I saw this NY Times article on Digby's site and it's just awful. As Edmund, a NY Times economic reporter, writes: If there was anybody who should have avoided the mortgage catastrophe, it was I.

Read his personal saga of getting sucked into the mortgage crisis. It's riveting. I watched this thing from the start because I sold my house right before the mortgage lenders lost their minds and almost destroyed the world. They should have been the firewall that prevents the virus that infects the system, but they turned out to be the virus themselves.

If there was anybody who should have avoided the mortgage catastrophe, it was I. As an economics reporter for The New York Times, I have been the paper’s chief eyes and ears on the Federal Reserve for the past six years. I watched Alan Greenspan and his successor, Ben S. Bernanke, at close range. I wrote several early-warning articles in 2004 about the spike in go-go mortgages. Before that, I had a hand in covering the Asian financial crisis of 1997, the Russia meltdown in 1998 and the dot-com collapse in 2000. I know a lot about the curveballs that the economy can throw at us.

But in 2004, I joined millions of otherwise-sane Americans in what we now know was a catastrophic binge on overpriced real estate and reckless mortgages. Nobody duped or hypnotized me. Like so many others — borrowers, lenders and the Wall Street dealmakers behind them — I just thought I could beat the odds. We all had our reasons. The brokers and dealmakers were scoring huge commissions. Ordinary homebuyers were stretching to get into first houses, or bigger houses, or better neighborhoods. Some were greedy, some were desperate and some were deceived...read on

He was so honest about his financial situation and his relationship with his wife that it lends the article the kind of credibility talking heads on TV will never have.

And I agree with Digby:

This is one of the bravest articles I've ever read. But it's important to read how an intelligent, successful person could get themselves caught in the maw of the sub-prime mortgage meltdown. It wasn't just a bunch of illegals lying on their mortgage applications. There was a whole industry devoted to seducing people into believing they could easily have things they couldn't afford. After all, our whole society was screaming at the time that you were a sucker for not getting in on the game. And everyone has some capacity for believing what they want to believe. It was a perfect American scam.

I rent these days and was lucky enough not to have destroyed myself before the fools gold rush began. If the financial experts got blinded by it, what chance did the average American family have against this massive financial con game?

It seems there's no easy way out of this housing mess:

Anxious to meet the bank's demands for quick action, Andrew Garcia and his fiancee, BethAnne Hoffmann, rushed to find financing to buy a foreclosed-on house in a lovely tree-lined Baltimore neighborhood.

That was in January.

A month later, the bank that's selling the house broke its own closing deadline. The couple has been in limbo since. In frustration, they turned to their congressman's office for help. Only then did they receive an apologetic call and a new proposed closing date of April 24 -- but still no signed paperwork.

"It's unbelievable. With all we hear about all the homes out there that need to be sold, I have to call my congressman in order to purchase a house," Garcia said. "If that's the process, there's no way we're going to clear all these foreclosures."

As bargain hunters turn their attention to foreclosures, many are discovering the toughest challenge is dealing with the banks that repossessed the homes. These banks are usually quick to accept a bid and write a contract. But the closer buyers get to the settlement table, the greater the potential for bureaucratic bungling and the chance the buyers will give up.

The housing market stands little chance of recovering until the foreclosures are sold. Distressed properties make up roughly a quarter of U.S. homes for sale. Moving them would go a long way toward stabilizing home prices. But working with the banks, which are typically based far from the homes they're selling, is not as simple as buying from a regular homeowner.

"Things go wrong, and it takes the bank a lot longer to deal with them," said Vivianne Couts, a Virginia real estate agent. "There are a lot more people involved, many more layers. The Realtor can't always call the bank and say, 'What's going on here?' "

[...] When their closing date passed and no one could explain the delay, they started digging into court records. They learned that days after the bank had repossessed the home, the previous owner had filed for bankruptcy protection. Garcia said all the bank needed to do was submit paperwork to the court confirming that it had foreclosed on the house prior to the bankruptcy filing. But that letter didn't materialize until their congressman, Rep. John Sarbanes (D-Md.), intervened.

As part of our ongoing race to the bottom, having an American family of five live in a motel room is something for which they should be grateful. After all, how many other families are living in storage bins?

COSTA MESA, Calif. — Greg Hayworth, 44, graduated from Syracuse University and made a good living in his home state, California, from real estate and mortgage finance. Then that business crashed, and early last year the bank foreclosed on the house his family was renting, forcing their eviction.

Now the Hayworths and their three children represent a new face of homelessness in Orange County: formerly middle income, living week to week in a cramped motel room.

“I owe it to my kids to get out of here,” Mr. Hayworth said, recalling the night they saw a motel neighbor drag a half-naked woman out the door while he beat her.

As the recession has deepened, longtime workers who lost their jobs are facing the terror and stigma of homelessness for the first time, including those who have owned or rented for years. Some show up in shelters and on the streets, but others, like the Hayworths, are the hidden homeless — living doubled up in apartments, in garages or in motels, uncounted in federal homeless data and often receiving little public aid.

The Hayworths tried staying with relatives but ended up last September at the Costa Mesa Motor Inn, one of more than 1,000 families estimated to be living in motels in Orange County alone. They are among a lucky few: a charity pays part of the $800-a-month charge while Mr. Hayworth tries to recreate a career.

The family, which includes a 15-year-old daughter, shares a single room and sleeps on two beds. With most possessions in storage, they eat in two shifts, on three borrowed plates — all that one jammed cabinet can hold. His wife, Terri, has health problems and, like many other families, they cannot muster the security deposit and other upfront costs of renting a new place.

Motel families exist by the hundreds in Denver, along freeway-bypassed Route 1 on the Eastern Seaboard, and in other cities from Chattanooga, Tenn., to Portland, Ore. But they are especially prevalent in Orange County, which has high rents, a shortage of public housing and a surplus of older motels that once housed Disneyland visitors.

Home equity loans are, after all, a major part of homeowner debt. The Obama proposal would allow homeowners to wipe out that debt in bankruptcy court, allowing homeowners to keep their houses. And of course the credit card industry (those usurious scoundrels!) is screaming.

Gee, that reminds me. Maybe it would be a good time to repeal all those changes in the bankruptcy laws the credit card industry won in the Bush era, too:

A key provision in President Obama's $75 billion foreclosure prevention plan would allow bankruptcy judges to modify home mortgages — a measure supported by bankruptcy attorneys and consumer groups but opposed by lenders.

The American Bankers Association has argued that allowing bankruptcy judges to change the terms of mortgages will increase the risks of mortgage lending at a time the market is already struggling.

The industry isn't unanimous in its opposition. Last month, Sen. Dick Durbin, D-Ill., announced that an agreement had been reached with Citigroup on legislation for bankruptcy mortgage modification.

"If enacted, this legislation would represent an important step forward," Vikram Pandit, chief executive officer at Citigroup, said in a letter to Durbin and three other senators. "Given today's exceptional economic environment, we support its swift passage."

The mortgage restructuring plan, called a mortgage cram-down, would give Chapter 13 bankruptcy judges the power to change loans for a primary residence.

Judges can already modify mortgages for second homes and commercial buildings.

"That's the rule for investors who own two, three and four homes," Obama said Wednesday. "It should be the rule for ordinary homeowners, too, as an alternative to foreclosure."

The change in the law would empower judges to lower interest rates, extend the repayment period, and change the principal amount owed on the mortgage to what is determined as the home's fair market value.

The banking and credit card industry say the proposal is too broad, because it could apply to any borrower, including those who aren't having trouble paying their mortgages.

To protect themselves, lenders want to be allowed to veto any alteration in a home mortgage, says Michael Calhoun, president of the Center for Responsible Lending, a consumer advocacy group.

Don't you love that? "Center for Responsible Lending." Right! Seducing people who are already on the ropes with credit cards so you can charge usurious rates is "responsible lending". But I digress: As it turns out, the Center for Responsible Lending is a group that fights predatory lending. I apologize for the mistake; they sounded like industry advocates from that isolated quote. My bad.

Bankruptcy attorneys argue that such a veto isn't necessary because under the proposed change, the homeowner and the lender would be able to present their case.

Each side could have an appraiser, and the judge would hear the testimony of both sides, including information about the borrower's income and expenses, says Joe Lee, bankruptcy judge for the Eastern District of Kentucky.

Many homeowners have two mortgages because they have taken out a home-equity loan to pay off their credit card debt.

Under the plan, the bankruptcy filing could wipe out the home-equity loan, enabling the family to keep their home, Lee says.

WASHINGTON — President Barack Obama's new effort to use Wall Street rescue money to halt the soaring rate of mortgage foreclosures nationwide encourages refinancing of homes that are now worth less than their mortgages and provides incentives for lenders to lower the debt load on struggling homeowners. Like the failed efforts under the Bush administration, however, Obama's $275 billion plan — announced on Wednesday — doesn't compel banks and other lenders to modify troubled mortgages. Instead, it provides a menu of incentives that may or may not prove sufficient in reaching the goal of helping 9 million homeowners. "It's a bold plan and that's encouraging. But at this moment, we don't have enough detail, and unfortunately with the foreclosure mitigation plans, the devil is in the details," said Elizabeth Warren, a Harvard University law professor who heads the Congressional Oversight Panel charged with monitoring use of taxpayer bailout funds. "There have been big headlines in the past and the details never caught up with the early promises." [...] The third and trickiest leg of the Obama plan involves using $75 billion in Wall Street rescue funds for a shared effort to help as many as 4 million distressed borrowers who are behind on their payments or facing foreclosure. Obama wants lenders to lower interest rates and extend the length of loans to make monthly mortgage payments no more than 38 percent of borrowers' after-tax income. Then, the government will step in and split the cost, dollar for dollar, to buy down those monthly payments until they account for no more than 31 percent of borrowers' after-tax income. Obama committed to publishing standardized guidelines for mortgage modifications and additional detail by March 4 — an aggressive timetable. "This sounds good but I'd have to see more," said Harlan Platt, a finance professor at Northeastern University in Boston. Platt has proposed an even more ambitious plan that would involve more aggressive write downs for banks in exchange for a greater percentage of gains when home prices rebound. The third leg of Obama's plan wouldn't be a permanent fix, but a five-year subsidy designed to stem the rising tide of foreclosures. "It recognizes that we've got to stop foreclosures, not just for families about to lose their home but anybody who owns a home" and is seeing home price declines, said Ellen Harnick, the senior policy counsel for the Center for Responsible Lending, an advocacy group in Durham, N.C. Consumer advocates applauded Obama's plan. The response from lenders — which would receive $1,000 payments to refinance mortgages, a $10 billion insurance program and other financial incentives — was lukewarm at best. Republicans sided with banks. "Among the concerns we have is that it seems to offer little help to borrowers whose loan exceeds their property value by more than 5 percent. This will limit the plan's success in some of the hardest hit areas in California, Florida, Nevada and Arizona, as well as some areas on the East Coast," said John Courson, the president of the Mortgage Bankers Association, in a statement. Obama's answer to that complaint riles lenders. If lenders aren't willing to write down some of those so-called underwater mortgages, he said Wednesday, bankruptcy courts may soon be able to do so. This is called a mortgage cram-down. Obama supported congressional efforts to authorize bankruptcy judges to write off the difference between what a borrower owes and the home's value.

Yet another area where Bush's "Let industry police itself" philosophy produced predictable results:

Foreclosure filings surpassed 3 million in 2008, setting a record that has Washington, D.C., policymakers calling for more aggressive efforts this year to aid troubled homeowners.

Foreclosures last year were up 81% from 2007 and 225% from 2006, according to a report out today from RealtyTrac. One in 54 homes received at least one foreclosure filing during the year, RealtyTrac reported.

Banks repossessed more than 850,000 properties in 2008 compared with about 404,000 in 2007.

[...] Houses in some stage of foreclosure totaled 303,410 in December, up 17% from the previous month and up nearly 41% from December 2007.

More than 7% of Nevada housing units received at least one foreclosure notice in 2008, giving it the nation's highest state foreclosure rate for the year.

As foreclosures mount, other homeowners are jumping on falling interest rates to lower their monthly mortgage payments. Refinancing applications, now about 85% of all mortgage applications, have surged to levels not seen since 2003, the Mortgage Bankers Association said Wednesday.

[...] The House is expected to vote this week on a bill introduced by Financial Services Committee Chairman Barney Frank, D-Mass., that would require at least $50 billion of that money to be spent on mitigating foreclosures. The Treasury Department would have to reach agreements with each bank that gets bailout funding on how the funds are to be used.

I can't even keep track of how many people I know have been laid off in the last month, and a few of them are already having trouble paying the mortgage:

Unemployment is now the cause of almost half of all foreclosures on conventional mortgages, raising concerns that mounting joblessness will stall any housing recovery and could cause more foreclosures next year.

The increase in unemployment as a cause is a significant shift from 2007, when foreclosures were primarily driven by the large number of homeowners who had taken on risky loans. Many were first-time home buyers or those who bought during the housing boom that ended in 2006.

Now, layoffs and the recession are playing the pivotal role in driving mortgage defaults. The 4.3 million people collecting unemployment is the most since 1974, the Labor Department says.

During the first half of the year, about 46% of the 90-day delinquencies on conventional, conforming loans were because of a loss of income, vs. 36% in 2006, according to mortgage giant Freddie Mac.

Job losses exacerbate the situation for homeowners with risky mortgages. "A subprime buyer is already more fragile, so when unemployment rises, foreclosures go up," says Freddie Mac spokesman Brad German.

Mounting joblessness is also affecting homeowners who may have traditional, 30-year conventional loans but are living paycheck to paycheck.

They tend to be more urban, lower- and middle-class blue-collar workers, says Rick Sharga of RealtyTrac.

"It's not going to be pretty," Sharga says. "You're going to see whole different regions of the country suffer."

  The Washington Post:

Senator John McCain's campaign manager was paid more than $30,000 a month for five years as president of an advocacy group set up by the mortgage giants Fannie Mae and Freddie Mac to defend them against stricter regulations, current and former officials say.

Mr. McCain, the Republican candidate for president, has recently begun campaigning as a critic of the two companies and the lobbying army that helped them evade greater regulation as they began buying riskier mortgages with implicit federal backing. He and his Democratic rival, Senator Barack Obama, have donors and advisers who are tied to the companies.

Incensed by the advertisements, several current and former executives of the companies came forward to discuss the role that Rick Davis, Mr. McCain's campaign manager and longtime adviser, played in helping Fannie Mae and Freddie Mac beat back regulatory challenges when he served as president of their advocacy group, the Homeownership Alliance, formed in the summer of 2000. Some who came forward were Democrats, but Republicans, speaking on the condition of anonymity, confirmed their descriptions. Read on...

Barack Obama and Joe Biden need to jump on this story and keep hammering away until the corporate media can no longer ignore it.  The U.S. stands on the brink of the next Great Depression thanks to Bush/McCain deregulation policies and now we find out that the man who runs the McCain campaign was paid handsomely to lobby for these fatal policies on behalf of Fannie Mae and Freddie Mac, even as he repeatedly tries to tie Obama to those companies. Voters need to know how we got into this mess and who is responsible. It was John McCain, his elite lobbyist cronies and the Republican party. I agree with John:

There should be a campaign to demand that McCain's campaign manager, Rick Davis, give ever penny back to the American people. There had better be an ad about this out by COB Monday, and calls for Davis' resignation. 

The McCain campaign thinks we're a nation full of whiners and cowards who should just STFU, take a second or third job and cancel our vacations and be thankful for what we're fed. The lack of respect is stunning -- is this the kind of leader you want?