(Hi, dday here from Hullabaloo and Calitics and my own site D-Day. Thanks to John for having me over for the week to fill in for Dave Neiwert.)

I don't think I'm being hyperbolic by saying that the average subprime mortgage broker should probably be in prison by now. They took loans that their customers had no possibility of paying back, often by forcing them into exotic arrangements where their payments would shoot up by double after a reset. They got bonuses for putting people into a higher interest rate than what the borrowers could qualify for. Now lots of those loans have gone sour, but the broker's company has already passed on that risk in the form of mortgage-backed securities. Indeed, these same lenders who preyed upon homeowners by getting them into residences they couldn't afford are now ripping them off again by setting up loan modification companies.

Yet the dangers assailing Mr. Soussana’s clients have yielded fresh business for him: Late last year, he and his team — ensconced in the same office where they used to broker mortgages — began working for a loan modification company. For fees reaching $3,495, with most of the money collected upfront, they promised to negotiate with lenders to lower payments on the now-delinquent mortgages they and their counterparts had sprinkled liberally across Southern California.

“We just changed the script and changed the product we were selling,” said Mr. Soussana, who ran the Los Angeles sales office of Federal Loan Modification Law Center. The new script: You got a raw deal, and “Now, we’re able to help you out because we understand your lender.” [...]

FedMod is but one example of how many of the same people who dispensed risky mortgages during the real estate bubble have reconstituted themselves into a new industry focused on selling loan modifications.

Despite making promises of relief to homeowners desperate to keep their homes, FedMod and other profit making loan modification firms often fail to deliver, according to a New York Times investigation based on interviews with scores of former employees and customers, more than 650 complaints filed with the Better Business Bureau, and documents filed by the Federal Trade Commission in a lawsuit against the company. The suit, filed in California federal court, asserts that FedMod frequently exaggerated its rates of success, advised clients to stop making their mortgage payments, did little or nothing to modify loans and failed to promptly refund fees. The suit seeks an end to FedMod’s practices, and compensation for customers.

“Our job was to get the money in and then we’re done,” said Paul Pejman, a former sales agent who worked out of FedMod’s two-story headquarters in Irvine, Calif. He recounted his experience, he said, because “I really feel bad.”

Before state regulators and the Feds figured out this was going on, hundreds of loan modification companies took probably billions from distressed homeowners and provided virtually nothing in return. They saw opportunity in crisis - and they also CREATED much of the crisis by selling the homes to people who couldn't afford them in the first place.

Special place in hell reserved for them...

For four years, Katrina survivors have been living in these toxic boxes. But there's more to this story than mere indifference or even incompetence - there was a concerted effort to push poor people out of the area after Katrina:

JACKSON, Miss. - Thanh Nguyen will soon give up the cramped travel trailer that's been her home for more than four years, pack her belongings into an old Toyota Corolla and rely on the kindness of others for a place to live.

She has no choice: The government is taking back the trailer.

"I'm going to pack everything I have in a car and go to my friends' houses and move on and on until I find something I can afford," the Vietnamese immigrant said through a translator. "It's for however long they allow me to stay."

Nguyen is one of nearly 6,000 residents in Mississippi, Louisiana and Alabama who face a May 1 deadline to leave the government trailers and cottages where they have lived since Hurricanes Katrina and Rita raked the Gulf Coast.

[...] The main barrier is affordability. Following Katrina, rent more than doubled along the Mississippi Gulf Coast. Much of the affordable housing stock was destroyed and insurance rates increased. Hundreds of housing units have been replaced within the last year, but "developers can't put it on line at pre-Katrina rates," Carr said.

The state also plans to transform 1,800 so-called Katrina Cottages — billed as a sturdier alternative to trailers — into permanent structures.

Nguyen, 69, lives on a $646 Social Security check, said Danny Le, who works for Boat People SOS, an organization that helps Asian immigrants.

Le said the minimum cost for a one-bedroom apartment in Biloxi is $500. He said Nguyen has applied for public housing, but hasn't received a response.

Perhaps things like this have something to do with it:

Peter Werwath [Enterprise Foundation] laid out a "Marshall Plan" to estimate how a relatively small amount of FEMA's budget could temporarily fix 150,000 roofs, install 50,000 trailers, and repair 100,000 homes. He noted the night and day difference between the progress being made in cleaning up Mississippi and the lack of activity in New Orleans, as well as the fact that FEMA had tarped tens of thousands of home roofs in Gulfport and Biloxi, while they had done very little in New Orleans.

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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.

Olbermann: Breaking from New York only days ago when opposing President Obama's stimulus plan the Republicans in Congress complained that the stim did not focus sufficient resources on housing. Tonight now that President Obama has unveiled his plan to fix the housing crisis, in our fifth story in the Countdown the Republicans are saying the President has focused too many resources on housing.

Keith follows up with Richard Wolffe and HUD administrator Shaun Donovan about the help for home owners President Obama is proposing and the Republican opposition to it. The GOP as usual is saying "No" to anything President Obama is proposing without offering and real solutions of their own.

I think home prices may fall by even more than 30%. We're hitting a period of deflation, which will drive wages (and employment) even lower and the value of houses may drop even more:

As painful as the decline has been, history suggests home values still may have a long way to drop and may take decades to return to the heights of 2½ years ago.

"We will never see these prices again in our lifetime, when you adjust for inflation," says Peter Schiff, president of investment firm Euro Pacific Capital of Darien, Conn. "These were lifetime peaks."

The boom in home prices — fueled by heavily leveraged loans built on low or even no down payments — made it easy to forget that housing values had been remarkably stable for a half-century after World War II, rising at roughly the same pace as income and inflation. Prices soared in most of the country — especially in Arizona, California, Florida and Nevada and metro areas of Washington, D.C., and New York — during a brief period of easy lending, especially from 2002 to 2006. That era's over.

So far, home values nationally have tumbled an average of 19% from their peak. As bad as that is, prices would need to fall as least 17% more to reach their traditional relationship to household income, according to a USA TODAY analysis of home prices since 1950. In that scenario, a $300,000 house in 2006 could be worth about $200,000 when real estate prices hit bottom.

ABC13.com:

What did Bush say at Olsen Fundraiser?

The President's folks didn't let the press in, but we got some exclusive video of POTUS talking up a storm at Pete Olson's fundraiser on July 18th.  Click and take a look.  transcript below the video.

It is uncertain, there’s no question about it.

Wall Street got drunk, it got drunk, (it’s one of the reasons I asked you to turn off your tv cameras.) It got drunk and now it’s got a hangover.  The question is how long will it sober up, and not try to do all these fancy financial instruments. 

 

And now we got a housing issue, not in Houston, and evidently, not in Dallas, because Laura was over there trying to buy a house today. (laugher.. Crawford!)

 

I like Crawford, unfortunately after eight years of asking her  to sacrifice, I’m now no longer the decision maker.  She’ll be deciding, thanks for the suggestion!    I suggest you don’t yell it out when she’s here.  Later, telling her “Hey honey, we’ve been on government pay now for 14 years... so go slow!" 

It’s uh.. caused me to lose my train of thought. Anyway. Read on...

 

If Wall St. got drunk, George Bush and the GOP were the bartenders. In most states, if a bartender feeds too much alcohol to a customer and it ends in tragedy they can be held liable. Our leadless fearer and his party should be held to the same standards, but we live in Bushworld and it will never happen. So, Pickles was house shopping in Dallas, eh? Interesting...

Update: Did Bush's Drunk remarks cause him to back down from his promised veto of the Housing bill?

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Well, well, Spud fell in the well---Our Gang-Wheezer, 1931

Crooks and Liars, all of them:

Federal authorities announced Thursday that more than 400 real estate industry players have been indicted since March — including dozens over the past two days — in nationwide crackdown on mortgage fraud that has contributed to the country’s housing crisis. The FBI put the losses to homeowners and other borrowers who were victims in the schemes at over $1 billion.

Meanwhile, over at Bear Stearns.

Matthew Tannin and Ralph Cioffi, formerly senior managers of two hedge funds run by Bear Stearns that failed last year, already have been taken into custody.

The charges against two will be announced during a press conference this afternoon in Brooklyn involving the U.S. Attorney's Office for the Eastern District of New York, the New York division of the Federal Bureau of Investigation and the Securities and Exchange Commission.

I watched it happen with my own eyes. Buying a mortgage is a very complicated thing for everyone, more so for a first timer and as we've learned----many, many people were manipulated and lied to. And to all those free marketers---we need regulations.