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Wednesday, February 4th, 2009

New Record: 19 Million Vacant U.S. Homes in 2008

On Feb. 3, the U.S. Census Bureau released a report indicating that the number of vacant homes in the U.S. rose 6.7 percent during the fourth quarter of 2008, as compared to the same period in the previous year.

By the end of 2008, a record 19 million U.S. homes were empty and home ownership had reached the lowest point in eight years.

Of the 130.8 million housing units in the U.S. during the fourth quarter, 2.23 million were empty and for sale.

Vacancy Rate

The Census report said the vacancy rate was 3.5 percent in urban areas and 2.6 percent in suburbs. The Census Bureau also reported there were 4.1 million vacant homes for rent and 4.8 million vacant seasonal properties.

The report contains an "other" category, which includes most foreclosures, homes otherwise tied up in legal proceedings, and homes that are vacant while the owners renovate.

There were 7.8 million U.S. homes in this category in the fourth quarter of 2008.

Home Ownership Rate

Due in large part to the nationwide foreclosure crisis, the home ownership rate dropped to 67.5 percent. This low rate has not been seen since the first quarter of 2001.

As foreclosures drive home prices down, more homeowners who are upside down in their mortgages are likely to walk away.

Homes in Danger of Foreclosure

Norm Miller, director of real estate programs for the School of Business Administration at the University of San Diego, told Bloomberg approximately a third of homeowners who see their home values drop 20 percent or more below what they owe will let their mortgages go into foreclosure.

Miller points out that the foreclosure epidemic is propelling itself because as home prices decline, more people tend to walk away and prospective buyers are discouraged.

Obama's Moves

President Barack Obama has voiced that something must be done about the growing U.S. housing crisis, which has become deepest housing slump since the Great Depression.

To stem the surge of mortgage foreclosures, the Obama administration is considering government guarantees for home loans modified by servicers.

This proposal, geared towards protecting lenders from default if they work with borrowers, is likely to come at taxpayers' expense.

As the economic recession rolls into its second year and the nationwide unemployment rate continues to rise, Obama and lawmakers in Washington are scrambling to find ways to repair the housing market.

On Jan. 30, the Department of Commerce underscored the need for immediate action with a report indicating the U.S. economy shrank more during the fourth quarter of 2008 than it had since 1982.

Stay tuned to Total Bankruptcy for news as it develops.

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Thursday, January 29th, 2009

Bank Nationalization - A Real Possibility?

The recent round of government bailouts for large banks has caused growing concern that the government may nationalize them, which means that the banks would be owned and operated by Uncle Sam.

The concern is that should banks become nationalized, common and preferred shareholders would likely be eliminated.

What’s the Price of the Government’s Bailout Money?

In exchange for the bailout money, 314 banking institutions signed over some of their shares and securities to the Treasury.

The Wall Street Journal reports that the government could step in and take ownership of some of these banks.

Bankruptcy Nationalization in the Past

In Western countries, bank nationalization is generally used in emergency situations to keep financial institutions from going bankrupt.

Sweden, France and the U.S. have nationalized banks before and France may be on the brink of doing it again.

How Would Bank Nationalization Affect Consumers?

If banks were nationalized, it could make getting loans easier for some, stop foreclosures and deposits would still be federally insured, just as they are now because the FDIC is backed by the U.S. government and is able to borrow money from the Treasury.

If banks were nationalized, consumers would also likely be able to qualify for loans they would be denied in the current tight credit market.

People with less-than-perfect credit might also benefit if nationalized banks offered basic credit cards with low interest rates.

These credit cards would allow consumers to start spending again, but would likely come without the perks and rewards programs currently offered on many cards.

Nationalized banks would also probably stave off the wave of foreclosures that are plaguing the country, while allowing homeowners the opportunity to keep their property.

But nationalization could come with drawbacks as well, such as possible branch closings, fewer new products and erosion of customer service. (Anyone who has ever waited in line at the DMV or attempted to call the IRS can imagine what the service level of banks might become if they are owned by the federal government.)

Could All Banks Be Nationalized?

The government only has the ability to take over the largest and most important banking institutions.

It would be too expensive and impractical for all American banks to be nationalized; however, it’s possible that some of the independent banks could turn toward filing bankruptcy, leaving Americans with no options outside of the nationalized banks.

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Wednesday, September 17th, 2008

AIG: Taxpayers To The Rescue, As Usual

So, we know that the government’s $85 billion handout to AIG (American International Group, Inc.) had to come from somewhere—the Feds didn’t just turn on the printing press to manufacture more cash.

No—they had to dip into our taxpayer money to bailout the insurance company.

This news comes after the Congressional Budget Office released a report last week that the federal budget deficit will increase by $246 billion over last year, for a grand total of a $407 billion federal deficit.

Last year—when the deficit was “a mere” $161 billion—the government attributed part of the spending increase to it covering “the insured deposits of insolvent financial institutions,” according to the agency.

That $246 billion increase didn’t even cover the recent government bailout of Freddie Mac and Fannie Mae. Although no one knows the exact cost of the Fannie and Freddie bailout, we expect it to be as much as $100 billion.

The Details

Not only is this costing American the taxpayer, but now the U.S. government has a 79.9 percent stake in one of the top insurance companies in the world. This wasn’t just an act to lend a helping hand—this was a government takeover.

AIG said it will fully repay the loan (with an interest rate of about 11.5 percent) by selling some of its assets. It’s up to AIG to determine what gets sold and when it happens.

The government will have veto power in that decision.

According to The Wall Street Journal, AIG’s current CEO, Robert Willumstad, is anticipated to be replaced by the former CEO of Allstate Corp., Edward Liddy, according to an unnamed source close to the deal.

With a 79.9 percent share, the government also has the right to remove senior management.

Looks Like We’re Seeing A Trend

These company fallouts have been the result of the sub-prime loan fiasco and Wall Streeter’s greedy money manipulations.

If the government is in such a deficit, it's no surprise that its citizens are feeling the crunch too. More people are filing bankruptcy and mortgage foreclosures are becoming much more frequent than previous years.

The Fed said the deal was necessary because the company’s failure would threaten the health of the already brittle economy.

AIG’s failure could “lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance,” the Fed said in a statement. The White House said it backs the Fed’s decision.

Many are applauding the move, including New York Governor David Paterson who said “Policy holders will be protected, jobs will be saved.”

As usual, taxpayers aren’t getting much of a say in the matter.

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Monday, June 16th, 2008

Detroit Foreclosures Become Farmland

The strategies for dealing with a foreclosure on an individual basis are often little understood; yet, an even less understood phenomenon is how neighborhoods deal with a rash of foreclosures.

Of course, abandoned homes that are untended start to reflect poorly on a neighborhood if enough of them accumulate.

A glut of foreclosed homes can even begin to lower property values in a neighborhood.

According to an NPR report, a group in Detroit called Urban Farming is taking a new approach to abandoned properties by tilling and planting the unused land, turning the spaces into urban gardens for food products.

The group has worked with Wayne County to recycle, in effect, 20 plots in a pilot program that could expand if all goes as expected.

Just another creative way that people are dealing with the lumbering economy....

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Wednesday, May 7th, 2008

Another Unintended Consequence of the Foreclosure Crisis

The San Jose Mercury News is reporting that local health officials are worried about the potential for disease epidemics like West Nile Virus carried by mosquitoes.

And where would mosquitoes carrying the deadly disease be likely to breed in record numbers?

The swimming pools of foreclosed homes.

A Santa Clara County official remarked "One of the first things to go bye-bye for a resident in foreclosure is pool maintenance. It's a drain on their resources."

To discover places where mosquitoes might breed, the county is flying a survey plane looking for telltale signs of pool neglect in homes without the county limits.

Santa Clara County had four reported cases of West Nile virus last year, though none so far this year.

And with record foreclosures hitting California, their concern is real and demonstrates how far the foreclosure crisis will impact the United States in ways that we haven't begun to see yet.

If you're concerned about how foreclosure might impact your family, speak with a local lawyer about how filing bankruptcy may help you stop pending foreclosure.

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Tuesday, April 15th, 2008

Foreclosures Up 57% from Last March

Foreclosures increased 57% and bank repossessions almost doubled in March when compared with a year earlier, according to Bloomberg.

Figures from RealtyTrac, Inc. estimate that one in every 538 homes in the United States is in foreclosure, with Nevada, California and Florida feeling the brunt of the foreclosure action.

Experts are estimating that $460 billion worth of subprime mortgages will reset in 2008, and that foreclosure rates will continue to increase throughout the year.

This will mean even more houses in an already saturated market, which will likely translate to continued decreases in home prices.

Some experts are even predicting a recession lasting twice as long (20 months) as is considered normal.

With rising foreclosures, more people may turn to filing bankruptcy as a way to possibly stop foreclosure.

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