One Idea for Bank Crisis: Quarantine the Bad Assets
Binyamin Appelbaum and David Cho
Washington Post

A housing bubble bursting, banks faltering toward failure, a nation plunging into recession.
The year was 1991, and the Swedish government responded with a dramatic plan: Unpaid loans and other troubled assets would be dumped into new state-owned banks, scrubbing the banking industry of problems in the hope of sparking a lending revival.

Britain announces 2nd banking rescue plan
David Stringer
The Associated Press

LONDON -- Britain announced a second rescue plan for the country's ailing banks on Monday, hoping to thaw frozen lending by offering to insure banks against large-scale losses on bad assets they already hold.

Obama advisor warns banks on the price of more aid
Tom Petruno, Los Angeles Times

President-elect Barack Obama's top economic advisor, Larry Summers, gave another verbal lashing to the nation's banks in a TV appearance Sunday.

The second half of the $700-billion bank bailout fund, Summers said on CBS' "Face the Nation," will come with more strings attached for lenders -- something he and others in the new administration, and in Congress, already had signaled, because of disappointment with the industry's response to government help so far.

U.S. economy may sputter for years
Peter G. Gosselin, Los Angeles Times

Reporting from Washington -- Transfixed by the daily spectacle of dismal economic news and wild Wall Street swings, few Americans have looked up to see what a wide array of economists say lies beyond the immediate crisis.

And with good reason: The picture isn't pretty. 

Foreclosures in U.S. Rose 81 Percent, Topping 2.3 Million Last Year
Bloomberg News
January 15, 2009

U.S. foreclosure filings jumped 81 percent last year as falling house prices, tighter mortgage lending and the longest recession in a quarter century battered property owners, RealtyTrac Inc. said.

U.S. Foreclosure Filings Up 81 Percent in 2008
The Associated Press
January 15, 2009

More than 2.3 million American homeowners faced foreclosure proceedings last year, an 81 percent increase from 2007, with the worst yet to come as consumers grapple with layoffs, shrinking investment portfolios and falling home prices.

Introducing 'The MLS Bill of Rights'
Inman News
January 15, 2009

A broker-controlled statewide MLS in Connecticut has released "The MLS Bill of Rights," a document that denounces MLS boundaries as barriers to business and calls for MLS participants to have access to all property listings in the state or states where they are licensed.

Foreclosure Guide Helps Homeowners
PR Newswire
January 15, 2009

Sherry Lee, a Florida Real Estate Broker, has written "What to Expect When You Are Expecting Foreclosure" as an answer the growing number of calls she has been fielding from distressed property owners. The 80-page book provides quick reference for homeowners and investors who have questions about their mortgage situation.

Bankruptcy Law Changes May Not Cut Home Foreclosures
January 14, 2009
Bloomberg News

A proposed change to bankruptcy laws that would allow judges to reduce consumers’ mortgages may not succeed in reducing the foreclosures that have been dragging down property prices, according to a Barclays Capital strategist.

Banks Take Back 1/4 Million California Homes in '08
January 14, 2009
San Francisco Chronicle

ForeclosureRadar, a paid service that tracks foreclosure listings in every California county, has issued its December and year-end report, and the numbers are grim.

Tenants Face Evictions as Foreclosure Crisis Grows
January 14, 2009
NY1

For thousands of renters, eviction notices are becoming the norm as property owners continue to fall into the trap of foreclosures.

Realtors' Former Top Economist Says Don't Blame the Messenger
Wall Street Journal
January 12, 2009

On a recent weekday, David Lereah sat in the sunroom of his five-bedroom colonial house. The only sound was the yapping of his dog Maisy.  Once one of the world's most-visible housing experts, Mr. Lereah is disconnected from his old life. The former chief economist for the National Association of Realtors says the group's top executives won't return his phone calls. He says he wasn't invited to the association's 100th birthday bash last May.

Power to Modify Mortgages Sits Well With Judges
Wall Street Journal
January 12, 2009

Federal bankruptcy judges say they are eager to have the power to restructure mortgages for struggling debtors because it could save hundreds of thousands of homeowners from foreclosure. Top Senate Democrats are advancing legislation to let bankruptcy-court judges approve new repayment terms on first mortgages for primary residences for homeowners who have sought protection in a Chapter 13 filing. The proposal allowing so-called mortgage cramdowns, in which the principal amount of the loan is reduced, is one of several efforts Democrats are pushing to give homeowners relief as they wrestle with increasing debt levels and plummeting home values.

Frank Seeks TARP Funds for Foreclosures
Wall Street Journal
January 10, 2009

The federal government should devote at least $50 billion of the remaining financial-rescue funds toward a plan to prevent foreclosures, said House Financial Services Committee Chairman Barney Frank Friday.

Obama Lobbies for Release of Second Half of Bailout
New York Times
January 11, 2009

Even as they continued to hash out the details of a nearly $800 billion economic recovery plan, aides to President-elect Barack Obama on Sunday began lobbying a reluctant Congress to release the second half of the Treasury’s $700 billion financial system bailout fund.

President-elect Barack Obama is going to need his track shoes on to hit the ground running when he takes office later this month. The nation’s tortuous economic course is going to test his endurance and stamina as he winds along a very long-winded marathon.

Although this is not breaking news to anyone, minutes released this week of the Federal Open Market Committee’s December meeting show just how bad things have become mixed with a bit of healthy dissention between the Committee members as to how to deal with the crisis. In the end the meeting resulted in a united statement of position with the Fed coming out announcing a “range” for the federal funds rate instead of the usual exact numerical target for the rate.

The minutes describe the many economic indicators that have taken a turn for the worse just in the period since the FOMC’s last meeting in October. There is a glimmer of hope on certain fronts, but overall, the U.S. economy is in dire straits with the real possibility of a “prolonged retraction” for many years looming overhead.

Factors relating directly to real estate continue to be of major concern. Those factors include:

•    The housing market weakened again as construction activity, new home sales, and home prices declined further
•    Financial markets saw a further pullback in risk-taking
•    Output of construction supplies declined
•    Whatever real income boost people got from recent lower energy prices was offset somewhat by the negative wealth effects of lower home equity and house prices
•    Single-family housing starts and permit issuance declined further in November

One positive factor was the slight ease of financing conditions for prime borrowers thanks to the Fed’s announcement it would purchase agency debt and mortgage-backed securities totaling as much as $600 billion.

An updated forecast prepared for the Committee by staff members revised down its outlook for economic recovery in 2009, with a projected moderate recovery in 2010. Real GDP is expected to fall further than anticipated during the first half of 2009.

All meeting participants agreed the economic downturn had intensified during the Fall of 2008. Household wealth has dropped sharply as credit conditions tightened up, unemployment increased and consumer confidence waned, causing a sharp contraction in consumer spending.

In summary, it looks like the FOMC members were somewhat taken aback by just how bad things had turned in such a short period of time. Whatever solutions they eventually promulgate will have a long, drawn-out course to post-marathon recovery.

What does all this mean for those looking to the advantages of purchasing or dealing in foreclosure property? Most likely it means there is still quite a way to go before the current foreclosure trend peaks out. Even when home prices bottom out, some forecasters expect the economy to drag along the bottom for a number of months (if not years) before prices recover any of the current lost equity.

It looks like 2009 and 2010 are going to be good years to buy real estate at bargain prices. Time to start doing your homework now and get ready to join the race.