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Housing crash termed 'worse than Great Depression'

Unemployment, malingering foreclosure probe add to consumer distress


When considering whether to file for the versatile, powerful protection offered by the U.S. Bankruptcy Code, it's sometime useful to consider the general state of affairs in the country as well as in your own region. If you're on the "cusp" of solvency/insolvency, but you reasonably expect to, let's say, step into a new, good-paying job soon, or you're about to close on a loan modification that realistically fits your budget, then it may make sense to hold off on filing bankruptcy.

On the other side of the decision fence, it may be good business sense to file sooner rather than later then use improving circumstances to more quickly rebuild your credit and FICO score. Consulting with an experienced, trained attorney can help bring these questions into sharper, clearer focus.

Unemployment, housing starts not encouraging

Today we'll look at two aspects of the national scene, the stagnant jobs market and the continuing foreclosure crisis. From a June 16 Reuters' report:
New applications for U.S. jobless benefits dipped in the latest week but remained at levels that were too high to put a dent in the unemployment rate.

U.S. housing starts rose more than expected and permits for future construction touched a five month high in May, a government report showed on Thursday, but any recovery will be hampered by a glut of pre-owned homes.

That "glut," of course, refers mostly to distressed properties, either about to be or already in foreclosure--or subject to a pending short sale. Diana Olick keeps reminding readers that the "real estate market is local, but consumer confidence is national."

Double dip: 'now worse than Great Depression'

Fellow CNBC.com staffer Jeff Cox, in a June 14 report, says "It's official: The housing crisis that began in 2006 and has recently entered a double dip is now worse than the Great Depression.

"The news comes as the Federal Reserve considers whether the economy has regained enough strength to stand on its own and as unemployment remains at a still-elevated 9.1 percent, throwing into question whether the recovery is real.

" 'The sharp fall in house prices in the first quarter provided further confirmation that this housing crash has been larger and faster than the one during the Great Depression,' Paul Dales, senior economist at Capital Economics in Toronto, wrote in research for clients."

Labor Department data show jobs dip

Sadly, the latest data from the Labor Department show unemployment is--like the national housing market--getting worse, after a period of small gains. According to the department's Table A-15, the "official" unemployment rate (row U-3) was 9.6 in May 2010 while May 2011's rate had improved to 9.1; however, it had improved in February '11 to 8.9 from 9.0 in January, then improved slightly to 8.8 in March. But by April '11, it was back to 9.0.

The actual unemployment rate (row U-6), which is "Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force," paints a marginally better picture: May 2010 was 16.5, down to 16.1 by Jan. 2011; Feb. was a little better at 15.9, down to 15.7 in March; but it rose again in April, back to 15.9. May clocked in at 15.8--hardly cause for celebration but still somewhat more encouraging than the dip in the lower "official" rate.

Attorneys General continue investigation: Coakley proposes foreclosure reform

Another malingering aspect of the national housing imbroglio is the ongoing investigation--and rumored pending settlement--of the 50 states' Attorneys Generals into lending practices of the nation's largest mortgage lenders.

If nationwide housing price declines further erode consumer confidence, imagine the effect on citizens' confidence in their government as these lenders balk at meaningful reform and response to shattered, battered homeowners.
True enough,  Massachusetts Attorney General Martha Coakley offers a glimmer of hope, at least for her state:
Addressing a group of 200 real estate agents, mortgage brokers, attorneys, home inspectors, and property managers, Attorney General Martha Coakley highlighted today her proposed legislation to address the ongoing mortgage foreclosure crisis that has gripped the Commonwealth.

An Act to Prevent Unnecessary and Unreasonable Foreclosures, which is sponsored by Senator Karen Spilka and Representative Steven M. Walsh, requires that creditors take reasonable steps to avoid foreclosure and prohibits foreclosures without appropriate documentation.  The legislation will also prevent additional foreclosures by mandating loan modifications in certain circumstances. AG Coakley discussed the legislation during her keynote address at the North Shore Association of Realtors’ Annual Membership Meeting and Business Expo in Peabody.

BOA denies hindering HUD review

But then we see that Bank of America refutes a finding from HUD's office of inspector general that the giant lender obstructed investigation into its foreclosure practices:
Bank of America, the largest U.S. lender, "significantly hindered" a federal review of its foreclosures on loans insured by the Federal Housing Administration, the U.S. said.

The bank was slow in providing data and offered incomplete information, according to the Department of Housing and Urban Development inspector general's office, which conducted the review.

"Our review was significantly hindered by Bank of America's reluctance to allow us to interview employees or provide data and information in a timely manner," William Nixon, an assistant regional inspector general for the agency, said in a sworn declaration.

BOA says not only did it cooperate but also, a company spokesman said, "any suggestion otherwise is both inaccurate and inconsistent with how we work with all regulators."

No repercussions for balky behavior?

If a HUD inspector can make a sworn statement otherwise, why can't the bank be fined or its officers hauled into court? Consumers who attempt bankruptcy fraud are subject to stiff penalties, including jail time. Seems as though like treatment for miscreant lenders might go a long way toward restoring some degree of consumer confidence.

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