In July of 2007 I predicted that loan modifications would be the only solution to preventing massive foreclosures. Well before many others and long before it became a buzz word.
I feel we are on the verge of that prediction coming true. So, I thought I would reveal some of my common sense housing predictions for 2009 that have been in my head all year and share them with my readers.
1. Foreclosure Moratorium:
In the 1st quarter of 2009, Congress will successfully pass legislation placing a national moratorium on foreclosures of primary residences for a period of 3-6 months (as long as 12 months). The main purpose of the moratorium is to freeze home sales activity and market speculation in order to control property depreciation.
The second purpose will be to avert foreclosures via a massive streamlined and loan by loan “workout” plan.
The plan will have a dual purpose and will be modeled after the FDIC’s loan mod in a box. The main goal will be to facilitate loan modifications on a massive scale, but also to facilitate a new federally subsidized “rent back or relocation program”.
This new plan will allow borrowers that cannot qualify for a loan modification the option to proceed through a streamlined short sale or deed in lieu process that will allow them to gracefully, instead of shamefully proceed through the foreclosure process.
Many will be offered rental assistance or to rent back their old property in order to combat vacancies and the community blithe that foreclosures bring. Win/win.
2. It Will Become Almost 100% Socially Acceptable to Walk Away From Your Home:
Much of our nation’s homeowners are underwater. Couple that with the fact that much of the real estate that was bought, sold and refinanced over the last 3 years involved massive fraud and speculation and now we have a major problem on our hands.
Without a reason to stay in their homes and the ability to reason, “Geez, I am $200,000 underwater and I can’t eat sleep because of this damn house that has become a ball and chain. What should I do?”
So, the wise man or woman walks away from that which causes their misery and says they will deal with the consequences later.
3. Mortgage Servicing is Dead:
Times have changed and the threats of foreclosure and mortgage servicing scare tactics will not work in 2009.
The old way of operating a mortgage servicing business is seriously broken and will be replaced by government regulation or legal force. Much more efficient specialty mortgage servicing centers will opne in all the major foreclosure markets in the nation.
Several class actions will be filed against all major mortgage servicers by law firms representing investors of mortgage backed securities. Litigation will expose wide spread abuse in the industry and force a massive over haul of the industry. Many will lose these contracts to specialty servicers and many will be legally forced to employ enough offices and staff to properly handle the loss mitigation needed on these mortgages.
The smart mortgage servicers will form sister specialty servicing units and the smart Wall Street players will jump in the distressed mortgage servicing business in a BIG way.
4. The Government Will Purchase $500-$700 Billion in Mortgage Backed Securities:
The US Treasury will coordinate with the remaining banks and mortgage servicers to purchase $500-$700 billion in toxic mortgage backed securities owned by investors.
The main purpose will be to stabilize housing prices and will work hand and hand with my #1 prediction. The second goal is to perform loan modifications to keep people in their homes, prevent foreclosure and thus stabilize home values.
5. The Government Will Enter the Mortgage Servicing Business:
Once they purchase these mortgages they will have to form a regulated mortgage servicing unit. The unit will monitor and perform these modifications in behalf of the government because now they are the investor.
6. The Government Will Employ 50,000 Ex-mortgage and Financial Professionals:
Someone needs to workout these mortgages, right? After the government purchases these billions in home mortgages, they will need to have competent people to assist in the loan workout process and also to staff these new mortgage servicing centers that will be opened in every major foreclosure market in the country.
A minimum of 10 offices in each major foreclosure market will be opened or taken over by the feds (ceased servicing centers) in the second half of 2009.
7. The FDIC’s Sheila Bair Will Lead Washington’s Foreclosure Prevention Efforts:
President Obama will create a new agency and appoint Sheila Bair to oversee and adopt regulations on the mortgage servicing industry and also the private for profit foreclosure prevention industry. A new FDIC chairperson will take her place by the 2nd or 3rd quarter of 2009.
6. FHA Will be the Biggest Lender in the Country:
Never again will lenders like Countrywide be able to operate like the Wild, Wild West and issue loan that no one would ever repay. There is a new mortgage sheriff in town that will dominate the mortgage arena from here on out.
Plain vanilla mortgages and loans people can repay will prevail. Welcome to the new and improved government lending power house, the Federal Housing Administration. AKA, FHA. Please get used to those 3 letters because they may be your new lender in the next year.
2009 will be the year that the Federal Housing Administration (FHA) will become the hottest 3 letter word in our economy. FHA will dominate every aspect of residential lending from here on out and it will be the mortgage of choice for millions of borrowers.
8. Bank of America, Chase, Citi and Select Few Other Lenders Will Enter the Real Estate Game in a Big Way:
What does one do with such massive REO (real estate owned portfolios)? Do they just keep out sourcing real estate deals to independent agents or do they become the real estate company that manages everything from the installing the front locks to collecting your rent and then selling you a home?
They would be foolish not to get into the real estate business, right? RE/MAX and Keller Williams, watch out!
9. Former Hedge Funds Reinvent Themselves as Banks:
The remaining hedges funds with sufficient backing and clout will become legit under the guise of becoming bankers. The FDIC will continue to cease banks and the only people with enough money to buy these banks will come from the shadows of the secret shadow banking system.
10. Housing Will Not Rebound Until 2011:
I believe that it will take 2 years to work out millions of mortgages. In 2009 the market will continue to drop until a foreclosure moratorium is in place. In the 4th quarter of 2009, prices will stabilize to 1998 levels in most metropolitan areas.
What do you think is going to happen?
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