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Two critical barometers of the U.S. housing market worsened in recent months. First came the news that American homes entering foreclosure rose to the highest level on record. Then, a report that homeowners' share of equity in their homes sunk to a post-World War II low.
Both serve as further evidence that the nation's credit crisis is in a free fall. To try to fix it, Uncle Sam is blowing out the budget and ratcheting up a major offensive.
Uncle Sam's campaign began with the $152 billion stimulus package announced earlier this year. Then, in late March, the Bush administration unveiled a plan to rebuild the patchwork system of U.S. financial regulation. That proposal, among many things, would establish a new federal regulator for the mortgage industry – a move that would affect lenders and brokers that now follow a patchwork of state rules.
The federal government also hopes to help the nation's housing market and financial system through a new agreement to hold or guarantee trillions of dollars in mortgage and other private loans through the Federal Reserve and, less directly, through Fannie Mae and Freddie Mac.
All told, Uncle Sam is thrashing about like the proverbial bull in a china shop – desperate to ease the downturn for consumers and pull the country from its economic pit.
More moves could follow, including direct bank bailouts and additional stimulus packages.
Some observers believe the federal government has a lot of grand plans that can't be achieved. The question few are asking is whether the government can afford to take on unprecedented amounts of debt it plans to add while bailing out consumers.
Surprisingly, the answer is not a definitive "no." The federal budget appears to have some wiggle room, shrinking last year to 1.2% of gross domestic product, the lowest since the budget was in surplus in 2001. The Congressional Budget Office actually projects surpluses will reappear in 2012.
But can those estimates be trusted? Who here trusts the federal government? Show of hands?
Collections & Credit Risk has extensively covered the mortgage meltdown in recent months. As we continue to track breaking industry news, we also have some set coverage plans.
This summer, watch for our annual list of the top 20 collection agencies and debt buyers based on revenue. If you have never received a survey from us, or if you don't see one by May 30, call me at (312) 983-6161.
Another upcoming story will feature the industry's top three collectors. If you know of a worthy candidate, send us a note explaining why your nominee deserves this honor.
While superior recovery rates and a special touch with debtors are good places to start, we also want to hear about individuals who are going beyond the job.
