- The U.S. Congress will adjourn this week until January,
taking no effective action to stop the biggest home-foreclosure wave in
U.S. history.
-
- Since Lyndon LaRouche, on Aug. 30, proposed the Homeowners
and Bank Protection Act (HBPA) to freeze foreclosures nationwide, and protect
chartered banks, the failure of Congress to act on this crisis, had cost
approximately 170,000 American households their homes, as of Dec. 1, and
will probably take 250,000 homes by Christmas. The rate of foreclosure
repossessions, at almost 2,500/day, now two-and-one-half times the level
at the depth of the Great Depression, has been growing by more than 30%
a month. The wave of "human misery" described by anti-foreclosure
advocates-and its potential for social chaos in the worst-hit cities and
suburbs-has been impervious to all the refinancing "jawboning"
and jaw-flapping from Treasury Secretary Henry Paulson and Congressional
leaders. They bear the blame for inaction as it gets worse, and spreads
to all types of homeowners and neighborhoods across the U.S.A.
-
- As in many other matters, Nancy Pelosi's and Harry Reid's
Democrats will wind up having enacted only, and exactly, what the lame-duck
Little Tyrant President George W. Bush has told them to enact on foreclosures-his
derisory "Federal Housing Authority Reform." With the median
price of all homes in America having dropped to about $215,000, amid the
mortgage meltdown and a foreclosure "tsunami," how many homes
are saved by raising the FHA limit for insuring new mortgages to $417,000,
and lowering the down payment required? "Mortgage-Backed Securities
Bailout" is a better name for it-one of the two such big bailout attempts
the White House is fiddling with, while American households burn.
-
- Consequences of Three Months' Blocking HBPA
-
- Here is the rising wave, in overlapping and essentially
agreeing figures from foreclosure tracking firms ForeclosureS.com and RealtyTrac.
LaRouche called the HBPA "immediate and urgent" in his Aug. 30
message to the nation and to Congress. In September, 41,000 American homeowners
had their homes repossessed and sold in foreclosure. In October, the number
jumped by 35% to approximately 55,000; and in November, with another jump
of more than 30%, the toll of foreclosure auctions reached more than 72,000.
While no Member of Congress, over three months, proposed action to freeze
foreclosures as the states and Federal government did in the 1930s Depression-and
as LaRouche spelled out in the principles of his proposed HBPA-170,000
American households lost their homes.
-
- If this inaction continues, the situation will continue
to get worse. By the year's end, more than 600,000 homes will have been
lost to foreclosure in 2007, three times the level of 2005. Then, in just
the first quarter of 2008, three-quarters of a million more adjustable-rate
mortgages (ARMs) with a debt "value" of $265 billion, will reset
to higher interest rates and 25-50% higher monthly payments. Through 2008,
this is nearly 2 million ARMs with a debt "value" of about $700
billion. Whereas the ARMs issued in 2002-04 had initial"teaser"
interest rates of 2-4% which then reset to 7-8%, the ARMs of 2005-06, resetting
en masse now, are a deadlier breed; their "teaser rates" started
at a hefty 7-9%, and they are resetting to 11-12% in the midst of zooming
inflation and lost middle-class jobs. Many of them are also "interest-only"
mortgages where the homeowner's mortgage debt is increasing every month,
while the market price of the home is falling more and more rapidly-the
national average rate of price drop, measured by the Case-Shiller Housing
Price Index, is already more than 5% a year. More than 5.5% or all mortgages-prime
and subprime, ARM and fixed-rate-were delinquent on payments as of November,
the Mortgage Bankers Association reported Dec. 6.
-
- These are the ingredients for worsening mass foreclosures
and social chaos, the consequence of blocking of the principles of the
HBPA in the House, by Nancy Pelosi's Democratic leadership, and by Rep.
Barney Frank and others who've arrogated Congressional "leadership"
on this crisis.
-
- At the same time, the number of "troubled"
banks officially on the FDIC's list jumped from 27 banks with $4.1 billion
assets in November 2006, to 65 banks with $18.7 billion assets in November
2007. But, for example, on Nov. 29, an official of Missouri's Insurance
and Financial Institutions Department told that state's legislature that
24 banks in Missouri alone were "in trouble" in the mortgage/securities
meltdown. And of course, the big money-center banks like Citigroup, Bear
Stearns, and Merrill Lynch that are not on the FDIC list, but are deep
"in trouble," will take down many smaller banks when they go.
-
- Foreclosures 'Ground Zero' Is Now Everywhere
-
- With 580,000 total foreclosure filings and actions in
the third quarter, 224,000 in October alone, "Ground Zero" of
the foreclosures crisis is now everywhere, from "the nation's wealthiest
county," Loudoun County, Va, to depression-wracked Detroit. Highly
paid professionals and unemployed industrial workers are being foreclosed
alike, on prime, subprime, and ARM mortgages, with nothing but escalation
of the social crisis in sight.
-
- Loudoun County, Washington, D.C.'s "speculation
suburb," with the nation's highest median household income-nearly
$100,000, as of 2006-now has one in every 46 households in foreclosure,
according to a report from George Mason University. Median home prices
in this one-time "Housing Bubble Ground Zero" have fallen a dramatic
16% from October 2006 to October 2007, says the county realtors association.
A Dec. 6 Washington Post story detailed cases of professionals-including
realtors-losing both the home they live in, and another one they speculated
on, due to high-interest ARM mortgages they could not refinance because
of the price drop.
-
- The nearby Washington suburb of Prince William County,
characterized by "starter homes" in the $200-300,000 range when
bought, has an even worse rate: 1 out of 38 homes in foreclosure. The larger
neighboring suburban county of Fairfax-fourth-wealthiest in the country,
according to the Census Bureau-is processing 40 foreclosures per court
day, ordering the great majority to auction, according to a courthouse
observer. The mortgage meltdown has abruptly blown a $240 million hole
in Fairfax's fiscal 2008 budget, and a $150 million hole in Loudoun's.
-
- In metropolitan Louisville, Ky., an EIR interview Dec.
7 with the head of the housing coalition (<http://www.larouchepub.com/other/interviews/2007/3450cathy_hinko.html>see
Interview, below) revealed that the foreclosure wave there-already high
in 2005 and early 2006, as across the upper Midwest states-has doubled
in two years (to 3,400, one in every 54 households in greater Louisville),
primarily due to too-high mortgage interest rates. It have shifted dramatically
to suburban neighborhoods; more than 10% of foreclosures are on prime mortgage
loans.
-
- In Detroit, the Sunday, Dec. 2 issue of the Detroit Free
Press carried a grim 122 newspaper pages of 2007 home foreclosures, which
Wayne County had to publish at a cost of $400,000! One-fourth of all Wayne
County's 500,000 homeowners are in default on their mortgages, and 18,000
are in foreclosure.
-
- Paulson's Plan Only Serves as 'Roadblock'
-
- The mortgage-foreclosure "plan" announced by
both President Bush and Treasury Secretary Paulson on Dec. 6, is actually
intended to put a roadblock in the way of any action by Congress to stop
foreclosures with a nationwide moratorium. Paulson said frankly on Dec.
6, "The investment community [is] on board and [is] a clear beneficiary
of this approach"-referring to the American Securitization Forum,
the investment banks and hedge funds which pushed for trillions in high-interest,
high-cost mortgages they could "securitize" and build mountains
of debt "leverage" upon. This loan-by-loan review of millions
of mortgages-under the control of mortgage banks and lenders and mortgage
securities holders, with help from Federal "mortgage counseling centers,"
is estimated to lead to perhaps one-tenth of the millions of households
facing foreclosure getting new, FHA-insured fixed-rate mortgages (and that
assumes that the total price drop in homes across the country will not
exceed 7%, a fantasy in the current collapse). This was the purpose of
the White House "FHA Reform" bill, which passed the Senate overwhelmingly
Dec. 13, just one week after Paulson's Dec. 6 press conference which demanded
it (the House had passed it earlier).
-
- In metro areas like Cleveland, Detroit, and New York,
and suburban counties like Fairfax, Va., the major "foreclosers"
against homes keep turning out to be obscure investment trusts, operated
by trustees appointed by banks like Citibank with no operating offices
in the region, or banks like Deutschebank with no operating offices in
the United States outside of Wall Street. This is "the investment
community" to which Paulson's plan to avoid foreclosures is entrusted!
In Federal and state courts across Ohio, in November and December, judges
ruled that these bank-operated trusts had not even registered any proof
that they owned the mortgages they were foreclosing. Some 40% of the 1,733
foreclosures studied by a University of Iowa law professor, did not contain
proof that the "plaintiff" owned the mortgage.
-
- The Bush/Paulson "plan" allows "not one
Federal dollar" to protect and keep chartered banks open, and dumps
all the debt costs of helping homeowners, onto the states.
-
- New Plans Falling Short
-
- Congressional Hispanic Caucus leader Rep. Joe Baca (D-Calif)
has modelled new legislation after President Franklin Roosevelt's Home
Owners' Loan Corporation, created by the 1934 Homeowners Loan Act (HLA).
This was the successful New Deal legislation that stopped mass foreclosures,
created the Federal Housing Administration (FHA) and the 30-year fixed-rate
mortgage; and EIR and LaRouche PAC have circulated two major articles in
Congress on the relevance of the HLA to the current foreclosures crisis.
-
- But Baca's legislation "is not a moratorium"
on foreclosures, he stresses, thus bowing to the Paulson Treasury and Mortgage
Bankers Association pressure. It does not address this real mortgage meltdown,
which is, in fact, a collapse of the U.S. and European banking systems.
So his proposal for a Federal corporation to buy up defaulted mortgages
before they foreclose, and replace them with government or government-backed
new, fixed-rate mortgages, could turn into an attempted bailout (using
up to $150 billion in new Federal bonds) of the superinflated mortgage
values which are now collapsing. The bill allows these government buyouts
to be at some discount ("short sales"), but also allows very
high-value buyouts, when mortgage values are, in fact, now collapsing into
a bottomless pit.
-
- "Today's collapse is not even a 1934 Depression
United States," commented LaRouche, on Baca's bill. "Today's
bank blowout is July-August 1923 in Germany. Hyperinflated values are collapsing.
The U.S. dollar is nearly non-viable due to central bank money-printing.
Don't bail out, don't buy into mortgages-freeze them. There's one solution,
and I've proposed it."
-
- Sen. Hillary Clinton (D-N.Y.), since a first statement
Dec. 6, has put forward a plan proposing an across-the-board national moratorium
"of at least 90 days" on home foreclosures. Clinton is the only
Presidential candidate to call for a complete halt to foreclosures-and
some local Democratic leaders are echoing her call, along with the hundreds
who have backed LaRouche's proposed HBPA. But Clinton's "plan"
is still not the kind of action which can bring a hyperinflationary bank
panic under control, and save millions of homeowners their homes.
-
- Clinton stresses that the Bush/Paulson plan "is
designed to help as few homeowners as possible ... and is intentionally
designed to leave out the roughly 400,000 families whose mortgages are
resetting" in the fourth quarter of 2007. "My plan," she
says, "imposes an immediate across-the-board moratorium on foreclosures;
an automatic, across-the-board rate freeze," and other measures. But
Clinton is still not proposing to put "her plan" into Congressional
legislation, but to demand it of the mortgage lenders and the White House-an
impossible quest.
-
- LaRouche's HBPA is the only Congressional enactment that
will work in this crisis.
-
-
- This article appears in the http://www.larouchepub.com/eirtoc/2007/eirtoc_3450.html
- December 21, 2007 issue of Executive Intelligence
Review.
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