Last Friday, there was a report on the Reuters newswire that stated nearly one in five mortgage borrowers owed more to lenders than their homes are worth. Even more upsetting was the prediction that the rate could soon approach one in four.
Those figures came from First American CoreLogic, which also found that 7.63 million properties had negative equity in September, and another 2.1 million will fall into that category if home prices slide by 5%. The report also noted that seven states – Arizona, California, Florida, Georgia, Michigan, Nevada and Ohio – were responsible for having 64% of all the nation's so-called underwater borrowers, yet they only made up 41% of all U.S. mortgages.
It was appropriate that this news was released on Halloween, which is perhaps the second scariest day of the year. The scariest day is actually tomorrow: Election Day. If you didn't laugh at that comment, that's fine, because I wasn't trying to be funny – especially in this political go-round, where we are facing a very difficult near-term future that will require an uncommon degree of strength and focus from the next president. We are living in scary times.
During the past few days, neither John McCain nor Barack Obama, nor their respective running mates, have made any remarks in their campaign speeches on that aforementioned report and its disturbing numbers – I wonder if they are even aware that the report was issued.
Instead, the campaign is expiring into what could easily be considered a burlesque of presidential election campaigns, complete with appearances on TV comedy shows. There has also been the persistent usage of proxies who are trotted out to give the candidates a sense of cred-by-association: Bill Clinton and Al Gore campaign for Obama in an obvious attempt to recall the relatively more serene 1990s, while McCain is campaigning with Samuel Joseph Wurzelbacher, a.k.a. Joe the Plumber, in an attempt to show that he can hang with the real blue collar guys.
It would have been great if McCain and Obama had other proxies on the stage with them – such as the homeowners who were evicted from their homes due to foreclosure or any of the thousands of mortgage banking professionals who are now out of work because of companies going out of business or downsizing precipitously. Those are the people who will need to receive the attention of the next president, and their voices have been ignored for most of this campaign. Sadly, no one gave them a microphone or a spot on the campaign podium.
Once the next president and Congress is sworn in, there is going to have to be a serious attempt to address this situation (to be frank, the current prescription seems wildly improvised). The economy in general and the housing market in particular have completely veered off-course into dangerous territory, and the next round of leaders will have their hands full in trying to get the country shifted back to a course of normalcy.
However, we cannot assume that the last two months of the Bush White House will be stagnant. Let's not forget this lame duck Republican presidency completely reconfigured the depth and breadth of the financial services industry, despite an overwhelming lack of support from the general public and a Congress where both chambers are under control by the opposition Democrats. Of course, the administration's ongoing machinations have yet to plug the gaping holes in the economy, and it is a sure bet the administration will continue to behave unilaterally in its fiscal policies until January 20.
Tomorrow should be a very interesting Election Day. For the nation in general and the mortgage banking industry in particular, the future is literally one day away.
– Phil Hall, editor, Secondary Marketing Executive.
(Please address all comments regarding this opinion column to hallp@sme-online.com.)
