Where are we now?

The good news is that in an effort to make homes affordable, lenders are completing more loan modifications if you can prove that you have sufficient income.

Other good news is that millions of families who have stopped paying their mortgages are still living in their homes — for up to 18 months in some cases. In the nation, banks are doing about 50,000 loan modifications a month with 320,000 homes monthly entering the foreclosure process.

There are an estimated 5 to 7 million homes in shadow foreclosure, where the home may be one step away from formal foreclosure. Why are there so many? Because banks do not post losses until after a foreclosure or short sale is finalized. Banks are reporting their earnings fully, but not all of their losses. That means up to $500 billion in unrealized losses are sitting somewhere off bank balance sheets. This does not include unrealized commercial loan losses. Government regulators turn their heads away in hope that more money will be lent. On the contrary, too-big-to-fail AIG, Goldman Sacks and others in the elite group are choosing instead to super-bonus their executives.

Instead of lavishing out bonuses, I think Wall Street should be asking their executives to chip in for the harm that they have caused. Resale of shadow homes will tend to depress real estate values for years to come as more foreclosures and more short sales come onto market.

Real Estate Settlement Procesures Act and Regulation X

The U.S. Department of Housing and Urban Development will institute significant revisions (again) to lending requirements beginning Jan. 1. This time around, GFE and HUD-1 forms will be standardized to make it easier for borrowers to compare quotes between different lenders. Also, all lender and mortgage broker fees will be combined and shown as a single amount. Broker rebates, paid out of closings and yield spread premiums will be included in total settlement charges.

Home Valuation Code of Conduct

Placing the appraisal process for conventional loans an arms-length away from broker and lender manipulation was supposed to be a good thing for consumers, according to Barney Frank and the New York State Attorney General’s Office. Instead, HVCC has added another layer of bureaucracy and cost and has hindered refinances. Appraisal reports also take longer now and can cause purchases to fall out of escrow when appraisers, hired from out-of-the-area, quantify homes for less than they’re worth. Even though HVCC has been a resounding failure, Federal Housing Administration loan protocol will require HVCC rules be followed starting Jan. 1.

Federal Housing Administration

Taxpayer guaranteed loans are boldly stepping where banks now fear to go with very low down payments and with no cash reserve requirements necessary. FHA default ratios have climbed to almost 10 percent. Also, the government now owns or insures about 80 percent of the $14.6 trillion of outstanding home mortgages in the United States. Will the government kick us out of our homes when a new wave of government foreclosures strikes the shore? Or will taxpayers eat the losses?

First-time homebuyer tax credit. At least 1.8 million homebuyers will receive $8,000. According to NAR, 355,000 of this number would not have purchased without the tax break. In other words, to get 355,000 to step up to the plate, we taxpayers have doled out an additional $12 Billion to those who would have bought anyway. It’s nice to be generous. Don’t it feel good?

Two-thirds of our gross domestic product is based upon national consumption. Currently, 40 percent of our reported consumption is in fact government stimulus re-labeled as consumption. Without this re-labeling, the media would be saying what many of us know — that we are still in the grip of the great recession. Since Dec. 2007, we have lost 7.2 million reported jobs. Since January of this year, 3.4 million reported jobs are gone.

Free enterprise proponents and their policy-making allies continue to work diligently to make the American workforce more competitive in the global market. This means lowering our standard of living so that more workers will work for less. When the economy returns to “full employment,” it could still mean that six out of a 100 people who are looking will not be able to find sustainable work. Add to this, the U.S. Department of Education has reported that two-thirds of our workforce in 2025 will be less literate and less skilled than our workforce was in 1995. There will be fewer blue-collar and repetitive-style jobs available in the future. Competition will be fierce.

Finally, on Wall Street and on Capitol Hill, making money (lots of it) and rewarding those who let you make more are still the biggest games in town. Fear continues to cover-up the promulgation of greed. Our last financial crisis was similar to the Savings & Loan crisis of the mid-1980s in that vast sums of our national treasury have been redistributed into the bank accounts of wealthy and politically-connected individuals after government deregulation set the stage for abuses. But this time around, the price tag might be in the trillions, not $124 billion, of taxpayer money.

You can mark another victory for savvy special interest lobbyists who are turning the president’s let’s-seek-consensus intellectual strategists into fried chicken with no meat on their bones. In Congress, bills are still being passed that exempt the very companies and institutional traders who need to be scrutinized the most. What have we learned? Where are we now? Stay tuned.

(Robert Fields is a loan agent with Sequoia Pacific Mortgage. He can be reached at 338-1196.)