Tuesday, August 17, 2010

Real Estate Fiasco Part II

When one goes to an education course in your field, it is usually the yea-rah-rah pep talk.   Educate, yes, but motivate as well. 

It was with concern today as I attended yet another real estate course when a national economist predicted....

What brought the real estate market to it's knees?
Mismanagement of funds
Conflict of interest
Liberal underwriting
Abandonment of personal ethics
Lack of accountability

The stimulus is not working. We are on a road of economic deceleration. Fannie Mae and Freddie Mac, the two major lending arms of the US government have no limits. The new lending guidelines will repeat the sub-prime loans we are trying to get out from under. Loans must be made to sell the volume of the current inventory. Loan guidelines will be changed.

We're entering a whole new phase of housing value reductions. And what will be done with this? It was the feeling of this economist that the current administration will, by executive order,  circumvent  congress, and will, at the eleventh hour before elections, reduce the principle of all mortgages of those people who are not paying their mortgage and are currently under water. That is to say, if you are having trouble paying your mortgage, you owe $250,000 and your house is now worth, $200,000, the government will pick up the tab for the $50,000.  This will apply to 20% of residential mortgages and will cost in the neighborhood of 6-8 BILLION, as much as the first failed bailout. This in turn will cause serious anger and resentment between people who are responsible and pay their debts and those who think government should pick up the tab for them. However, this "dangling the carrot" just before elections may be enough to sway voters. At what cost?? To us? To our children? To our grandchildren?

What will all of this "printing of fictitious money do for us?  Lead us to inflation, perhaps hyper-inflation. You thought cost of goods and services are increasing now?  Hold on, you're in for quite a ride.


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