There may be hope however, as the Wall Street Journal writes:

A recent improvement in beleaguered home-equity loans has been a rare sign of encouragement for banks. But bullish investors need to remove their rose-colored glasses.

Banks have about $700 billion of home-equity loans — in which a bank lends money to a homeowner against the equity in his house. That includes both fixed-rate loans and floating-rate debt drawn from credit lines. Lenders usually can’t collect on a defaulted home-equity loan by seizing a house unless the borrower has no mortgage, since mortgage lenders have first claim.

This increase may help the many consumers looking to reduce debt by consolidating to an equity line.

According to Naked Capitalism:

 Note we have doubts about “rescue debtor” operations. Iin many cases, these borrowers had little to no equity in their home, which begs the question of why it is so awful for them to lose their home. Indignity, yes, tragedy, no.

But a cynical plan to do nothing while pretending to offer relief is even worse than standing pat. It gives homeowners and possibly mortgage investors false hope and forestalls discussion of the tough choices that need to be made (the residential housing market is simply too large for the Feds to rescue), But then again, if your aim is merely to leave this problem in the lap of the incoming regime, a Potemkin program like this is exactly the sort of thing you want.

Not much of a surprise there.  The bailout plan is not going to drive rates downwards.

According to the Miami Herald:

Harriet and Paul Fass, both 65 and hoping to soon retire, aren’t rich.

Even so, the Wilton Manors couple cobbled together $100,000 to invest in the financing of a private housing development in Florida City, in the midst of the region’s real estate boom.

It was a risky business venture, somewhat cushioned by a supposed security blanket of promised government intervention: A Florida City public official had guaranteed, in writing, to bail out the project if it stumbled.

”It sounded safer than the stock market,” Harriet Fass said of the real estate deal.

Now the Fasses, and some four dozen other investors, are facing the prospect of losing hundreds of thousands of dollars. Some families’ entire life savings could be wiped out.

Apparently the city has backed out leaving these would be investors with a  large loss.

                Foreclosure used to be a rare thing, typically resulting from job loss, illness, or a death in the family. But changes in the mortgage industry in recent years have altered the how and why of foreclosure.

Most of the borrowers who are walking away now are doing so because of increasing payments and depreciating assets. There is also the fact that the majority of the borrowers now have nothing to lose–they didn’t put anything down and therefore have very little invested.

Walking away can make sense for them because it can be less costly than going bankrupt in an attempt to save a single asset that is losing value by the day. Of course, this depends heavily upon where the borrower lives.

Different states have different rules for borrowers and lenders. For example, the state laws in California make it difficult for lenders to collect additional money after foreclosing and selling a property. In other states, like Michigan, lenders are allowed to go after the borrower for the difference.

 In the current midst of the real estate market drop, vacant properties are becoming more and more common as homeowners are quitting their mortgages. This isn’t good news for the real estate market as property value decreases without proper care/tending of the property. Lenders are also out of luck as they lose face value for repossessed homes.

This is really every lender’s worst  nightmare.  As homeowners decide to forego the duty to payoff mortgage loans in favor of foreclosure, banks will start to fold.

Pamela Liebman, chief executive of the Corcoran Group, said Tuesday at the Reuters Housing Summit that a lack of supply and a surfeit of foreign buyers taking advantage of a weak U.S. dollar has meant the city has “absolutely stood alone” in skirting the nation’s decline in housing prices.

While bidding wars are less common than a year ago, Liebman said demand remains very healthy, especially for the largest, multimillion dollar apartments — but that could change.

“If Wall Street has a terrible year, and the press is really talking negative about the economy and the election, I think things could really slow down at the end of the year,” she said.

“I don’t see New York City crashing or coming to any kind of a standstill, because the product is too good and there’s too much belief in the city,” Liebman continued. “What will stall this market is a negative economy, nervousness and skittishness about job security, consumer spending, layoffs, and sellers with unrealistic prices.”

Earlier Tuesday, Jonathan Miller, director of research at Radar Logic, said at the Summit that Manhattan’s housing market was “definitely going to see weakness” within a year or two. Radar Logic tracks home price changes in 25 U.S. metropolitan areas.

News of NYC’s real estate market doesn’t come as a surprise as the entire country has seen a slow down in market over the past 2 years. Properties all over the nation have dropped in value as sellers have no choice in selling their property at a lower price to meet buyer demand. Hopefully, within the next five years, real estate market will spring back up along with the new economy brought on by the new presidential cabinet.  Should the NYC market collapse however, rates for loans such as the second mortgage will certainly rise.  Banks rates tend to jump as banks fail.

Unless you’ve been living under a rock, you are probably aware of the JP Morgan/Fed orchestrated bailout. The amazing thing about this entire situation is how quickly Bear Stearns went under. In the matter of one year, the once fifth largest investment bank was bought out for a pittance of its once mighty price. Bear Stearns has a long and storied legacy going back to 1923. Bear has lived through numerous recessions and the Great Depression. The company has approximately 14,000 people and as of last November, was generating a net income of $233 million.

Bear even as recently as 2005 to 2007 was listed as “most admired” securities firm according to Forbes magazine. If anything, it seemed like the mighty Bear could do no wrong. That is until the credit crunch hit.In June of 2007 Bear had to come up with over $3 billion to bail out one of its funds that was dabbling in collateralized debt obligations (CDOs). Incredibly these funds were seized at the time by Merril Lynch for $850 million who was only able to get $100 million for them on the auction block. Talk about mark to market. This little hiccup turned out to be the tip of the iceberg as we entered August and the market pummeling credit crunch.

With the government agreeing to payoff mortgage debt, the US doubtlessly has a huge economic crisis close at hand. Bear Sterns was just the big domino that will topple over countless others.

Somehow, Johnson’s house was transferred three times to new owners without anyone noticing he was inside. It’s a story involving forged deeds, a corrupt title company and a South Side family that has been under investigation for mortgage fraud.

The intrigue surrounding the Oakenwald house offers a glimpse into the strange and murky world of mortgage fraud. Lenders duped into making loans have every incentive to unload the properties, and almost none to blow the whistle on wrongdoers. If borrowers or government watchdogs fail to cry foul, the same home can change hands again and again before anyone is the wiser.

“They foreclose. They don’t care. They just foreclose,” said Daniel Lindsey, a supervisory attorney with the Legal Assistance Foundation of Metropolitan Chicago. Most of the time, he said, the foreclosures go through because no one with an interest has the legal firepower to stop them.

This story carries a dramatic twist with the scandal of mortgage fraud. The death of Randy Johnson comes as a surprise not because of his demeanor and odd personality, but because the house was exchanged three times to different owners. The mortgage company involved in the transaction of this house is under investigation, but it was wise for Country Wide to refund the payment to the most recent buyers from the legal suit brought upon by Cook Country officials.

Often borrowers can be so concerned with seeking out a 2nd mortgage that they find themselves overwhelmed with the details, as mentioned here.

Moody’s/REAL Commercial Property Price Indices fell by 1.5 percent in December — the fourth-largest monthly drop in the 84-month history covered by the price index.

“The last few months of the index have represented a bit of a plateau, but one with more ‘down months’ than ‘up months,’” said senior vice president Sally Gordon, coauthor of the report. “The asymmetry of the number of months when prices increased or decreased is striking and clearly indicative of where we are in the real estate cycle–the beginnings of a downturn after a long run-up in prices.”

One surprise in December, according to Moody’s, was that the volume of the repeat sales transactions remained robust during the month — usually a sign of market strength. In December, the Moody’s/REAL CPPI captured 352 transactions totaling $7.1 billion.

“Although December is often a more active month for transactions as some borrowers and/or lenders are eager to close before the year-end for one or another financial reason, the jump in volume in December might turn out to be atypical before a softer pace sets in,” said Gordon.

Pricing for the market has been steadily dropping and decreasing the value of many properties up for sale. Investors will be less likely to pump in money for lenders who are receiving broken mortgage promises as they are forced to increase rates to make up for their losses. The mortgage problem these days are becoming more frequent as can be seen by many foreclosures and quitting of mortgages.

Such a decrease in commercial real estate will likely result in an increase on second mortgage rates.

‘Some approaches risk billions in taxpayers’ money, perhaps hundreds of billions, and any intervention in the marketplace is likely to favor one group over another, leading to cries of “foul.”‘

Which according to sources, could lead to no bailout at all, a negative solution for everyone.

The award is based on Ambac’s strong global presence and its role in a number of ground-breaking transactions in 2007, as well as from the results of ISR’s online poll.

“Ambac is honored to receive this award,” said Douglas Renfield-Miller, Executive Vice President of Ambac and Chairman of Ambac UK Limited. “Ambac has had an active year closing many noteworthy transactions. This award underscores the company’s ability to use our in-depth knowledge and expertise to help issuers and financial advisors structure innovative transactions across a diverse range of asset classes and jurisdictions.”

In 2007, Ambac was sole guarantor of award-winning deals Theatre Hospitals 1&2 (CMBS Deal of the Year - Europe) and Punch Taverns Finance (Corporate Deal of the Year - Europe). It also participated in Channel Link Enterprises Finance (Deal of the Year - Europe) and Airspeed (ABS Deal of the Year - Europe).

Ambac Financial Group, Inc., headquartered in New York City, is a holding company whose affiliates provide financial guarantees and financial services to clients in both the public and private sectors around the world. Ambac’s principal operating subsidiary, Ambac Assurance Corporation, a leading guarantor of public finance and structured finance obligations, has earned triple-A ratings, the highest ratings available from Moody’s Investors Service, Inc., Standard & Poor’s Ratings Services and Fitch, Inc. Ambac Financial Group, Inc. common stock is listed on the New York Stock Exchange (ticker symbol ABK).

I’m not sure whether to congratulate Ambac for winning this award or to roll over and die. Ambac isn’t the most popular online insurer in the business but they do have an extensive list of clientèle whose net worth range from 100K to the millions. I have to give it up to Ambac though, for keeping in the business and using their services for “ground-breaking transactions.”

 It certainly seems unfair that home owners must continue to slave away in order to payoff mortgage loans while insurers are able to skip out on their debts.