Thursday, January 12, 2012

Taxpayer Money For Mortgages; More Foreclosures in 2012

"Mitt Romney is a conservative - just like George W. Bush is a real cowboy"
- Unknown source

I need to unload two huge sources of irritation today based on reports that I guarantee you will not be presented on Fox News, Fox Business, CNBC, Bloomberg, CNN etc. 

I sourced these from an excellent source for housing market news,  I mentioned the other day that FRE had implemented a program to enable those without a job to go for up to 12 months without making a mortgage payment.  While the thought of this is nice, make no mistake,  the expense of this will be funded by you, the Taxpayer.  Now Fannie Mae has implemented the same program.  And, all you need for the first six months is a phone call to your mortgage servicer.  Here's the LINK

So now, if you lose your job, you can get jobless benefits for up to 2 1/2 years and if you have a Fannie or Freddie funded mortgage you can live in your home for free for 12 months.  Maybe in Tim Tebow's spiritually ideal world of charity for anyone in need this is a great way to run society.  But the expense of both the jobless claims and the housing welfare is something that our country and taxpayer base just can not afford.  But just like the $278 million per hour that the Obama Government borrows every day, why not spend now to get votes and worry about paying for it later.  This mortgage "forbearance" program is nothing more than another layer being added to the  Government's welfare State.  Given that this is a program being implemented without much in the way of a public announcement, you need to ask yourself if you would have voted for Obama knowing that this was coming...

The second item of agitation is the report that FICO, the most widely known assessor of credit scores, is out with a warning that it expects student loan and mortgage defaults to rise in 2012:  LINK  Given that we know that the evaluators of credit ratings are always way behind the curve when it comes to warning about debt payment problems and impending bankruptcy, I would suggest that student loan and mortgage defaults are already a lot higher in the "shadow" credit system.  I define "shadow" credit system as the situation where banks and other lenders are giving borrowers several months beyond what the established accounting rules call for in declaring a borrow to be "in default."  I know for a fact the banks are playing this game with mortgages and I have no reason to assume that student loan servicers are not doing the same thing: 
Evidence is mounting that student loans could be the next trouble spot for lenders, said Dr. Andrew Jennings, chief analytics officer at FICO.  A significant rise in defaults on student loans would impact lenders as well as taxpayers, who could be facing big losses due to these defaults.
Quietly, the amount of student loans outstanding and guaranteed by the Taxpayers is now larger than the amount of credit card debt outstanding.  The article linked puts the number at $750 billion, but I believe that the actual amount now per the latest consumer credit report is even larger - and its growing at an accelerating rate because many people are taking out student loans and going back to school when they drop out of the labor force because they can't find a job. Even worse, a large majority of students now graduate with a massive debt load and no way in hell of ever hoping to pay it off.  A friend of mine who is a professor at Denver University Law School said that 90% of the class graduating last year did not have jobs.

So the public debt load continues to grow at an increasing rate on a daily basis and the ability to pay off this debt declines - at an increasing rate.  Which brings up another point.  The reported amount of Federal debt outstanding - and the amount used for purposes of calculating the debt limit test - is $15.2 trillion.  However,  this number is incorrect.   There is $7 trillion in Fannie/Freddie debt guaranteed by the Government, plus roughly $2.5 trillion of "special" Treasury bonds in the Social Security trust plus, and most people are unaware of this, a few $100 billion in guaranteed GM and Chrysler loans (I don't know the exact number).   So the next time you see a debt to GDP number of 100% for the U.S., know that the golden truth is that the real  number is at least 160%.


  1. This is a 28min. video about Mitt's actions at Bain Capital. It is pretty devasting.

    I'd bet most of us wouldn't think the video came from a GOP candidate, but it is so: Newt's team.

    They say they are going to buy half-hour time slots in SC to show the video. But HUGE pressures are being applied to not discuss Mitt's biz background in the primaries, so we shall see.

  2. listen....Are We All Austrians Now?

  3. Jim Sinclair-5 Major US Banks Could Fail From Derivatives

    When asked about derivatives, Sinclair said, “They do nothing but grow and fail to perform. Defaults work constantly if nobody asks them to perform. If the credit swaps are asked to perform, five major US banks will fail. When you have a ticking time bomb, it’s the rational for kicking everything down the road, hoping to God something improves.

    It is an insurance industry that doesn’t have the backing or the regulation of an insurance industry. They are selling insurance they can’t insure. It will keep rolling along as long as nobody uses the two ‘D’ words, depression or defaults.

    If you can camouflage, such as FASB allows auditors to do, the real value of the paper you are holding, your balance sheet looks sound and is accepted as sound. What people can’t see, they can’t focus on. If you are the average blue collar guy you are in terrible trouble.

    If you are working for a huge financial entity, you are shaking in your boots every Friday to see whether you are still employed. The (economic) statistics are modestly off the bottom, mostly statistical aberration, and again, blasted over the airwaves as recovery and the sheeple yell, ‘We’re saved!’”

  4. ONeill:deficit::Gingrich:Surplus::Pelosi:Crash

  5. I keep hearing about how much true debt the US has to GDP, how it keeps growing, etc. etc. My question is just how high can the debt go before it doesn't work anymore? Look at Japan, zombie for 10+ years and still going. Can the US do it for 10+ years? If not, how long? Would love to hear predictions with a good argument(s).

  6. this....

    The $U.S. Dollar Centric Derivatives Complex: Progenitor of Parasitic, Ponzi Price-Fixing

    However, the largest component of the derivatives complex remains interest rate products which the U.S. Office of the Comptroller of the Currency tells us constitute more than 82 % of all outstanding bank held notionals. Interest rate derivatives have a great effect on interest rates as will be discussed later.

    Complete Capture of the Derivatives Complex and Defiling of Fiat Capital

    That irredeemable fiat money is designed to fail – by its very nature – is laid out very well in Chris Martenson’s, Crash Course – a staple which everyone is encouraged to take the time to watch. But rather than let the “fiat” U.S. Dollar fail, as all irredeemable fiat currencies are designed to do – the sociopathic miscreants in charge of the Anglo/American banking edifice have BOUGHT TIME through the capture of the DERIVATIVES PRICE CONTROL GRID – by blatantly commandeering the unlimited resources of the U.S. Treasury’s ESF along with the printing presses of the Federal Reserve. This is done to make historic alternative currencies, like precious metal, appear unworthy. This has further endangered the financial wellbeing of all who have acted prudently and financially responsible.