9-14-08

Investors and the banking industry are preparing for a Black Monday event as Lehman Brothers is expected to file bankruptcy as its two main buyers pulled out of talks further hurling the financial markets into chaos. In a choice that also makes the Lehman bankruptcy more likely is that Bank of America decided against buying Lehman and instead agreed to purchase Merrill Lynch which had also been hit hard by the financial crisis. Washington Mutual is also under watch and they are about to reveal more information about their current situation which is expected to also be in dire straits. As the market sees more Options Arms and hybrid mortgages adjust more and more bank failures are expected especially for those with high exposure to the mortgage industry. Even Alan Greenspan former Federal Reserve chairman is saying that we are now in a one in a century crisis and that housing will not recover until some time in 2009.

In an effort to prevent further instability the Federal Government is expanding and allowing banks to borrow more money and drastically reduced rates, it is argued that these short term loans are in fact equivalent to a bail out which also raises the question as to why the average homeowner can not get decent help from the Federal Government but the moment a national bank is in trouble the Feds are literally handing out money to prevent them from going under.

Home foreclosures also hit another all time record high in August when 304,000 American homeowners where in some state of foreclosure. This is a 12% increase in foreclosure filings as compared to July of this year suggesting that government backed efforts to advert foreclosures are not effective and do not offer homeowners any real help thus further weakening the economy.

The new FHA bail out loan for homeowners called Hope for Homeowners is also known as the Housing Bill or Foreclosure Bill is expected to start October 1st but in order to prevent a veto threat from the Bush White House the bill includes far less help then it was intended to offer and people familiar with the industry do not thing it will help the average American homeowner because this bill or now law is voluntary for the mortgage holder to let you into the program. The holding bank could rather decide to foreclosure on you if they deem it more profitable. The idea is that this new FHA plan would be cheaper to the banks then letting you go into foreclosure but that remains to be since since this bill offers to make the new loan at 90% of current market prices which means huge losses to banks but much lower payments for homeowners. It is our hope that this program will be revamped once it becomes live to include more good and hard working Americans who have been taken advantage of. This is our only true hope to prevent further collapse in the US economy as a whole.

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