We are now facing the worst economic disaster in history — worse even than the Great Depression. I’ve warned for two years now that the real estate picture is far worse than most Americans understand.
The foreclosure disaster we’ve seen is only the tip of the iceberg. At the moment 30 percent of all mortgages across the country are underwater. The so-called “shadow inventory” (homes in foreclosure or far behind on payments) is already 11 million homes and growing.
Millions of additional homes will soon fall into foreclosure.
Yet the bigger disaster is the commercial real estate market. Banks have been hiding this tragedy by extending loans on properties that are no longer worth 10 cents on the dollar.
Many commercial properties have lost most or all of their tenants, and haven’t made mortgage payments in months, if not years. Yet by extending the loans, banks have hidden the disaster unfolding on their books.
Make no mistake — commercial real estate loans will face foreclosure in unimaginable numbers over the next five years. Each new wave will cripple the U.S. economy.
The real disaster unfolded late last week as it became clear that the banks don’t even hold title to the notes of the homes in their portfolio. That means they have no legal right to foreclose.
Banks will have to halt foreclosures across the country (think Bank of America), thereby further damaging the housing market.
The biggest banks in America will now have to spend billions on legal fees to fight lawsuits by state attorneys general, class-action legal vultures representing homeowners facing foreclosure, and past mortgage holders who were foreclosed.
If banks can’t prove title, many homeowners from coast to coast will keep living in their homes without paying a dime. Banks will lose billions.
Now think of the millions of homes that have already been foreclosed. Suddenly all of these former homeowners will sue the banks, asking them to prove they held the proper legal title when they foreclosed.
Courts could award them damages in the millions each, plus their old houses back.
How about the current homeowners living in those foreclosed houses they bought from the banks. Who is the rightful owner?
Real estate values will drop further than anyone ever imagined when the magnitude of this situation becomes clear. Real estate prices could drop another 20 percent to 30 percent from today’s lows.
The real estate market could take decades — not years — to recover.
Banks books are cooked — whatever real estate is on them is worthless. But heck, who cares? They can’t prove they own it anyway.
And as things get worse, and property values sink further, fewer and fewer homeowners will continue to make their mortgage payment. Why should I continue to pay, if my neighbors and friends are no longer paying? Soon the entire system will unravel.
American taxpayers are on the hook for Fannie Mae and Freddie Mac and all the banks too. All their deposits are insured by U.S. taxpayers. Can you spell B-A-I-L-O-U-T?
But the federal government is broke too. We owe over $13 trillion in national debt, and over $100 trillion in debt plus unfunded liabilities. States, counties and cities are broke and looking at the federal government to save them. This is what you call a never-ending cycle of economic disaster and despair.
Government has over-seen it all, and mismanaged it all.
Government inflated the bubble with low interest rates and mandates for banks to loan to people with no credit, no way to prove income, and no way to ever repay the loans.
Government caused this entire catastrophe. Remember that on Nov. 2 when you walk into that voting booth. Message to the N.Y. Times: This just might be why the tea party voters are angry and frightened.
The result will be one of the greatest landslides in U.S. political history. My advice: V.E.T.O. — VOTE EVERYONE of THEM OUT!
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