Another Record -

9% mortgages behind in payments. Today must be bad news day. This is really bad. Wave after wave of problematic housing issues. This article from Yahoo titled Home loan troubles break records again: Delinquencies, foreclosures rise to more than 9 percent of US home loans in second quarter says it all. Lets take a look -

A record 9 percent of American homeowners with a mortgage were either behind on their payments or in foreclosure at the end of June, as damage from the housing crisis continues to mount, the Mortgage Bankers Association said Friday.

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New foreclosures were concentrated in eight states: Nevada, Florida, California, Arizona, Michigan, Rhode Island, Indiana and Ohio.

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What's driving the delinquency rate up now is the number of homeowners with risky, adjustable-rate prime loans made with little or no proof of the borrowers' income or assets.

Many of these loans allowed the borrower to pay only the interest on the loan for a fixed period of time. Others gave borrower the option to "pick-a-payment," adding any unpaid interest to the principal balance.

More than one out of 10 borrowers with a prime adjustable-rate loan is now delinquent or in foreclosure. That portion, 11.3 percent, was up from 9.7 percent in the first quarter and is expected to continue to rise as more homeowners see their monthly payments spike.

Option ARMs and Liar Loans are going to drag everyone down. Just wait until the ride down hill really starts. We are in for a bumpy ride - downhill.

Can it really only be $1 billion?

Supposedly that is the amount of mortgage fraud that has occurred during the last decade. It seems much to low. $1 billion sounds low just for California or Florida alone. Perhaps the amount is limited to convictions of mortgage fraud. The article on mortgage fraud comes to us from AP via The Record and is titled Mortgage fraud soars by 42% in first quarter. Lets take a look -

Reported incidents of mortgage fraud jumped 42 percent nationwide, with Florida reporting the highest number of cases, according to industry data released Monday.

Properties in the Sunshine State accounted for nearly a quarter of all mortgage fraud incidents, the Mortgage Asset Research Institute said. California ranked second, followed by a three-way tie for third among Illinois, Maryland and Michigan.

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The most common mortgage fraud cases included misrepresenting income, employment history and debt and assets. Maryland, for example, had an unusually high percentage - 69 percent - of its cases involved in tax return and financial statement misrepresentation.

Mortgage fraud has represented about $1 billion in losses over the past decade, the Mortgage Bankers Association has said.

It would be nice to have an outside evaluation of what the real costs of mortgage fraud. Is this billion only limited to banks' specific losses or are these numbers all encompassing? What about the people who lose their homes due to mortgage fraud by brokers? Are these included?

Liar, Liar, Foreclosure is Dire

One of the strangest parts of the Great Housing Bubble was the reliance on the credit score. If you had a good credit score you could get any mortgage you wanted and buy any house you desired. People could take no doc loans that did not require proof of income or assets. In fact with the higher interest rates and fees many mortgage professionals preferred giving these loans. It is no surprise when when we come across this article from MSNBC titled 'Liar Loans' threaten to prolong mortgage mess.

The nation's struggling housing market, already awash in subprime foreclosures, is now getting hit with a second wave of losses as homeowners with liar loans default in record numbers. In some parts of the country, the loans are threatening to drag out the mortgage crisis for another two years.

"Those loans are going to perform very badly," said Thomas Lawler, a Virginia housing economist. "They're heavily concentrated in states where home prices are plummeting" such as California, Florida, Nevada and Arizona.

Many homeowners with liar loans are stuck. They can't refinance because housing prices in those markets have nose-dived, and lenders are now demanding full documentation of income and assets.

Losses on liar loans could total $100 billion, according to Moody's Economy.com. That's on top of the $400 billion in expected losses from subprime loans.

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The loans were also immensely profitable for the mortgage industry because they carried higher fees and higher interest rates. A broker who signed up a borrower for a liar loan could reap as much as $15,000 in fees for a $300,000 loan. Traditional lending is far less lucrative, netting brokers around $2,000 to $4,000 in fees for a fixed-rate loan.

Although the idea of these loans were incredibly illogical especially on such a large scale, they allowed unlimited amounts of greed. Greed of homeowners to purchase any house they wanted. Greed of mortgage investors to get significantly higher commissions and greed of investors to buy and sell more profitable products. Now we, collectively, will be paying for that greed.