Bernanke is going to use the Fed's bully pulpit to coerce the Consumer Financial Protection Bureau (CFPB) to define a "qualified mortgage" in a way that allows the banks to dump their garbage loans on Uncle Sam without any risk to themselves. That's what this charade is really all about; the banks want a "safe harbor" provision in upcoming regulations that will exempt them from having to buy back mortgages.

::::::::

There's good news and bad news about housing.

The good news is that housing starts are up, way up. In fact, housing starts in October were up nearly 42 percent compared to September 2011. (2012 = 894,000 starts vs 2011= 595,000 starts) That's a vast improvement by any standard.

And existing home sales have been picking up, too. Sales on existing homes rose 2.1 percent in October to a seasonally adjusted annual rate of 4.79 million. It looks like pent up demand is finally having an impact on sales.

Then there's prices, which appear to be headed in the right direction, too. According to a recent real estate report by Zillow, home prices have gone up 4.7 percent in the last year, which suggests that housing may have bottomed and is starting to rebound.

Finally, there's existing inventory, which according to Realtor.com has plunged 17 percent in the last year. The dwindling supply of homes in many of the country's hottest markets has boosted demand and increased the number of multiple-offer bids.

So, there it is in a nutshell: Housing starts, sales, prices and inventory. Good, good, good and good. And just to top it off, the Federal Reserve has initiated a program to purchase $40 billion in mortgage backed securities (MBS) per month "indefinitely" (QE3) which provides a powerful incentive for banks to boost lending so they can take advantage of this gigantic market-distorting subsidy.

So, what's the bad news?

Well, for one thing, the homeownership rate is falling.

Huh? But how can that be, after all, sales are up, right?

Yes, but there's more to that than meets the eye. Here's the scoop from blogger Sober Look:

"Some readers have been asking how one can reconcile positive signs in the housing market with declining rates of homeownership. Indeed, homeownership is falling at an even faster pace than during the 08-10 period.

"The explanation is that so far a great deal of net demand growth in housing has been in rental units. Households are putting a premium on mobility. This demand for rentals is in fact one of the factors supporting the housing market -- for every renter there is a landlord who buys a home." ("Fallinghomeownership rate and the housing market," sober look)

Whoa! So the Fed's "accommodative" monetary policies haven't really revived organic sales at all. What they've done is breathed new life into real estate speculation. Zero rates and QE3 have triggered a housing market gold rush with all kinds of yield-seeking investor groups and private equity pirates looking to make a killing in property management. Here's more on the topic from CNBC:

"The October numbers were driven entirely by multifamily apartment starts, up 10 percent month-to-month and up 63 percent year over year. ...Younger Americans are in fact moving out of their parents' basements, but many are moving into rental units, and that is also a formed household." ("Yes, Housing Starts Surge, but Rentals Are the Drivers," CNBC)

Well, that doesn't sound like much of a "recovery" to me. It sounds like Bernanke is just doing what he always does--- cut the fat hog for the bankers while everyone else gets table scraps. And here's another thing to mull over (from the same article):

"Housing starts at 894,000 is near where they were at the depths of the 1981 and 1991 recessions and 60 percent below the peak in January 2006," pointed out Peter Boockvar at Miller Tabak."

So, while the increase housing starts is encouraging, we need to keep it in perspective. The market is still in the tank. Naturally, if the banks withhold distressed inventory, the government lends money to underwater homeowners, and the Fed slashes rates to record lows and buys whatever MBS the banks produce, then there's going to be a surge in activity. But how long will it last?

Who knows, but one thing is certain, the Fed's loosy goosy policies never seem to work as advertized. Case in point: Bernanke's zero rates and QE3 have not revived interest in housing as much as they have touched off a frenzy of speculation which could generate another destabilizing asset-price bubble. Get a load of this from the SF Gate:

"'There is a tsunami of money coming into the market, billions of dollars to buy distressed single-family homes,' said Jeff Lerman, a San Rafael real estate lawyer, speaking about the national landscape. 'The window of opportunity is rapidly closing (as prices rise). Over the next 18 months, profit margins in single-family opportunistic buying will be compressed quite a bit.'
...

"A Chronicle analysis of sales data compiled by San Diego research firm DataQuick showed that absentee buyers, who once bought about 10 percent of homes sold in the nine Bay Area counties, account for about a quarter of all purchases this year, more than doubling their share. Absentee buyers are defined as those who have property tax bills sent to a different address than the house they just bought....

"'Right now the dominating force driving the rental market in California is foreclosed-upon former homeowners transitioning to renters,' Burke said. 'That demographic is an important market segment for us.'" ("Investors rushing into real estate deals," SF Gate)

Repeat: "A tsunami of money coming into the market." How's that for a summary of Fed policy?

Of course the article focuses on the Bay Area, but the same thing is going on in the hotter markets across the country, particularly Los Vegas, Phoenix, and Miami. Investors are snatching up every cheap, low-end home they can get their greasy mitts on. The flurry of activity has pushed prices higher, which has had a positive effect on consumer sentiment, (People are feeling better about housing than they have in years.) but can it last? Housing expert Mark Hanson doesn't think so. Here's a clip from a recent post at The Big Picture:

"For years I have proclaimed that 'no housing recovery will ever occur -- or no dead-cat-bounce will reach 'escape velocity' or become 'durable' -- unless the repeat buyer is leading the way. This is because investors and first-timers are thin, volatile cohorts who have been known over history to leave the market literally, overnight....

"The problem is that the mortgaged homeowner has always been the primary demand cohort. It's not investors, first-timers or those who own their homes free and clear. Rather, the mortgage-levered homeowner who tends to move every 6 to 8 years who provides most of the historic underlying support for macro housing.

"This is a problem. Put simply, there are more houses today then there were five years ago but a full HALF of the primary demand cohort -- repeat buyers -- died due to negative equity..... and able buyers have been cut in half.

"Bottom line, WHERE IS THE 'DURABLE,' INCREMENTAL DEMAND GOING TO COME FROM(?)" ("Shadow" & "Ghost" Inventory/Negative & "Effective" Negative Equity" The Real Challenges for US Housing," Mark Hanson, The Big Picture)

Hanson makes a good point. Traditionally, repeat "move up" buyers have driven the market, but that's not happening now, because so many people are underwater and can't afford to move. So, yes, housing prices can go higher for a while (due to the frenzy of real estate speculation), but the higher they go, the less profit investors will make, which will lead to a drop-off in sales and greater price erosion. That will put the market back where it started.

So, what's going to play-out? How's Fed chairman Bernanke going to push prices higher so his banking buddies can crank out more junk mortgages and rake in more dough?

That's easy. Bernanke's going to do what he always does; create another bubble. All he's got to do is convince regulators to ease lending standards so that more unqualified, high risk, subprime loan applicants can get a mortgage. In fact, the Great Bernanke PR Bubble Campaign has already begun in earnest. Just take a look at this article at Bloomberg:

"Federal Reserve Chairman Ben S. Bernanke said the Fed will take action to speed growth and a rebound in a housing market facing obstacles ranging from too-tight lending rules to racial discrimination. ...

"Bernanke said while tighter credit standards after a collapse in the subprime mortgage market were appropriate, 'it seems likely at this point that the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery.'...

"Bernanke said housing-finance authorities have taken steps to 'remove barriers to the flow of mortgage credit' and referred to efforts by the Federal Housing Finance Agency and by Fannie Mae and Freddie Mac to clarify rules surrounding mortgages that go into default.

"These steps, the 58-year-old Fed chief said, should 'increase the willingness of lenders to make new loans.'" ("Bernanke Says Fed Will Do What It Can to Support Housing," Bloomberg)

So lending standards are "too tight"?!?

Uhm, not exactly, Ben.

And did you catch that part about how "the Fed will take action (on) racial discrimination"? That just tells you that African Americans are going to be in the crosshairs again like they were during the subprime fiasco. Take a look at this in Bloomberg:

"Lenders were 3-1/2 times more likely to steer blacks to high-interest mortgages than whites with comparable credit scores, according to a Center for Responsible Lending study of 27 million loans originated from 2004 to 2008. In Memphis, where 63 percent of the 652,000 residents are black, officials say their city was targeted for such predatory lending -- a practice that Marano says his company didn't engage in...." ("Wall Street Kept Winning on Mortgages Upending Homeowners," Bloomberg)

How do you like them apples? The people who run the big banks are such dispicable dirtbags they're already figuring how they can fleece some of the country's most vulnerable groups. And Bernanke's on board with the whole stinking swindle.

It's outrageous!

So, here's what to look for: Bernanke is going to use the Fed's bully pulpit to coerce the Consumer Financial Protection Bureau (CFPB) to define a "qualified mortgage" in a way that allows the banks to dump their garbage loans on Uncle Sam without any risk to themselves. That's what this charade is really all about; the banks want a "safe harbor" provision in upcoming regulations that will exempt them from having to buy back the mortgages that were proferred to people who cannot repay the loan.

In other words, the banks want to use Bernanke's $40 billion per month giveaway (QE3) to create an entire constelation of toxic mortgage-backed securities (MBS) for which they will have zero liability.

The CFPB will decide the matter sometime in January 2013. Bernanke's plan to reflate the housing bubble and turbo-charge salaries and bouses at the big Wall Street banks depends largely on the agency's definition of "qualified mortgage."

Absent looser lending standards, housing prices will probably decline sometime in late 2013. But that's just a guess.

Authors Bio:

Mike is a freelance writer living in Washington state.