$193 million for American ... layoffs.

Last we heard from the Fisker Karma, the electric vehicle in which US taxpayers sunk $193 million so far, the loans were paying off by creating jobs … in Finland.  As it turns out, even that report was too optimistic.  With Fisker having burned through about 40% of the stimulus funds guaranteed by the Obama [...]

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It’s an issue that begs to be turned into a riddle, such as…  Who lives hopelessly underwater and in the desert at the same time?

Answer: Arizona’s homeowners.

Over this past year, Arizona State Senator Michelle Reagan (R) began a careful study of what appeared to be some very frightening numbers about her home state, but she was never willing to view them as a fait accompli.

“In Arizona we don’t ignore problems, nor do we pretend they aren’t there,” Sen. Reagan explains.  “Obviously, the federal programs aren’t going to address our state’s needs, and that’s fine.  We’re perfectly capable of doing what’s best for Arizona.”  

This past week Sen. Reagan brought her historically significant solution bill, SB 1451, to the Arizona State Senate.

According to CoreLogic, as of the third quarter of last year, more than 50 percent of Arizona’s homeowners were underwater, meaning they owed more on their mortgage than their homes were worth… 52 percent, to be specific.

If that weren’t bad enough, according to the latest Case-Schiller survey, which uses data from the Federal Housing Finance Agency (“FHFA”), by the third quarter of 2012, home prices in the Phoenix metro area are expected to drop another 9.6 percent, and the same study shows an additional 3.4 percent drop a year after that.

And the really frightening thing about such forecasts is that for at the last four or five years, the actual numbers have, in all cases, exceeded forecasted amounts.  The reverse is never true.

Now, run a tape on all that and you’ll be looking at 65 percent of Arizona homeowners being underwater by the third quarter of 2013, then add in the eight percent or so to account for the homeowners “effectively underwater,” meaning they would be underwater were real estate sales commissions and the like factored in, and we’re talking about well over 70 percent of Arizona homeowners underwater within a couple of years, which is to say nothing of the amounts involved.  Recently, one Arizona homeowner wrote to me about the sale of a home across the street from his for $310,000.  He was very upset.  His mortgage, I later learned, was $860,000.

Why hadn’t he just walked away, was my immediate question.  His response was the his adjustable rate mortgage had been reduced annually and was now at 2.25 percent.  Were interest rates to rise even to five percent and he’d be out of there in no time flat.

Want to know why there aren’t more strategic defaulters in places like Phoenix, AZ?  Now you know.

So, what’s the federal government’s response to the soggy situation?  Well, last fall the Obama Administration loosened restrictions on the HARP program, so now it can be used to refinance your home no matter how far it’s underwater… 100 percent, 200 percent… 300 percent… it doesn’t matter.  Of course, you’ll still be just as underwater as you were before, but you might shave a point or two off your interest rate, which might save you a couple hundred bucks a month… maybe.

Not surprisingly, the new HARP program has not exactly taken off like gangbusters in Arizona or anywhere else for that matter.  And just imagining someone signing a promissory note that obligates one to pay an amount two or three times the market value of  the property, will give you an idea why it doesn’t happen all that often.

Moody’s now pegs Arizona’s recovery in the housing markets at 2034, without adjusting for inflation.  One might as well have forecasted recovery as coming… never.  When 70 percent of a housing market is underwater, and recognizing that under normal circumstances at least two-thirds of home buyers are also home sellers, it’s easy to see that future demand will look nothing like demand seen in past years.

More homeowners realizing they are hopelessly underwater and walking away would seem a certainty.  Costs associated with foreclosed homes being incurred by the state are mounting beyond all previous forecasts and the resulting state budget deficits are becoming increasingly difficult to close.  By 2013, many state economies will be caught up in negative feedback loops that will prevent recovery as, for example, requisite budget cuts and tax increases further surpress consumer spending.

Foreclosures breed foreclosures…

So, after five years of being told that next year would be better… Sen. Reagan had enough.

First, she set out to learn everything about the economic meltdown and the situation related to foreclosures and underwater homes, and once she understood the dynamics, she set out to find a way to free homeowners in her home state from the downward spiral in which they were clearly locked, because she came to understand that otherwise the state’s future could only be bleak.  She assembled a team of experts in various disciplines and the result is found in Senate Bill 1451, The Housing Finance Reform Act of 2012.

I like to refer to it as… Raising Arizona… or, sometimes as, “The shot heard ’round the world.”  You’ll see why soon enough.

Senator Reagan’s bill represents BREAKTHROUGH THINKING as far as solutions to the housing crisis are concerned.  To be blunt, there’s been nothing like it proposed anywhere as yet, nothing close… but that’s not going to be the case for long… already other state legislatures are taking a close look.

Want a little taste?  How’s this just for starters… 

• Writes down mortgage balances for Arizona homeowners to up to 125% of  current market value.
• Lowers monthly mortgage payment by at least 33%.
• NO COST to taxpayers, not a dime.
• No credit score requirement, borrower must be current on mortgage or be able to bring loan current.

But, I’m not going to spoil it for you… CLICK PLAY BELOW and listen in on the conversation with Senator Michelle Reagan, along with key members of her team, Ira Hecht, Steve Kravitz and of course, yours truly, as we talk all about… what the bill is all about.  

(You’ll also find a copy of the bill below.)  

Mandelman out.

*******

ATTENTION ARIZONA HOMEOWNERS…

IF YOU WANT IT, YOU HAVE TO SPEAK OUT!

Sen. Reagan NEEDS YOUR SUPPORT to get this revolutionary mortgage financing bill passed into law.  It’s crucial that you email your state representatives and tell them how important this bill is to your life and your future.

To find email addresses for your state assembly and senate representatives…

 CLICK HERE. 

It’s easy and only takes a few seconds, I promise.

AZ Housing Finance Reform Act Bill

1. Abigail Field | NV AG Masto Defends Nevadans Against a Rushed and Bad Servicer Settlement
2. Abigail Field | What a Strong Servicer Settlement Looks Like
3. Abigail Field | Schneiderman Sues BNY; Homeowners Validated; Will Deutsche Bank Be Next?

1. Texana Hollis | Evicted Woman, 101, Can’t Go Home as Promised – HUD Says Foreclosed Detroit Home is Unsafe
2. JPMorgan Chase Advised Homeowners to Stop Making Loan Payments…and Then Foreclosed
3. Deadbeat | Ex-Marine, Single Father of Three, Who Payed on Time, Foreclosed, Facing Eviction

1. Freddie Mac Seek $6 Billion of Treasury Aid After Executives Get Big Cash Bonuses (MILLIONS)
2. NY Times | Banks Want Pieces of Fannie-Freddie Pie
3. Fannie Mae Begs Treasury for $7.8 Billion MORE to Stay Afloat After HUGE Bonuses Given to Executives

1. Freddie Mac Seek $6 Billion of Treasury Aid After Executives Get Big Cash Bonuses (MILLIONS)
2. NY Times | Banks Want Pieces of Fannie-Freddie Pie
3. Fannie Mae Begs Treasury for $7.8 Billion MORE to Stay Afloat After HUGE Bonuses Given to Executives

1. Bloomberg | Goldman Sachs Will Sell Litton Loan Servicing to Ocwen for $264 Million
2. Litton/Ocwen Foreclosure Threats | Not missed a payment and yet foreclosure warnings keep arriving
3. Veteran’s Four Year Foreclosure Fiasco Finally Comes to an End – Ocwen Gives Back Stolen Title to Paid Off Home

1. William Black – Lenders Put the Lies in Liar’s Loans
2. William K. Black | 2011 Will Bring More de Facto Decriminalization of Elite Financial Fraud
3. MBS – Lisa Epstein of Foreclosure Hamlet on with Dylan Ratigan and William Black

1. “Ghetto Loans” City accuses Wells Fargo of engaging in illegal “Reverse Redlining”
2. Wells Fargo Loses Bid to Dismiss Fraud Claims | GUSTAVO REYES, ET AL., Plaintiffs, v. WELLS FARGO BANK, N.A., Defendant
3. Judge Slaps Wells Fargo in Foreclosure | KENG HEE PAIK, Plaintiff, v. WELLS FARGO BANK, N.A.

1. MTD Denied | FDIC has to Face a $10 Billion Lawsuit Tied to the Failure of Washington Mutual Bank
2. Washington Mutual JPMorgan Chase FDIC Deal NOT Finalized? So how can JPMorgan Foreclose on WAMU Loans?
3. FDIC Sues WaMu Executives, Kerry Killinger, Stephen Rotella, David Schneider and their Wives

1. Asshat Alert | Ajay Rajadhyaksha, Managing Director of Barclays Capital – Legalizing the Mortgage Electronic Registration System (MERS) Will Streamline the Legal Process to Accurately Transfer Loans
2. Fannie Mae SEC 10-Q Report “MERS System could pose counterparty, operational, reputational and legal risks for us.”
3. Statement by CEO of Mortgage Electronic Registration Systems (MERS) “The MERS System is not fraudulent, and MERS has not committed any fraud.”

1. Barry Ritholtz’s Answer to the Foreclosure Mess: Sell the Fraudclosed, Clouded Title Homes to Unsuspecting Immigrants (VIDEO)
2. “Listen, it’s either settlement or trial today. That’s it” | Florida Cop-Turned-Judge Challenges Banks to Clear Foreclosure Backlog
3. KABOOM – Foreclosure Mill Florida Default Law Group’s Title Insurer New House Title Won’t Insure Firm’s Foreclosure Titles

1. Florida Court System Facing $72.3 Million Deficit Due to Shortfall in Foreclosure Filing Fees
2. Fraudclosure | Hillsborough County Chief Judge Menendez Responds to Accusations of Restricted Court Access
3. Foreclosure Fraud – BAC / Countrywide Must Pay $108 Million for Illegally Overcharging Struggling Homeowners; Loan Servicer Inflated Fees, Mishandled Loans of Borrowers

1. FEDSPEAK Report | The Impact of Vacant, Tax-Delinquent and Foreclosed Property on Sales Prices of Neighboring Homes
2. 18.4 Million Vacant Homes in the U.S. in Q4 ’10
3. Home Wreckers | How Wall Street Foreclosures Are Devastating Communities

1. More Deadbeat Banks Missing TARP Dividend Payments
2. Wall Street Aristocracy Got $1.2 Trillion in Secret Fed Loans
3. Abigail Field | Bank of America’s $500 Million Back-door TARP

1. Dylan Ratigan | America’s Mad as Hell Moment
2. WATCH MSNBC TODAY- 4:00 THE DYLAN RATIGAN SHOW- MY DECLARATION OF WAR AGAINST BANK SPONSORED BURGLARIES
3. 6:30pm-8:30pm Oct 11 -NY,NY (& Web) Eliot Spitzer & ProPublica Discuss The Wall Street Money Machine

1. Consumer bankruptcy attorney O. Max Gardner III brings his foreclosure fight to New York City
2. Aug 26, Palm Beach Gardens $449 Fraudclosure Defense Seminar (CLE)
3. Columbia Law School Report – National Banks Made Riskier Loans That Worsened Foreclosure Crisis, Study Shows

1. Nevada Attorney General Catherine Cortez Masto Expected to File Criminal Charges Against Bank and Title Company Employees, as well as Notary Publics, Over Robosigning
2. Outrageous | Good Deeds Punished: State-Run Mortgage Lender Forecloses on Californians Current on Their Loans
3. Watch out, Whistleblowers: Congress and Courts Move to Curtail Leaks

1. Bloomberg | Citigroup 46% Gain Masks Flawed Mortgages Freddie Mac Calls Not Acceptable
2. LPS’ Mortgage Monitor Report Shows Average Loan in Foreclosure Is Delinquent for Record 599 Days
3. Mortgage giants Fannie Mae & Freddie Mac quietly shop $250 billion in bad loans

Transparency!

When Barack Obama got asked about the loss of $535 million in taxpayer-guaranteed loans in the Solyndra collapse, he told ABC that he thought it had been a “good bet.”  Now that the House wants the executive branch to produce documents relating to how Obama came to that conclusion, it looks like the taxpayers who [...]

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WHAT’S THE DEAL WITH INVESTORS?  WHO ARE THEY?
ARE THEY LOSING MONEY ON FORECLOSURES?

What do the investors think about all these foreclosures?

What’s the relationship like between investors and servicers?

Do investors want to modify loans?

Do investors ever stop servicers from approving loan modifications?

Why don’t investors get more involved in this mess?

IF YOU’VE ASKED THESE QUESTIONS, HERE’S YOUR CHANCE TO GET ANSWERS!

Attorney Talcott Franklin knows mortgage-backed securities inside and out.  He should… his firm, Talcott Franklin P.C. whose main offices are in Dallas, in dollar terms represents more than half of all the investors in mortgage-backed securities on the planet.  Tal’s the co-author of the “Mortgage and Asset-backed Securities Litigation Handbook,” and he’s a very experienced and highly sophisticated litigator.

What makes Tal a pleasure to talk to, however, is that he makes a very complex subject very easy to understand… in fact, every time I talk to him, I feel like come away smarter.  Actually, the very first time Tal and I spoke, it was very clear that we couldn’t be more in-sync as to our views on the economy… where it’s headed and why.

Tal sees the foreclosure crisis essentially the same way I do, which I found interesting right from the start because he represents the other side of the foreclosure coin… the investor side.  And because of his knowledge and perspective you’re going to find listening to what he has to say absolutely fascinating.

You know how servicers are always saying “the investor says no,” when they want to deny a loan modification… well, Tal explains why that simply isn’t true.  And he walks us through the securitization process in a way that you’re likely to remember forever.  And you’ll learn all sorts of other things you did not know.  I’m telling you, you’re going to love spending an hour with Talcott Franklin on this, A Mandelman Matters Podcast.

The podcast is available in two versions… MP4 and MP3.  The MP4 version includes a couple of slides that show diagrams of the basic securitization process, but the MP4 format may not play on some computers.  The MP3 version is audio only, and should play on most any computer.  Most listeners will have no trouble following along either way.

So, turn up the volume on your speakers, and click the MP4 or MP3 version.  I loved recoding this podcast.  If you want to know more about the foreclosure crisis, you’re about to learn from an expert on the other side of the foreclosures, the investor side… it doesn’t get any better than this!

CLICK HERE TO PLAY THE ENHANCED MP4 VERSION

… INCLUDES SLIDES ON SECURITIZATION

OR

CLICK HERE TO PLAY THE MP3 VERSION

Mandelman out.

1. Foxes Guarding the Hen House | Analysis: Bank-Picked Experts Take On U.S. Fraudclosure Reviews
2. Foreclosure Fraud – BAC / Countrywide Must Pay $108 Million for Illegally Overcharging Struggling Homeowners; Loan Servicer Inflated Fees, Mishandled Loans of Borrowers
3. USA, DOT, OCC Fraudclosure Settlement Consent Orders for the Banksters

1. Fannie Freddie FHA REO Inventory Q1 2010
2. Report | Federal Housing Finance Agency’s Oversight of Fannie Mae’s and Freddie Mac’s Executive Compensation Programs
3. Foreclosure Mills Pocketed $50M From Fannie, Freddie

"Hindsight is always 20/20."

His defense, essentially, is that some loans are bound to go bust. Banks face the same hard reality, of course, and unlike the Energy Department’s green-loans program, they’re not limited to lending to risky clean-energy businesses. In that case, I wonder how many busted loans he’s prepared to tolerate in the name of trying to [...]

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Including George Kaiser again?

Earlier today, I noted that one of the new loans approved by the Department of Energy for green-tech stimulus just happened to favor a company with connections to Nancy Pelosi’s family.  That’s not the only connection in the batch of new loan approvals from the DoE, as the Daily Caller discovered.  Digging into investment records [...]

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Please don’t assume that this article is only about Spain, and therefore not one you should read.

A little over a week ago, Jose´María Roldán, the Bank of Spain’s Director General of Banking Regulation, gave a presentation in London to investors that the New York Times described as “surprisingly frank.”  Apparently, Spain’s banks are not doing very well at all, and Roldán was there to tell those in attendance that the country’s central bank forecasts that the situation is going to worsen going forward.

It’s interesting because, according to Roldán, the cause of the pain in Spain, has nothing to do with Greek or Irish bonds, as one might have guessed, rather it’s because “with Spain’s economy weak, and home prices falling, bad loans are growing,” explains Floyd Norris of the Times.

I don’t want to get too far off track here, but that sounds eerily familiar to me… it’s spooky.  Where the heck have I heard of that same sort of thing going on… a weak economy and falling home prices causing more loans to default… and the country’s banks going under as a result?  Let me just think for a moment…

Nope… can’t place it, especially that last part about banks getting in trouble as a result.  I seem to recall something about a weak economy, falling home prices and increasing loan defaults, but banks getting in trouble as a result… why, that doesn’t seem to fit in at all.  Oh well, maybe it was the plot of a movie I watched recently, or something like that.  Let’s get back to Spain…

Roldán told investors that land prices in his country, adjusted for inflation, have now fallen 30 percent, and Spanish home prices have dropped roughly 22 percent, since their high water mark back in 2007.  He also said that Spain’s central bank expects further declines in the years ahead.

The Central Bank’s “baseline scenario” shows that land prices will ultimately fall to about half of their peak in 2007, but the bank’s “adverse scenario” shows that the decline in process could be a whole lot worse.

I have to tell you that I like how Spain operates in terms of its economic forecasting.  They’ve got a “baseline scenario,” which shows that things are going to get worse, but they also have an “adverse scenario,” which shows that the baseline might paint too optimistic a picture of what’s to come.  On the other hand, here in the U.S. it seems that we only put out a “baseless scenario,” which never comes close to materializing, and we don’t even consider anything more “adverse.”

Maybe people in Spain are more mature than we are in America and therefore Spain’s government feels they can be told the truth.  It’s fascinating though, don’t you think?  Okay, sorry… let’s get back to our story…

The reason the New York Times called Roldán’s latest presentation to investors “surprisingly frank,” is that last February, when he gave a similar presentation, home prices in Spain were down by about 18 percent from their 2007 peak, and yet he argued that the declines were merely “cyclical downturns,” as had occurred in the past, and that prices would soon be rising once again.

Here’s another aspect of Spain’s banking crisis that I found remarkable to say the least.

According to the story in the Times, Spain doesn’t have “irresponsible homeowners” that are causing the residential mortgage loans to default, like we do here in the good old U.S.A.  In Spain, lending to homeowners was far more prudent, so the story goes, and as a result, Spanish banks are not being left holding large amounts of bad loans as the country’s residential mortgages increasingly go into default.

(Look, if that last paragraph is making you feel a little lightheaded, or you’re starting to break out in hives, just let it go, okay?  Of course, it makes no sense whatsoever, but who am I to question the venerable New York Times.  Just take a deep breath and lets press on…)

In Spain, it’s not the “irresponsible borrowers” that are causing the problem, instead it’s Spain’s “irresponsible real estate developers and construction companies” that are at the root of all economic evil.  Sí, es verdad.

Apparently, as land prices went higher and higher between 2003 and 2007, Spain’s banks became more and more eager to push out loans to developers and construction companies, and as of the middle of this year, 17 percent of the loans made to Spanish real estate developers and construction companies were considered “doubtful,” which is the term favored by the country’s central bank.  And not only that, but the percentage of doubtful loans has been increasing fast, which coincides with the declining residential real estate values.

I still can’t get over how familiar the facts of this story sound to me… why is that darn it… it’s driving me crazy, like when I can’t remember who played the Professor on Gilligan’s Island, or something like that.  (It’s Russell Johnson, by the way… that useless fact I have no trouble remembering.  Where I’m supposed to be this afternoon at three, I have no idea.)  Okay, sorry… it’s just that it’s nagging at me… never mind… let’s get back to it…

The story in the Times went on to explain that when the financial crisis hit in 2008, it seemed that Spanish banks were in better shape than most, primarily because of stricter regulations that prevented them from making the same mistakes that other banks had made, but as it turns out, Spain’s banks were heavily exposed to the real estate market, and now they’ve got trouble… with a capital ‘T’ and that rhymes with ‘P’ and that stands for “pool de hipotecas,” which is Spanish for “mortgage pool.”

So far, the Bank of Spain has forced the country’s troubled banks to merge, brought in new and improved management, and as of the end of this month, will have put in about 26 billion euros to recapitalize the banks, although the chief Southern European economist at Barclay’s Capital says that Spain’s banks will need closer to $50 billion before they are on solid ground again.

Of course, Spain’s banks are still sailing around in a boat with a hole in its bottom, so it’s hard to say how much they will ultimately need to remain afloat.  Loans secured by raw land and by construction that were made during the real estate bubble continue to default and as they do the losses are destroying the balance sheets of Spanish banks.

It seems that real estate developers took out the loans to build offices, stores and new homes, and now that the economic situation has worsened, demand has evaporated and Spain’s irresponsible developers are finding themselves unable to repay their loans.  And not only that, but with unemployment in Spain now above 20 percent, there are other corporate loans that are also showing signs of “doubtfulness,” I suppose the Spaniards might say, and wouldn’t you know it, car loans and other loans made to individuals aren’t doing all that well either.

Why, who would have ever thunk it?  Go figure.

Spain is still taking some misplaced comfort in the fact that only 2.5 percent of its mortgage loans appear to be in danger of default… today.  That’s about where we were in 2008, so I see no reason to worry about that statistic becoming more of a problem, especially when you consider that all mortgages in Spain are variable rate loans… we might call them ARMs… so, as long as interest rates never go up, there’ll be no need for refinancing and everything should be muy bueno.

It is worth noting that Spain does have a couple of advantages not shared by the U.S. as related to the mortgage markets.  For one thing, Spain has almost no home equity loans so most people still have equity… today at least.  When someone loses his or her job, they can still sell their home, assuming the new buyer can get a loan from one of Spain’s troubled banks, that is.

I wonder what will happen in the next few years as more loans default and the condition of Spain’s banks deteriorates further.  You don’t suppose that will mean fewer loans and tighter credit, which will reduce the demand for residential property, and which in turn will put downward pressure on housing prices thus forcing more and more Spaniards underwater as far as their mortgages are concerned?

And once underwater, is it possible that when someone in Spain loses a job, they could find themselves unable to sell and in foreclosure?  And do you think that foreclosures will put even more downward pressure on housing prices, thus forcing even more homeowners in Spain underwater?

Nah, none of that will happen.  Geeze, Mandelman… where do you get this stuff?  You’re such a downer.

The other positive difference Spain has in its corner is that its banks didn’t engage in the securitization schemes our Wall Street bankers did.  Spanish banks didn’t just originate the loans in order to bundle them up to be sold as AAA rated bonds to investors.  So, when the loans go bad, Spain’s banks take the losses, but at least they don’t have to worry about having leveraged themselves 30 or 40 to one.  If a bank in Spain looses $100k, at least all they loose is the $100k, instead of the three or four million that U.S. banks lose when they have a $100k loan go bad.
Norris’ wrapped up his story in the Times with the following paragraphs, which I think are worth reprinting word for word:

“The Bank of Spain has said it is emphasizing transparency in seeking to fix the banking system, and that it is willing to be flexible as conditions change. Its openness may be winning over investors. No one likes to hear bad news, but it is reassuring to believe that the news is accurate, rather than sugar-coated.

Here, here!  Here’s to accurate news.  May we one day experience some here in the United States.

I have not seen other banking regulators distributing charts forecasting the biggest problem facing their banks was likely to get significantly worse, as the Bank of Spain did this week.

No, you have not, Mr. Norris.  And you know why that is, right?  Because U.S. Treasury Secretary Tim Geithner prefers a slightly different strategy than the one being implemented here… he believes that in light of the worst financial crisis since the Great Depression, the only decent thing to do is to deceive us.

It has been more common for regulators to seek to weaken accounting rules, on the theory that it will help confidence if banks seem to be strong, regardless of the facts. That is an attitude that has backfired, particularly after the European stress tests chose to assume that all sovereign debt was safe.

Yes, and it does cause one to ponder where else such a strategy has been employed… on steroids… and is therefore highly likely to soon backfire, doesn’t it?  I mean, here’s some key learning to hang onto for life… when you hear that a plan being implemented is being referred to as “extend and pretend,” unless it involves only five year-olds… hit the pause button and see if things shouldn’t be reconsidered.  I’m just thinking out loud over here…

Rather than denigrate markets as being foolishly negative — as some other European officials have done recently — Mr. Roldán cited market trends, including the rising cost of credit-default swaps on the banks, as evidence of the problems confronting them.

All hail the honest banker!  Yes, last February he was every bit as full of beans as the rest of them, but as of a couple weeks back, the man who regulates Spain’s banking system has broken with the pack.  All hail the honest banker!

It is a refreshing attitude in a bank regulator. When, and if, Mr. Roldán ever starts to say the worst is over, it will be a lot easier to believe him.”

Funny how that works, isn’t it?  Perhaps Tim Geithner’s mom never read him the story of “The Boy Who Cried Wolf.”  I know it made a big impression on me as a child.  Geithner, on the other hand, if he was in fact read the story, seems to have entirely missed its point.

Okay, so now that we’ve covered what’s happening in Spain… I have a minute to try to remember why this story sounds so darn familiar to me.  Let’s see… here’s a recap of what’s going on in Spain…

There was a real estate bubble between 2003 and 2007… check.

It popped in 2008, when the financial crisis began in earnest… check.

Unemployment started rising, and is now over 20%… check.

Land has fallen in value by 30 percent, homes by 22 percent… and it is acknowledged by Spain’s central bank that both have farther to fall… check.

Only 2.5 percent of residential mortgages are currently in default, but as credit constricts and home prices continue their descent, more and more homeowners will find themselves underwater… foreclosures will begin… check.

The banks made loans to “irresponsible real estate developers and construction companies” that now cannot be repaid, and the number of such loans in default is growing, as are defaults on car and other consumer loans… check.

The government is forcing some bank mergers, and pumping funds into the troubled banks to recapitalize them.  Oh yeah, they’re also replacing bank management at the same time, although that’s not something I’ve seen done in our country… check.

Wait… I’ve got it.  It is a movie I saw recently.  No, I’m kidding…. I’m a kidder… I kid.

It’s a mirror image of us, but as seen though a country that is choosing not to extend and pretend… not to fabricate a recovery out of thin air, the same way the Fed generates our GDP of late.

So, what about the discrepancies… answer me this:

How come as Spain’s economy worsens, unemployment rises, property values fall, and “irresponsible developers,” among others, cause loan defaults to steadily increase… those same things have a negative impact on the country’s banks.

But when the very same things happen in the United States, our banks appear impervious to such forces… they don’t lend, but they still only thrive… becoming more profitable and awarding larger bonuses year after year, while they ignore entirely a generation that will never trust them again?

The answer is… someone is not telling us the truth about our financial institutions, because the same forces in play must have a similar impact.  The fundamental tenets of economics don’t know from geopolitical borders.

There are two obvious differences between our handling of the crisis and Spain’s.  One is that when they recapitalized their banks, they replaced bank management.  We did nothing of the kind.  I wonder if that could be playing a role in how well we’re not doing in the United States.

Ya’ think?

The other difference is that Spain is hanging the irresponsible jacket, not on homeowners, but on real estate developers, so if they do punish one group at all, they’ll be punishing a much smaller group than that of the American homeowner.

We, on the other hand, are continuing to blame and therefore punish the very people we need to transform our recession into recovery… the American homeowner… the millions of consumers whose spending has always been something like 70 percent of our economic growth… and yet we continue to bankrupt our middle class by the hundreds of thousands, under the guise that their irresponsible behavior is what caused our economic collapse.

Spain is facing essentially the same economic conditions that we are, albeit on a smaller scale, and with certain advantages, and disadvantages… but it’s a similar situation, as I hope you now see.  So, maybe we should start blaming “irresponsible real estate developers,” instead of our homeowners, whose crime at most… if there is one at all… was wanting a nice place to live.

Isn’t it time we stopped blaming our neighbors for a crisis that continues to destroy the world’s economy, or if we’re going to continue blaming our homeowners, shouldn’t we at least start blaming them for what’s wrong with Spain too?

Mandelman out.

Do you understand why it’s so incredibly important that we produce the documentary about the foreclosure crisis?  Because far too many in this country still don’t know we’re having a crisis, and until we all understand the situation, we won’t take steps to solve it.

I speak with people about the crisis every day, and half don’t even know what’s going on.  Help me to tell the story in documentary form, so more people can join the fight to stop the crisis that is tearing apart our nation, and destroying any hopes for economic recovery.  It doesn’t matter how much, but please donate today.  Even if all you can afford is $1… take the time to click the button below and sign on help produce the communications tool that can help stop this crisis from being ignored.