When it comes to foreclosures, the latest news makes it seem as if the government and lenders are finally getting serious about the core problem, negative equity.

Lots of activity, but little will likely change

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April 8, 2010
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There’s been a lot of housing market activity in both the public and private sector recently.

When it comes to foreclosures, the latest news makes it seem as if the government and lenders are finally getting serious about the core problem, negative equity. As we’ve discussed here before, it is only through the elimination of negative equity that homeowners will escape their prison’s of debt, allowing them to once again participate in our consumer driven economy. Unfortunately, I don’t expect dramatic results from any of these programs because of another core problem. Our financial institutions can’t afford to forgive all the debt necessary to eliminate negative equity and remain solvent, and neither can the FDIC or, with this ballooning deficit, the federal government itself.Instead, I believe these programs will run into the same delays, oversights, and design failings that doomed their predecessors. Perhaps that is the point.

These announcements provide Wall St and politicians political cover while buying time.These failings combined with the Fed’s exit from purchasing Mortgage Backed Securities and the coming end of the homebuyer tax credits is leading some to predict the worst for housing in the coming months.

While I believe we are far from the return of a truly healthy housing market, supported by reasonable equity levels and manageable debt, I don’t personally think housing we’ll see a dramatic double-dip, especially in those areas that have already seen a significant correction.

My reasoning is simple. If there is anything we’ve learned over the last couple of years, it’s that our elected officials, and their appointees at the FDIC, Federal Reserve, etc, will do whatever it takes to limit foreclosures and stimulate housing.

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April 8, 2010
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