Heating, eating or sleeping: pick one

Lenders, swilling in fiscal poison of their own making, are now getting "responsible"- and are cracking down on asset documentation and up front money.  They are now requiring actual verification of income and have upped the down payment requirement to as much as 40% in some markets, even as they hold billions of dollars in rapidly depreciating real estate, which, in some markets is turning into the nation's newest urban nightmare.

Today's mortgage lenders are "-getting tough' and current buyers have to cough up tens of thousands of dollars in down payment funds. Currently,  a person who wants to get a mortgage on a  $100,000 house must have as much as $40,000 as a down payment before the lender will even look at their application.  With fuel, food and living expenses outpacing pay raises, it is going to be extremely difficult for many to come up with that kind of cash, leaving millions of potential home buyers too cash deficient to come up with the higher down payments that the "closing the door after the cow got out of the barn"- mortgage industry now requires.

And so it is that as the government bails out bankers, quasi-government home loan agencies and institutional investors, millions of  homeowners are sitting on the edge of a financial abyss, waiting for a puff of wind to blow them to financial ruin.  Others, who are just getting financially stable enough to afford long-term house payments may now find themselves priced out of home ownership because they can't cone up with the high down payments lenders are now asking for.

This leaves a depressed American real estate market  drowning in billions of dollars worth of foreclosed and devalued property, as foreign buyers scavenge the corpse, looking for good deals with their euros and other currency.  They are investing in real estate that Americans can no longer afford to buy, while the housing market in the United State's turns into an investment goldmine for foreign buyers. The foreign buyers and investors are running off with a veritable trifecta: a depressed dollar, a housing market glut, and falling American real estate values.

Some economists on the extreme edge of economic pessimism say this may the last generation in a while to be able to afford to buy a home. Even worse, not only are our housing markets depressed, but falling real estate values, rising down payment requirements, and foreclosure-associated crime rate explosions have brought vacancy, vagrancy, crime, gang activity, vandalism, drugs and social decline to what were once exclusive neighborhoods just a few years ago.

According to the Atlantic Monthly, one community's experience with foreclosure-associated decline may well be the bell weather for many other communities across the nation.

For 60 years, Americans have pushed steadily into the suburbs, transforming the landscape and (until recently) leaving cities behind. But today the pendulum is swinging back toward urban living, and there are many reasons to believe this swing will continue. As it does, many low-density suburbs and McMansion subdivisions, including some that are lovely and affluent today, may become what inner cities became in the 1960s and '70s--slums characterized by poverty, crime, and decay. (Christopher B. Leinberger, "The Next Slum?"- Atlantic Weekly,  March, 2008)

The whole scenario has been building for more than twenty years. While politicians and insiders were playing games with bank, insurance and home lending regulations, a dangerous level of fraud, irresponsibility, greed and malfeasance was building up in the banking and mortgage industry, including corruption in some of the government regulatory agencies tasked with overseeing the industry.

The current and upcoming crisis in the nation's housing market is not a recently birthed nightmare. No, this puppy has been gestating for at least a generation.  Current and potential problems generated by the fallout of the "-mortgage crisis' have set the American real estate market up for the most drastic changes in the industry since the birth of  the suburbs.

And, naturally, the Washingtonian spinners are busy weaving a web of blame, one-sided statistics and denial laying blame on everyone but the players who designed and profited from this "game."- The spinners want to blame it all on greedy home buyers who lied about their income, falsified their loan papers, and turned the application process into a massive example of creative writing and exaggeration.  They don't want to talk about the top tier banks who failed to exercise due diligence, broke the law by forging loan documents and/or knowingly made risky loans, then sold those loans as bundled securities, knowing the loans were shakier than a fat woman wearing 4 inch spike heels.

The industry doesn't want to talk about the liars and fraudsters in the real estate and mortgage loan industries who made billions from document deception and mortgage fraud; nor do they willingly acknowledge the role of so called reputable banking institutions in the whole mess of swindles. 

The end result is that when people have to choose between eating and being dunned for a house payment on a house that is worth less than their mortgage, many are simply burning their bridges and tossing their credit scores down the toilet.

Welcome to the Brave, New, Nightmare World, coming to a neighborhood near you.

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