Washblog

. . A recent sampling of 100 stated income loans by an auditing firm in Virginia (based on IRS records) found that 90 percent of the income statements were exaggerated by 5 percent or more, WHILE ALMOST 60 percent OF THE STATED AMOUNTS WERE EXAGGERATED BY MORE THAN 50 percent." (Dan Dorfman New York Sun)

Are you kidding me? A majority of loan applicants are grossly exaggerating their income and the banks are handing out hundreds of thousands of dollars WITHOUT EVEN CROSS-CHECKING IRS STATEMENTS?

Did you fudge on your income just to get the loan? I applied while my wife was still employed so her income had a lot to do with loan approval.

Shame on you and shame on me ...

The Commerce Dept. failed to subtract the thousands of people who signed contracts but "simply walked away from their deposits when they realized they couldn't flip the houses for a quick profit."

Ooops! So the government is falsifying the figures to make things look better than they really are?

You bet. And, most of the high-end homebuilders like Toll Bros are reporting cancellations in the neighborhood of 37 percent!

... Gadzooks!

Okay, so the homeowners are lying on their loans, and the government is lying about the sales (and inventory) figures; is that it?

Oh? Well then if the govermint can do it, we sure as hell can too.

Bubble, bubble, toil and trouble

So, what can we expect when interest rates tighten up and the market begins to slump?

The banks are battening down the hatches and preparing for the worst. This just confirms that the real hurricane hasn't even touched down yet and that America's over-leveraged consumers should try to straighten out their financial affairs as swiftly as possible. (Get out of debt, pronto!)

A USB study indicates that a "high percentage of borrowers with delinquent, defaulted and foreclosed loans have second mortgages. These borrowers are so overburdened by the added debt that THEY HAVE TROUBLE MAKING THE PAYMENTS ON THEIR FIRST MORTGAGES. This is an ominous development since 34 percent of all mortgages in 2006 were second mortgages."

Remember all those phone calls and letters from financial specialists offering to solve all your problems just because you're a home buyer? Did you fall for it?

The American consumer is hobbled by debt and has no way to increase his revenue as long as wages remain stagnant. Additionally, US households are now showing negative savings. (minus .2 percent) When the home equity "punch bowl" dries up, it'll be hard times for the average over-leveraged American consumer. He'll have nothing left for his buying sprees but the plastic in his wallet. (Credit card debt is soaring)

Oh beautiful for credit cards for amber waves of red ink .... keep up that erected patriotism, spend spend spend ... charge charge charge   your growing debt ... charge charge charge until you debt yourself to death.

So, what happens now?

What can we expect from the architects of this colossal rip-off in the next year or two?

Well, the Fed, the US Treasury and the Bush administration -- the real axis of evil -- would like to forestall the inevitable recession-depression until they carry out their forthcoming attack on Iran. That's why Bush is sending another carrier group to the Gulf as well as a squadron of F-16s to Turkey. (It also explains why US forces seized five Iranian hostages in Irbil, Iraq last week.) The US is clamping down on transactions with Iran's main banks ("unilateral sanctions") and has coerced the Saudis into "discounting their top-line sweet crude by $1.75 to US customers" (Jim Willie, Golden Jackass.com) to put additional pressure on Iranian oil exports. As Willie says, "This is the real story behind the falling (gas) prices, not the silly (East Coast) weather".

Uncle Sam is gearing up for another Middle East dust-up in Iran and the lower gas prices are (temporarily) averting a US recession.

Wow! ANOTHER reason for the great capitalist obsession for Middle Eastern scapegoats and excuses ... I mean, terrorists and religious fanatics. (Sorry Dick and George Armstrong Custer Bush, I didn't mean to get it wrong.)

. . America holds record mortgage debt in a declining housing market. Even that might first seem okay -- we can just whether the storm in our nice new houses. And in fact things will be okay for homeowners who bought long ago and have seen the price of their homes double and then double again. But for more recent homeowners, who bought at the top and now face decades of payments on houses that soon will be worth less than they paid for them, serious trouble is brewing. And they are not an insignificant bunch. The problem for recent homeowners is not just that prices are falling; it's that prices are falling even as the buyer's total mortgage remains the same or even increases. Eventually, the price of the house will fall below what the homeowners owe, a state that economists call negative equity. They can't sell -- the declining market price won't cover what they owe the bank -- but they still have to make those (often growing) monthly payments. Their only "choice" is to cut back spending in other areas or lose the house -- and everything they paid for in it -- in foreclosure. Free markets are based on choice. But more and more homeowners are discovering that what they got for their money is fewer and fewer choices. A real estate boom that began with the promise of 'economic freedom' will almost certainly end with a growing number of workers locked into a lifetime of debt servitude that absorbs every spare penny."

Uh oh ...