Finance Column » Your Money This Week » Foreclosure woes wound embattled economy

Foreclosure woes wound embattled economy

By Gregg Fields · Bankrate.com
Monday, October 18, 2010
Posted 9 am ET

Last week, the world watched transfixed as 33 Chilean miners were flawlessly hauled up a makeshift tunnel, ending a nightmarish ordeal.

If only the foreclosure crisis had a Phoenix capsule. Unfortunately, the economic statistics of last week indicated no one knows an escape route from this catastrophic crippling of the U.S. economy.

California firm RealtyTrac reported last week that lenders repossessed 102,134 foreclosed homes in September. That's a record number. It would appear that foreclosed homes may stop piling up, but only because a growing number of besieged lenders have halted foreclosures altogether.

“Lenders foreclosed on a record number of properties in September and in the third quarter ... ”

Lenders have quit trying to foreclose on bad loans because, well, mistakes have been made. Some bankers have admitted improperly signing foreclosure documents so rapidly that one wonders if bionic arms are now required for finance careers.

A New York Times story said one institution hired untrained staffers to review mortgage documents and nicknamed them "the Burger King kids.'' Small wonder we have a Whopper of a problem.

Can the housing market recover with everything at a standstill? Can a parked car pass you?

The foreclosure crisis dominated news coverage, and on one radio show a caller noted that the long-term solution to the housing crisis is, simply, an improved economy. Unemployment is stuck on high and it only follows that more families are losing their homes.

Sadly, another statistic of last week suggested that, as an economic fix, higher employment won't work, at least not soon. New unemployment claims were up to 462,000 in the previous week, suggesting unemployment lines won't be getting shorter anytime soon.

In a speech Friday morning, Federal Reserve Chairman Ben Bernanke affirmed that the Fed is considering doing something, with details to follow. Bernanke's robotic speech was broadcast while millions of Americans were driving to work, and it should have carried a warning: Do not operate heavy machinery while listening. Who would have thought we'd long for Alan Greenspan's exuberance?

Assuring, Bernanke was not. Stock futures rose steeply while he talked, but when the opening bell rang the Dow sank.

This week, we'll have fresh evidence about where the economy is headed. Perhaps most importantly, the Conference Board will release the leading indicators for September. This compendium of 10 economic statistics is particularly useful for signaling turning points in the business cycle.

In August, the leading indicators had their strongest gain since May. Continued momentum in September would be cause for some cautious optimism. In that regard, perhaps the very tough lessons learned from the Great Recession can prevent similar disasters in the future.

As one hopeful leader said last week, ''You are not the same, and the country is not the same after this.'' It was Sebastian Pinera, president of Chile.

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