The Continuing Mortgage Disaster

Atrios is right. I don't see how the economy can return to normal until someone grows a pair and figures out a coherent policy to deal with this:

Nobel Prize-winning economist Joseph Stiglitz said another 2 million foreclosures are expected in the U.S. this year, adding to the 7 million that have occurred since the economic crisis of 2008.

“U.S. foreclosures are continuing apace,” Stiglitz told a conference near Port Louis, the capital of Mauritius, today. “A quarter of U.S. homes are underwater.”

CNBC has more:

The number of borrowers who owe more on their mortgages than their homes are worth took a huge leap in the fourth quarter of 2010. A full 27 percent of borrowers are now “underwater” on their mortgages, up from 23 percent in the previous quarter, according to a new report from Zillow. Foreclosure moratoriums and falling home prices are to blame.

Adding to a slew of negative reports on home prices, Zillow found home values posted their largest quarter-over-quarter decline, 2.6 percent, since the beginning of 2009.  The home buyer tax credit, which inflated home prices artificially in the first half of the year, resulted in a Fall hangover. Home prices plunged 5.9 percent compared to the fourth quarter of 2009.

[...]

Negative equity is one of, if not the, primary drivers of mortgage default, but as banks ramp up repossessions, the percentage of underwater loans should fall back to previous, albeit historically high, percentages.

Negative equity not only makes it harder to sell a home, it also makes it more difficult to modify a troubled loan. Some also blame negative equity for high redefault rates on loan modifications, as some borrowers choose to walk away.

But fuck all those people, because they are poor and undeserving and unscrupulous and irresponsible and probably borrowed more than they can afford. And we don't throw good taxpayer money after bad behavior. They made their beds and they need to lie in them, because contracts are sacred and allowing individuals to alter them could have a chilling effect on the free market. 

And this guy is right too:

The financial industry keeps defeating attempts at reform, according to North Carolina Rep. Brad Miller (D - North Carolina).

"I have just about pulled my hair out trying," Rep. Miller said, speaking to MSNBC's Dylan Ratigan's "Radio Free Dylan" podcast posted today. "But until we get something in place that is not entirely voluntary for the banks, we just are not going to get an orderly resolution of the household debt tied up in mortgages."

But forcing the banks to do something, especially help the aforementioned poor/undeserving/irresponsible/unscrupulous jackholes, would be socialism. We've already seen how well the administration's bank-friendly voluntary solution is working: a whopping 800,000 mortgages modified (and some still can't even afford the modification) out of the millions upon millions that are in foreclosure or on their way there. Free market, bitches!