The first shortfall is that the program doesn’t provide a clear process to triage the over 7.5 million delinquent loans. The second is that it doesn’t take into account that the primary reason borrowers default is “negative equity.” When a house is worth less than what is owed on it, making monthly payments seems like a waste of money and many homeowners walk away.

To be successful, a loan-modification program must focus on preserving and building homeowner equity. The Treasury program focuses instead on getting favorable headlines that report a large number of loans modified.

Over the summer, Treasury realized that its loan-modification program was off to a slow start. It tried to speed things along by waiving the requirement that mortgage servicers receive income documentation and qualify the borrower before proceeding with a trial modification.

Some in the industry predicted that this attempt to swell the number of trial modifications would lead to problems. That is now what seems to be happening.

By Sept. 1, Treasury pushed about 375,000 loans into its trial modification process. If everyone of them converted to permanent modification, Treasury would be on its way to helping owners save their homes and stabilizing neighborhoods. Treasury is emphasizing the number of loans “scheduled to convert to permanent modifications by the end of the year.” But scheduling a loan for permanent modification and saving a homeowner from foreclosure are not the same thing.

Borrowers for 75% of these 375,000 trial modifications have either not submitted required documentation or have not been approved. Many of the remainder have already missed a payment. Unless the rules are changed again, I estimate that somewhere between 100,000 and 190,000 of these trial modifications will become permanent by year end.

In the first six months of this year, before its loan-modification program got rolling, about 160,000 loans were modified each quarter. The Comptroller of the Currency reports that servicers and lenders on non-Fannie Mae, Freddie Mac, or Federal Housing Administration loans were responsible for 80% of those modifications. At three months, the redefault rate on loans in lenders’ private portfolios where principal reduction or deferral was prevalently used was less than half that of other modifications. In short, before the government got involved, private lenders were modifying just about as many loans per quarter as Treasury will accomplish in the fourth quarter.

At its current pace, Treasury isn’t on course to save a majority of delinquent borrowers from foreclosure. What those borrowers and the housing market need is triage that provides quick answers and fast decisions.

There are three types of delinquent borrowers. The first consists of vacant homes with loans often taken out by scammers or investors. These need to be identified quickly and, when necessary, foreclosed on. The second group consists of borrowers who can’t or won’t pay their mortgages. These borrowers need to be given incentives (either a small amount of cash or the ability to conduct a short sale) to vacate their homes. Many foreclosed homes in these two groups will be scooped up by bargain hunters and either fixed up or rented out, while others will be bulldozed.

The third group consists of homes that can be saved because the borrower has a demonstrated ability and willingness to pay. We can best help this group if we stop clogging the system with unqualified borrowers from groups one and two.

Forty percent of the loans that fall into the third group are either owned or guaranteed by government agencies such as Fannie, Freddie and the FHA. Treasury should focus on saving the homes of these borrowers by modifying their loans, while foreclosing on those in group one and encouraging those in group two to voluntarily move on with their lives.

In October 2008, Peter Wallison and I wrote on these pages that government agencies have an obligation to clean up the mess they had made by lowering underwriting standards to satisfy Congress’s desire to increase home ownership. We suggested that the loan principal could be reduced by an average of 20% to give owners equity—and with it an incentive to pay their mortgages. We also suggested that loans be modified to a 5% fixed rate loan with a 20-year term.

This is still the best policy. It would rebuild equity for homeowners and protect neighborhoods. Borrowers would be prohibited from borrowing against their home equity so long as the loan is outstanding. To make sure people who receive such generous terms don’t walk away later, the government could make the decreased loan amount a “recourse loan.” That means a lender could pursue a borrower who walks away from the loan by garnishing wages, putting liens on other properties, or taking other steps.

If designed properly, the long-term costs of this plan would be about the same as what the Treasury is spending now, but with more homes saved.

Mr. Pinto was the chief credit officer at Fannie Mae from 1987 to 1989. He is currently a consultant to the mortgage-finance industry.

DECEMBER 8, 2009, 3:23 P.M. ET..
By JESSICA HOLZER
WASHINGTON — House Financial Services Chairman Barney Frank (D, Mass.) harshly criticized the Obama administration’s efforts to keep people in their homes.

“We have a great frustration with the failure of the combined efforts of elements of the federal government to make a substantial impact on the foreclosure crisis,” Mr. Frank said in opening remarks at a hearing before his panel Tuesday on lender and government responses to soaring foreclosures.

“No one should think we are doing a satisfactory job,” Mr. Frank added.

Rep. Shelley Moore Capito (R., W.V.) said she had serious concerns about the government’s ability to make a significant dent in mounting foreclosures. And Rep. Jeb Hensarling (R., Texas) slammed such programs as “abject failures.” He argued that no taxpayer-funded program would work to prevent foreclosures without significant improvements in the job market.

Critics have ratcheted up attacks on the administration’s Making Home Affordable Program, which they say is ill-suited to address what they contend are the current causes of spiking foreclosures: negative equity, high unemployment and a wave of resets on complex mortgages that are difficult to modify. The program relies on hefty incentives for servicers to lower borrower payments to 31% of income.

While more than 680,000 people have received trial modifications under the program, just a tiny fraction have graduated to permanent modifications.

Executives from J.P. Morgan Chase & Co. and Bank of America Corp. testified that the banks were struggling to move borrowers into permanent loan modifications because eligible borrowers weren’t submitting the required paperwork.

Of the roughly 65,000 customers who have made the required three payments during the trial period, 50,000 haven’t submitted any or all of the required documents needed to graduate to a permanent modification, according to Jack Schakett, risk management executive, credit loss mitigation strategies, at Bank of America.

Meanwhile, Molly Sheehan of J.P. Morgan Chase said that, for every 100 borrowers offered trial modifications under the administration’s program from April through September, only 16 borrowers are likely to be approved for a permanent modification. Though 71 of those 100 borrowers made all three required trial period payments, 51 failed to submit the required documents. Others were denied because they don’t meet the program’s guidelines, said Ms. Sheehan, who is senior vice president, Chase home finance.

Treasury Assistant Secretary for Financial Stability Herbert Allison acknowledged the program faced challenges, saying officials should strive to reach more borrowers in need of assistance and help more of them to convert to permanent modifications.

Asked whether he was satisfied with mortgage servicers’ progress, he said they “have a long way to go” to help homeowners.

“We’re not satisfied by any means,” Mr. Allison said.

Write to Jessica Holzer at jessica.holzer@dowjones.com

Faced with sluggish progress in its foreclosure-prevention effort, the Obama administration will spend the coming weeks cracking down on mortgage companies that aren’t doing enough to help borrowers at risk of losing their homes.
Treasury Department officials said Monday they will step up pressure on the 71 companies participating in the government’s $75 billion effort to stem the foreclosure crisis. They will start this week by sending three-person “SWAT teams” to monitor the eight largest companies’ work and requesting twice-daily reports on their progress.
In an effort to shame the companies into doing a better job, Treasury will publish a list next week of the lagging mortgage companies.
The mortgage companies, also known as loan servicers, have had a hard time getting borrowers to complete the needed paperwork for the administration’s loan modification program. AP

Mass AG Reaches Agreement w/ Servicer To Provide Affordable Loan Mods To Qualified Borrowers, Up To $7.5K Relocation Expenses To Ineligible Homeowners

From the Office of the Massachusetts Attorney General:

[A]ttorney General Martha Coakley’s Office announced that it has entered into an agreement with Texas-based American Home Mortgage Servicing, Inc. (“AHMSI”) that will provide significant benefits to approximately 8,200 Massachusetts borrowers holding loans originated by Option One Mortgage Corp. (“Option One”) and H&R Block Mortgage Corp. (“H&R Block Mortgage”). Those mortgage loans are the subject of a lawsuit which the Attorney General’s Office filed in June 2008. The complaint alleges Option One and H&R Block Mortgage originated the risky subprime loans with reckless disregard for whether borrowers would be able to afford their loan payments – a practice that has contributed significantly to the foreclosure crisis in Massachusetts. Under the agreement, [...] AHMSI will be required to provide affordable loan modifications to certain borrowers who fall behind in their mortgage payments.(1)
***

The agreement is designed to remedy unfair and deceptive conduct by Option One and H&R Block Mortgage that was highlighted by the Superior Court in the injunction issued in November 2008. The injunction prohibits the defendants from initiating or advancing foreclosures on loans that are “presumptively unfair,” because they predictably led to default or foreclosure. That preliminary injunction was affirmed by the Massachusetts Appeals Court on October 28, 2009. The Attorney General’s litigation with Option One, H&R Block Mortgage, Block Financial Corp., and their parent company, H&R Block, Inc., is ongoing, and is expected to go to trial in 2010.(2)

For the entire Massachusetts AG press release, see Attorney General Coakley’s Office Reaches Affordable Loan Modification and Foreclosure Prevention Agreement with Mortgage Servicer (Purchaser Will Provide Affordable Loan Modifications to 8,000 borrowers).

The law, signed this month by Gov. Arnold Schwarzenegger, assures the poor legal counsel in an array of civil cases. Advocates for the change say poor people often wind up in court facing life-changing consequences — such as eviction — but go through the process without adequate legal advice. That can lead to mistakes and delays.

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Michael Mullady

Jamie Silahua, leaving his foreclosed Antioch, Calif., home in April for the last time, couldn’t afford a lawyer to help hang on to the house. A new law will ensure legal counsel for poor Californians in foreclosures and other civil cases.
.”This is a really big step forward,” said Richard Alderman, associate dean and director of the Center for Consumer Law at the University of Houston. “Everyone will be watching it.”

The movement to mandate legal representation for the poor in civil cases, known as “civil Gideon” — named after the Supreme Court case more than 40 years ago that required government-provided lawyers for criminal defendants — has been gaining support in recent years. In 2006, the American Bar Association issued a statement backing civil Gideon.

But finding the money for it, even when the economy was booming, has been difficult.

California’s law will be funded by a pre-approved $10 increase in some court fees. For now, those fees — expected to generate about $11 million annually — will go into the cash-strapped court system’s general operating budget. California’s budget crisis has forced its courts to close every third Wednesday of the month.

Starting in 2011, the fee will be funneled toward the new law, which calls for legal-aid groups to propose methods of delivering services to the indigent. Those living at 200% above the federal poverty guidelines or less will be eligible for free legal services. For a family of four, that means an annual income of $44,100.

Most states mandate lawyers for the poor in civil cases that could result in them being committed to a mental institution. A few states provide lawyers in some types of child-custody cases. A city-council resolution pending in New York City would provide free legal representation to the elderly in eviction cases.

But California is the first state to enact such a sweeping mandate.

It is common practice for publicly funded legal-aid groups to represent the poor in civil cases, though it generally isn’t a requirement. But legal-aid lawyers around the U.S. say they are overwhelmed with cases, especially as foreclosures and evictions rise.

Julia Wilson, executive director of the Legal Aid Association of California, an association of state nonprofits that provide legal aid to the poor, said legal-aid groups in the state are forced to turn away as many as two thirds of those who come looking for free help because of a lack of resources.

Most legal-aid groups get funding from a patchwork of federal and state programs. California’s Judicial Council, the policy-making body of the state’s courts, says around 4 million people represent themselves in California civil matters. Many who need the help “have a valid defense, they just have no idea how to present it,” said Debra Gardner, coordinator for the National Coalition for a Civil Right to Counsel.

Ted Frank, a Washington lawyer who has written about civil Gideon for the American Enterprise Institute, a conservative think tank, said he believes the new law will result in more waste in the court system.

Parents fighting over child custody, for example, will be less inclined to work out an agreement on their own and more apt to fight in court because of access to free legal services, he said.

Mr. Frank said he believes landlords will have a harder and more expensive time carrying out legitimate evictions, which may cause rents to rise.

“What is clear is that you will never have a simple eviction because every single one of them will be litigated,” Mr. Frank said. “The rest of the poor will be worse off because that.”

Write to Tamara Audi at tammy.audi@wsj.com

Reuters

Over 250 protesters march outside the American Bankers Association annual convention in Chicago.
.The group, which included supporters from community group National People’s Action and the Service Employees International Union, has organized the protests to coincide with the annual meeting of the American Bankers Association. The group is demanding that “banks end their over-reliance on greed and profits and commit to using their taxpayer bailouts and backstops to help America’s economy recover,” said a news release from the Service Employees International Union.

The protests, similar to ones that have flared up in other cities throughout the financial crisis, pick up on popular sentiment that big banks are partly to blame for the financial crisis. Last week, a government pay czar proposed slashing compensation for bank executives whose companies received government bailout money.

People inside the American Bankers Association meeting said the anger directed at that group was misplaced, since the association mostly represents community banks.

“You did not make any abusive subprime loans; you did not take big bonuses for products that later blew up,” ABA President Edward Yingling said during his opening remarks.

Most of the protesters on the Chicago streets Monday appeared to be with a union and many of them were brought in on yellow school buses from across the Midwest. The message was one of ire at bank executives’ large bonuses, bank foreclosures and predatory lending.

“I’m here basically for my grandchildren,” said Peggy Sower Knoepfle, a protester who traveled in on a bus from Springfield, Ill., with National People’s Action. “If we don’t stop these foreclosures we’re not going to have a country left.”

Another protester, Garry Klicker, who is with the Iowa Citizens for Community Improvement, took time away from harvesting his corn and soybeans in Bloomfield, Iowa, to voice his anger.

“This is not a financial system,” he said. “This is a financial disaster.”

Protesters carried effigies of bank executives, including John Stumpf, chief executive of Wells Fargo, and former Bank of America Chief Executive Ken Lewis. Some clutched “Wanted” signs bearing the faces of bank executives deemed “Wall Street Robber Banker[s].” They carried signs with slogans such as “No Bonuses for Big Banks” and chanted sayings like “Bust up big banks!”

The morning protests started at the Chicago offices of Goldman Sachs. A woman on a megaphone shouted, “We’re here to tell Goldman Sachs, shame on you! Shame on you for helping bring this country to the brink of a depression!” The crowd, in turn, chanted “Shame on you!” An organizer yelled a list of demands for Goldman Sachs, including that the bank support calls for a consumer-finance protection agency and that it donate the money set aside for bonuses to loan-modification programs.

The group also asked to meet with Goldman’s chairman and chief executive officer, Lloyd Blankfein “within the next 30 days.” At one point the group tried to enter the Goldman Sachs lobby to hand-deliver a letter to Mr. Blankfein but was held back by police and security. Instead, a representative was sent down to pick up the letter. That person shook hands with some of the protesters.

A spokeswoman at Goldman Sachs said the bank’s security office in Chicago had received a copy of the letter. She didn’t comment further.

The group then marched down the street to the Chicago offices of Wells Fargo. There they also attempted to hand-deliver a letter to Mr. Stumpf, the Wells Fargo CEO. Officials at Wells Fargo couldn’t immediately be reached for comment.

Around noon, the group boarded a fleet of yellow school buses that took them to the American Bankers Association convention.

At the convention, speeches by Federal Deposit Insurance Corp. Chairman Sheila Bair and Comptroller of the Currency John Dugan weren’t disrupted by the protests amid tight security.

Ms. Bair, who had earlier addressed protesters, told the audience of community bankers that there was still work to be done in assuaging public concerns over banks’ policies on fees.

She drew applause when she said lax regulation of nonbank financial entities had been a “key gap that was exploited,” pledging with Mr. Dugan to crack down on lenders that had cost traditional banks market share.

—Doug Cameron contributed to this article.
Write to Lauren Etter at lauren.etter@wsj.com

Strapped Borrowers Head to Court
Homeowners Press Mortgage Servicers to Rule They Are Eligible for Loan Modifications

By RUTH SIMON
Some struggling homeowners are turning to the courts in a bid to force mortgage servicers to consider them for the Obama administration’s foreclosure-rescue program, arguing they are eligible for help but haven’t received it.

The suits are the latest sign of difficulties some borrowers are having with the program, which has helped more than 500,000 people begin trial loan modifications since it was announced in February.

The program requires mortgage servicers to screen borrowers for eligibility for modifications before completing a foreclosure. But a growing number of borrowers say this isn’t happening, or that their requests for help are improperly rejected by the servicers, which collect loan payments and work with delinquent borrowers.

Homeowner Wins Break from BankView Slideshow
Mustafah Abdulaziz for The Wall Street Journal Marvin Walker in front of his home in Philadelphia. Facing foreclosure, Mr. Walker got a trial loan modification.
.More photos and interactive graphics .
“People are unbelievably frustrated with the way [the modification program] is working because it is so nontransparent, and because there is such a basic distrust of servicers,” said Ira Rheingold, executive director of the National Association of Consumer Advocates, a group of attorneys and consumer advocates who work with homeowners facing foreclosure.

“I am not saying that the program is perfect,” said Assistant Treasury Secretary Michael Barr, “but we are doing what we promised to do.” He said the administration had already reached its initial goal of getting 500,000 borrowers on trial loan modifications by Nov. 1. He added that servicers have improved their performance under the program, “but they still need to do better.”

John Courson, president of the Mortgage Bankers Association, said mortgage-servicing companies have been going through their records and inviting borrowers who qualify for help under the rescue program to contact them about a loan modification. “There are groups of borrowers that will not be offered a trial modification because they are not eligible” for the program, he said.

Statistics aren’t available, but attorneys say legal action tied to the rescue program is being taken in states including California, Florida, Ohio and Pennsylvania. A lawsuit seeking class-action status in U.S. District Court in Minnesota wants to halt foreclosures on homeowners eligible for the rescue program until the administration puts in place certain procedural safeguards, such as creating a formal appeals process.

South Carolina Supreme Court Chief Justice Jean Toal in May issued an order requiring that all complaints seeking foreclosure state whether the loan is subject to the rescue program and, if so, why the borrower doesn’t have a loan modification.

Victor Jones Jr., who operates a loader for a recycling company, recently asked the Greenville County South Carolina Court of Common Pleas to require Wells Fargo & Co. to consider him for the rescue program before proceeding with a foreclosure. The case is pending. After being contacted by a reporter, Wells Fargo reached out to Mr. Jones and is now attempting to determine what type of loan workout he qualifies for, a company spokesman says.

After months of growing pains, the Obama administration in September said the modification effort was picking up steam. But a critical report issued earlier this month by a congressional panel said there was “evidence that eligible borrowers are being denied incorrectly.”

Later this month, the administration will begin requiring mortgage servicers to provide borrowers with more specific information as to why their modification request was denied. It has also ordered the companies to create an appeals process.

Not all ailing borrowers qualify for aid under the program. Some, for instance, can’t meet a test used to determine whether a modification will be less costly than foreclosure. Others ignore notices from their mortgage company.

Margery Golant, an attorney in Boca Raton, Fla., has raised the modification issue in roughly 50 foreclosure cases, but has received rulings in only two of them. In one case, a Circuit Court judge in Broward County stayed the foreclosure proceeding by 90 days to provide time for J.P. Morgan Chase & Co. and the borrower to work out a loan modification. A spokesman for J.P. Morgan said the borrower hadn’t responded to previous offers of help.

Sometimes the legal maneuver doesn’t win in court but is enough to get the servicer’s attention. In August, Marvin Walker, a disabled former corrections officer, asked the Court of Common Pleas in Philadelphia County to set aside the foreclosure sale of his home and require his mortgage company, Saxon Mortgage Services, to consider a loan modification. In September, the court denied his request.

But while the case was pending, Saxon, a unit of Morgan Stanley, agreed to put him on a trial modification, said his attorney, Elizabeth Goodell of Community Legal Services of Philadelphia. “Now I can afford this,” said Mr. Walker, whose monthly payment dropped by nearly 50% to $787. Mr. Walker said he didn’t contact Saxon earlier because he thought his attorney at the time was negotiating with it.

A Morgan Stanley spokeswoman said it wrote all borrowers facing foreclosure in May about modifications.

Write to Ruth Simon at ruth.simon@wsj.com

OCTOBER 10, 2009.Foreclosure Plan Ill-Suited for Changing Crisis, Report Says .
By NICK TIMIRAOS and JESSICA HOLZER
Despite offering a rising number of trial loan modifications, the Obama administration’s housing-rescue efforts are increasingly ill-suited to address the changing nature of the foreclosure crisis, according to a report released Friday by a watchdog panel.

The report, from the bipartisan Congressional Oversight Panel created to oversee the government’s $700 billion financial bailout, concluded that the most ambitious effort to prevent foreclosures to date isn’t set up to help the current drivers of foreclosures — borrowers with good credit who have lost their jobs and those with complex mortgages.

Under the Home Affordable Modification Program, or HAMP, eligible borrowers who are behind on their mortgage payments or at imminent risk of default can have their monthly payments reduced. A companion program allows eligible borrowers to refinance their mortgage if they have little or no equity in their home. But modifying loans for unemployed borrowers who are unable to afford even reduced payments could lead to higher redefault rates.

RelatedReport Shows Foreclosures Increasing for High-End Homes Loan Modification Plan Hits Target .

The report was released one day after the Obama administration said it had met a key benchmark for the housing-rescue program by offering trial loan modifications to 500,000 homeowners.

According to the Congressional Oversight Panel’s report, “it increasingly appears that HAMP is targeted at the housing crisis as it existed six months ago, rather than as it exists right now.”

Even trial modifications might not lead to a permanent fix, and the homeowners who do receive a permanent modification will see payments rise after five years. “The result for many homeowners could be that foreclosure is delayed, not avoided,” the report said.

Foreclosure efforts so far, including HAMP, were designed to modify subprime adjustable-rate mortgages and other risky loans that were becoming delinquent as interest rates adjusted, making loans unaffordable. By reducing the interest rate or extending the loan over a longer term, more borrowers might be able to make monthly payments.

The current wave of trouble is being driven by borrowers with good credit who are losing their jobs and can’t afford to make any mortgage payments or who have complex mortgages that can’t be easily modified without writing down the loan balance, which mortgage companies have been reluctant to do.

The oversight panel, which approved the report on a 3-2 vote, called for the administration to expand the scope of the effort to address this new wave of troubled borrowers.

A Treasury Department spokeswoman defended the progress of the effort and said, “We continue to study further ways to help unemployed homeowners.”

Senate Democrats last month introduced a bill that would set aside federal funds for states to offer mortgage assistance to unemployed borrowers, and policy makers are also considering proposals that would allow lenders to lower payments beyond the requirements of the HAMP program for unemployed homeowners.

Unemployment-driven foreclosures are a “much more difficult problem, and probably outside the scope of a loan-modification plan,” said Mark Zandi, chief economist of Moody’s Economy.com.

The vast majority of modifications haven’t included writing down loan balances, which some analysts believe would facilitate more successful modifications. “If you get into early next year and things aren’t going well…then the odds are going to rise significantly that they’ll try to do something that includes principal write-downs,” Mr. Zandi said.

Write to Nick Timiraos at nick.timiraos@wsj.com and Jessica Holzer at jessica.holzer@dowjones.com

Printed in The Wall Street Journal, page A3
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved

Great Article from the Wall Street Journal

Lawler: ‘Duh!’ FHA Should’ve Done This Long Ago.Today brings news of tighter credit standards from the Federal Housing Administration, the arm of the Department of Housing and Urban Development, or HUD, that insures lenders against losses on home mortgages.

HUD is trying to quell rising anxiety over whether Congress eventually will have to bail out the FHA. “There will be no taxpayer bailout,” David Stevens, FHA commissioner, told reporters today. (As it was a telephone conference call, it wasn’t clear whether Mr. Stevens was crossing his fingers.)

The FHA czar said the planned tighter standards will help ensure that happy outcome.

But Thomas Lawler, a housing economist in Leesburg, Va., argues that the surprise is that the FHA didn’t take many of these precautionary steps long ago.

For instance, the FHA was allowing appraisals to remain valid for as long as 12 months on homes under construction, despite rapid house-price deflation over the past three years. Now the FHA won’t allow appraisals more than four months old.

Under planned new rules, the FHA also said lenders making FHA-insured loans will need to show net worth of at least $1 million, up from $250,000, and further increases may be sought later. As Mr. Lawler put it, even $1 million is a “puny” capital requirement.

For refinances of FHA loans, the agency will make new requirements for verifying income and other quality-control checks. It also will impose a maximum loan value of 125% of the current estimated home value on refinanced loans, in line with government-backed mortgage investors Fannie Mae and Freddie Mac. A limit of 125% will strike many as way too high, but it’s better than no limit at all.

And the FHA plans to hire a chief risk officer for the first time.

Here’s Mr. Lawler’s verdict on the overall package: “This is literally HUD spelled backwards-–duh! These are things they should have been doing for a long time.”

He thinks the FHA should be thinking about going further. For starters, he recommends raising the minimum down payment requirement from the current 3.5% on 30-year loans. For borrowers who want to pay a microscopic down payment, Mr. Lawler recommends requiring a shorter-term loan of 15 or 20 years. That would mean higher monthly payments, but the borrower would have more chance of building up at least a sliver of equity before falling home prices wipe out any true ownership in the house.

(Blog readers if you’re looking for more housing news, follow me on Twitter at JamesRHagerty.)