estate wants a bailout as well.
But what about homeowners? Well, despite my usual anti-Bush tendencies, the administration and Congress did work together in mid-2008 to put together a joint FHA/HUD effort to help homeowners fend off foreclosure and stay in their homes through refinancing with willing current lenders. The problem is that not all lenders want to play in this game, because the government program requires those lenders, who already loaned money to borrowers at inflated valuations and collected fees on those transactions, to now accept a write-down of those valuations and eat the overage.
For those lenders that don't want to play in that arena, the industry has its own program to help borrowers get new financing and avoid foreclosure. By most accounts, the industry has been fairly motivated to help out, perhaps to avoid whatever a Democratic congress forces upon them in the new year, which may be coupled with a revisiting of the 2005 Bankruptcy "Reform" Act.