The Next Mortgage Crisis 2010 is Coming
The next mortgage crisis 2010 is on the horizon. This could be as bad as the United States sub-prime mortgage crisis 2009. Most people feel that the economy is recovering. The U.S. stock market reflects that opinion. The housing market has improved as sales increase and home prices stabilize. They are not seeing as lots of foreclosures as they saw a few months ago.
The Leading Economic Indicator (LEI), published by the Conference Board, increased at a rate of 4.2% in October. This was the seventh month in a row that there has been an increase. These LEI numbers give a lovely indication that the economy will continue to grow.
The gross domestic product grew in the third quarter at a 2.8% rate, the first increase in several quarters.
Federal Reserve Chairman Ben Bernanke proudly asserts that the worst is behind us thanks to his wise modification of the economy. It is interesting that Bernanke and the Fed feel they can bring us out of the recession when they had no clue that their low interest rates and stimulative policies were a major factor in putting us in a recession by causing the housing real estate bubble.
When the housing real estate bubble burst, the Fed had no idea how severe the crisis was. Bernanke assured everyone that the housing market disturbance was contained and would not be a problem going forward. They later claimed that the losses from the housing market issue would be less than $100 billion. Total losses far exceeded that amount. Unfortunately, lots of people followed his advice and had major losses in their stock market portfolio.
The federal government bank stress tests were concluded earlier this year. Bernanke assured us all by saying that "most U.S. banking organizations currently have capital levels well in excess of the amounts necessary to be well capitalized." But as of today, banks continue to hold onto the money given to them by the federal government and are not willing to loan it out.
How can they trust the Fed and Bernanke to lead us out of this recession when they have such a nasty track record? Bernanke feels that his policies can control the financial markets. Bernanke feels that they is smarter than the market. They is not willing to trust the natural economic forces to help solve our problems. History shows that they is wrong.
They have moved beyond the United States sub-prime mortgage crisis 2009. The period between September - December, 2009, is the lowest point of the mortgage resets. Therefore, the housing market and foreclosure problem should be improving today, like it is.
If the economy is improving, as Bernanke says, why is the Fed keeping interest rates near zero and maintaining such accommodative policies?
This new foreclosure problem will cause further writedowns on the books of U.S. banks. This is the reason that the Fed and Bernanke are keeping such accommodative policies. They are well aware that the next mortgage crisis 2010 will cause major problems for the banks. Most Americans are unaware that this event is on the horizon.
But another mortgage crisis is soon coming. In the second quarter of 2010 through the fourth quarter of 2011, there will be a significant number of mortgage rate resets in Alt-A and Option-ARM mortgages. Most of these mortgages were established during the peak years of the housing real estate bubble. As a result, these mortgages now have an high loan to value ratio and will further aggravate the foreclosure problem.
A strong economic recovery is important to lots of corporate professionals. Some have lost jobs, and a strong recovery will help them find employment. Others are feeling job insecurity and hope that a recovery will improve the financial picture for their companies.
President Obama feels that all of his stimulative policies have had a powerful impact on the economy. Although they remains cautiously optimistic, they feels that the economy will continue to grow. The statements made by the Federal Reserve indicate their belief that their policies have worked.
I hope that what they are saying is correct. But I feel that they still have major problems to overcome. Because of our uncertain economy, I recommend that employees set up a job backup plan that can protect them in the case of loss of income of a relatives member. The world wide web promotion industry is a recession proof alternative that needs to be thought about.
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