Recession, Round Two

Here's one of the big reasons we should take all assertions of full economic recovery with a very large grain of sodium chloride:

The FHA is on the hook for lots of “underwater” loans, taken out by low-income homeowners who got special low down-payment deals and — in case you didn’t notice — unemployment hit a 26-year high in August, with no prospect the 9.7% jobless rate will go down any time this year. Dave Hogberg of Investors Business Daily reports:

FHA-insured loans have more than tripled from 530,000 in fiscal year 2007 to 1.7 million thus far in 2009. The Government National Mortgage Association, which securitizes FHA loans, has boosted its mortgage-related issuance to $287 billion from $85 billion. Yet during that same period, the FHA’s loan delinquency rate has climbed to 14.4% in Q2 from 12.6% two years earlier.

OK, so guess what the consequences are now?

As job losses continue to mount, why would someone facing economic difficulties try to keep a home that is worth less than the money owed on it?

One expert explained to the Wall Street Journal what this means:

“They’re probably going to need a bailout at some point because they’re making loans in a riskier environment,” says Edward Pinto, a mortgage-industry consultant and former chief credit officer at Fannie Mae. “I’ve never seen an entity successfully outrun a situation like this.”

Read all about it at NTCNews.com. The revolution will not be televised, but the apocalypse will be blogged.

This is why the Right wanted to dismantle Fannie and Freddie last fall, but the Right was shut out of the discussion. What did the Left do instead? Bailouts. And, of course, that means the problem will not go away, but rather come back soon and be even worse. Can you imagine how that housing crisis will go?

And what about the commercial foreclosures?

Across the country and in St. Louis, commercial real estate is beginning to show signs of trouble.

Sprinklings of foreclosures of commercial properties are turning into a steady stream.

Last December, St. Louis’ largest hotel, the Renaissance Grand & Suites downtown, was foreclosed on as its bondholders took over ownership of the 1,100-room property.

Other sizable properties followed like dominoes, including the half million-square-foot vacant Jefferson Arms building downtown, which was foreclosed on in August.

What do you think it'll be like when this scenario plays out in large volumes in cities all over the country? The first foreclosure mess will seem like child's play.

America can still recover. But, everything that Obama is doing is making that recovery more and more difficult. Things are likely to get very, very ugly before they get 'better', and these are the reasons why.

There's my two cents.