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Whatever happened to good, old-fashioned capitalism?

Several days ago, Massachusetts’ Supreme Judicial Court voided the foreclosure of two homes by Wells Fargo & Company (NYSE/WFC) and U.S. Bancorp (NYSE/USB), because the court says the banks failed to show they owned the mortgages at the time of foreclosure.

You have to wonder if it is all a conspiracy to slow down the foreclosure of U.S. homes where the lenders are in default.

After all, three different levels of governments are investigating home foreclosures:

All 50 state attorney generals are reviewing the “foreclosure process” and will not have their investigations complete until the spring. The FHA (Federal Housing Administration) is examining whether lenders are using all legal options available to them before foreclosing on government-insured loans. Then there is a branch of the Justice Department (Executive Office for U.S. Trustees) that is doing its own examination of lenders and their law firms in respect to homeowners’ bankruptcy filings.

U.S. home foreclosure activity fell 21% in November from October, according to an Obama Administration report—but they are not falling because the housing market is getting better. On the contrary, foreclosures have declined because lenders have dramatically slowed their pace of foreclosure in light of all the government investigations.

Let’s call a spade a spade: If I am a bank and I lend you money on your home, and you are not paying your mortgage to me, I should have the right to come in and take the home back due to non-payment after I’ve given you written warning to make good on your payments. That’s how real estate has always worked. That’s how capitalism works and how banks have always worked in their lending practices.

I’m reading all kinds of reports that say homeowners are missing their monthly payments on their mortgages because they have caught on that lenders have curbed their foreclosures.

I wonder if it is all a ploy to get lenders to modify their mortgages (take haircuts) as opposed to foreclosing.

Is someone so smart at the White House that they said: “Hey banks, you started this mess by lending people money to buy houses they could not afford! Now we are going to make it hard for you to foreclose on your mortgages, so go back and work with the homeowners to reduce the amount of their mortgages to market value.” I’d have to call that quite brilliant if indeed this is the plan.

But we need to respect how capitalism works. That is what America is all about. Regardless of whether a bank takes a haircut on a mortgage or forecloses, they are still taking a loss that shareholders will have to endure.

In the immediate term, stalling foreclosures will move housing prices slowly up, as less home supply hits the markets. Most home real estate auctions I follow are showing prices actually rising. Some neighborhood homes are selling at lender auctions today at five percent to 10% more than last year because less supply is on the market.

But eventually the piper needs to be paid. The housing market cannot have a meaningful bottom (or bounce in price) until all the foreclosures are washed out of the system. According to a report in The New York Times (1/9/11), “More than four million households are in serious default and vulnerable to losing their homes.” Until these homes “come onto the market,” a black cloud will hang over the U.S. housing recovery.

Michael’s Personal Notes:

We pride ourselves on providing our PROFIT CONFIDENTIAL family with editorials, opinions and financial ideas they will not read anywhere else. Robert Appel, a financial analyst here at Lombardi (who is a lawyer turned stock-picker) and is someone whose financial savvy I truly respect, had the following to say about the markets and the economy. I thought my readers would find this thought-provoking:

“We start 2011 with a number of interesting events, all of which are a cause for concern singly, yet form a larger concern if taken as a group:

A haircut in the gold pits—this was not unexpected and indeed the possibility increased as gold became overbought. Accumulate. This too shall pass.A campaign by the major media (who, suspiciously, always seem to serve up the same stories at the exact same time) to invest in the market because things are looking “great” for the U.S. economy. Especially now that the housing boom is over, why not go back to stocks? We consider this a bear signal.Ongoing “QE23 by the Fed (a euphemism for printing money) and maybe even plans for QE3. We consider this ominous as well.Real bond yields are moving higher (as I projected) meaning that the “fuse” on the timer has been set. It is a matter of time (maybe a year) before this impacts the stock markets at all levels in all locations.Many “calendar” events set to take place this spring in Europe affecting debt becoming due. The good news is that they distract from the mess in America. The bad news is that they could collapse markets worldwide. Ominous.Inflation in China, especially in housing, and signs of trouble. A close similarity to where Japan was in the 1980s—and look how great that ended up! Ominous.Signals that the public has 100% failed to grasp the problems with infrastructure and fund-raising at the state and city levels: Stories of Filter Cartridge Suppliers drivers going state to state, and reporting on problems with bridges and roads, yet with no repair crews on the jobs. Ominous.Signals that the U.S. is going after pensions, just as it happened in Europe last year. Ominous.Surveys showing that the educational standards of the U.S. relative to other countries have dropped yet again. Ominous. (At this rate, as one pundit quipped, they will bring those call-centers back to the U.S. from India and Indonesia, and re-classify them as “skilled labor!”)No sign that Wall Street is curtailing pay to its executives. One study said that the average Wall Street executive makes 60 times—that’s 6,000%—what the average working stiff does, plus bonuses. And this is supposed to be a “service” niche that merely “facilitates” commerce, not swallows it whole and then spits out the bones.Government now making laws regulating the Internet. Ominous!

The earliest the U.S. can begin to form a new “low-expectation economy” that is somewhat self-sustaining would be in the period 2018-2022. Until then, we remain very concerned about the stock market and economy for 2011.”

Where the Market Stands; Where it’s Headed:

The stock market had another small push upwards yesterday. This morning, the news that Portugal was successful in selling about a billion euros in government bonds has stock futures rising again. As I have been saying, this bear market rally has immediate-term life left in it and that is exactly what has been happening—stocks continue with small spikes upwards.

The Dow Jones Industrial Average opens this morning up about one percent for 2011. I’m still very concerned in the short term about several factors, including too much bullishness amongst investors and advisors, out of control government debt (Congress will have to raise the limit by which the U.S. can borrow money again this year) and rising long-term interest rates.

(The cost for Portugal to sell its bonds was high. The three-year bonds went at a yield of 5.4%, the longer-term 2020 bonds went at a yield of 6.7%—more proof of interest rates rising worldwide. Imagine if the U.S. had to pay this kind of yield on its Treasuries? It could and it will eventually happen…which will push our interest payments on our debt to one trillion dollars annually!)

What He Said:

“Recipe for Catastrophe: To me, the accelerated rate at which American consumers are spending, coupled with the drastic decline in the amount of their savings is a recipe for a financial catastrophe.” Michael Lombardi in PROFIT CONFIDENTIAL, September 7, 2005. Michael started talking about and predicting the financial catastrophe we started experiencing in 2008 long before anyone else.

For almost three years now, we have been told just how bad the housing market it and how bad it could possible get.  Some market mavens have used words like “financial armageddon" or “economic 911."  While it is true that things have gotten very bad in the financial markets, it is not like we cannot get through this.  The housing market has in fact fallen 31% since the top of June 2006 but no one is looking at the positive aspect of this.

Yes, many people have lost great amounts of money in their homes, but isn’t now a time to invest even more in your future and the future of your home?  If you Tap Water Filters Factory are 100% confidence that you will continue to be a successful individual, there should be little worries about the future.  America has always pulled through the hard times.  Will this recession be worse than the Great Depression?  Who knows, but one thing is for sure, we will get through this.  The way we will get through this is to have a positive outlook on things and realize that it is going to get better eventually.

When looking at the housing market, one thing that has to make most home owners and first time buyers extremely happy is the fact that mortgage rates are at an all time low.  Now is one of the best times in the history of the United States to sink some capital into the housing market.  Some of the most influential individuals in the real estate market are putting amounts of money into homes in the distressed areas such as Florida and Arizona.  

If you do anything in the next few months, try to be positive on the financial markets.  Please do not try to make a quick buck but realize that you are investing in YOUR future which is very bright.

Despite efforts by the US government to ease foreclosure woes through its loan modification program, many troubled borrowers are still finding themselves forced out of their homes.

About 50 percent of the 1.4 million borrowers who applied for loan modifications were evicted out of their homes while the others failed to even avail of a mortgage reduction. 

Critics says that the government should now review its Home Affordable Modification Program or HAMP since it clearly failed to address the increasing number of foreclosures among homeowners and should instead consider the following alternatives: government-backed mortgage refinancing, right-to-rent and cram down. 

Economic advisers have been pitching for a mortgage refinancing program which involves a new round of mortgage-backed securities issued by government sponsored finance firms, such as Fannie Mae and Freddie Mac. This housing program would target low income families as well as some 30 million borrowers who are burdened with high interest rates. 

While proponents insist that this plan would not cost US taxpayers any money, critics say that this could be just another kind of bailout program that could potentially drain the country’s resources. 

On the other hand, others say that renting a house should also be part of the American dream. Westwood Capital proposes a right-to-rent scheme, which will allow delinquent borrowers to continue staying at their homes by opting to remain as renters. This would also enable the homeowners to repurchase their homes at market value in the future or once their finances clear up. 

While this plan requires a legislation before it can be implemented, many people are drawn to the idea of having a compromise between the lender and borrower through the scheme. 

The cramdown proposal will allow troubled homeowners and cash-strapped borrowers to take and plead their cause to a federal judge where they could ask for longer payment schedules, lower interest rates or even a reduced mortgage balance due to bankruptcy. 

Supporters of this plan see it as a response to HAMP’s failure to address second liens and home equity loans issues. They also recommend the creation of a separate court for bankruptcy and cramdown resolutions to enable judges to carefully consider a borrower’s financial position and debts. But bankruptcy judges have already expressed their opinion against the idea. 

In Big Blue Housing general, the message remains the same: the government needs to find a more permanent solution to the country’s foreclosure problems. 

Blue Ridge is a really small town with a picturesque little downtown area and some of the nicest antique shops in all of Georgia. Blue Ridge is referred to by some as the antique capital of Georgia. It is located about 90 miles north of Atlanta and is about 30 miles from the border of North Carolina and Tennessee. This quaint little town is known as the Gateway to the Blue Ridge Mountains.

The serenity you experience in Blue Ridge will make it hard to believe you are only an hour and a half outside of Atlanta. It is nothing like the busy metropolis of Atlanta nor the more touristy mountain vacation areas of the southeast.

While the more touristy type places like Gatlinburg and Pigeon Forge are very nice places to visit if you’re looking for a mountain vacation, Blue Ridge is a place to get away from all of those arcade type attractions and just enjoy nature and the beautiful surroundings the mountains have Tap Water Filters Factory to offer.

Not to worry if you want something to do though, the downtown Blue Ridge area has many specialty shops, some of the best antiquing in all of Georgia as Imentioned earlier, a theater, art galleries, many tasty restaurants and much more. One of the biggest attractions around is to take the Blue Ridge Scenic Railway around a 26 mile loop throughout Fannin County. It stops right in the middle of the downtown area so you can’t miss it.

A vacation in Blue Ridge Georgia is all about relaxing and if you want, you can just sit downtown all day, watch the train go by and sip a cup of coffee. Right across from the train station is a great little cafe that serves the best coffee and coffee drinks in town. You will enjoy the atmosphere, as this unique little cafe is a refurbished bank, complete with a vault and a large steel door. Of course the vault never closes. You can grab a cup of coffee to go or spend the morning or afternoon in one of their plush couches or chairs.

Earlier Ireferred to Blue Ridge as a really small town because its population is about 1,100 people. However, Blue Ridge and Fannin County boast some of the nicest cabin rentals with the best mountain or wooded views to enjoy a weekend getaway or a week long vacation. You will never have trouble finding a place to stay around Blue Ridge because there are actually more cabin rentals in Fannin county then there are people living in Blue Ridge.

If you are looking to get away from everything and have a nice quiet vacation in a beautiful log cabin, then Blue Ridge Georgia is definitely the place to go.

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