Wash. DC, Feb. 19 -- President Obama announced a $75 billion assistance package to address home foreclosures yesterday.  He also promised a $200 billion infusion into Freddie Mac and Fannie Mae, the nation's underlying lenders.  That's exactly $275 billion more dollars than the previous administration committed to citizens to help ease their very human crises surrounding foreclosure.

Is this enough to stem the tide for those losing their homes?  Will those "who have played by the rules," as Obama calls them, be salvaged the indignities and financial oblivion that begin in earnest if they're thrown onto the street?  Or will those who broke all the rules profit immeasurably? 

Too Little Too Late? The Money Party at Work Feb. 19, 2009

The following chart was developed from the Federal Reserve Bank of New York's report on nonprime loans for the period of 2008.  The chart assumes risk of default indicated by 30 plus days over due on a loan payment.  See the excellent spreadsheets and the interactive map linked below this chart. 

A high rate of overdue payments in both subprime and Alt-A loans is taken as a sign of serious financial troubles.  When the at risk states are grouped geographically there is potential for a synergy that will make conditions even worse.  On the left, the first three states with high default risks for both Alt-A and subprime loans are Georgia, Louisiana, and Mississippi.  Grouped together, they form an arc of crisis.  While Georgia has a somewhat diverse economy, Louisiana and Mississippi are the weak links in the U.S. economy.  A substantial worsening of their conditions is difficult to imagine. 

Maryland, Virginia, and West Virginia are contiguous mid Atlantic states.  While West Virginia struggles, Virginia and Maryland are strong players economically, particularly Northern Virginia, one of the most prosperous regions in the world.  The Fed Dynamic Map of Nonprime Mortgage Conditions in America shows that the heart of Virginia's economy, Fairfax, Arlington, and Loudoun counties are not part of the stress zone for potential or actual foreclosures.  The exurbs of the DC/Northern Virginia area are hard strapped, though.  Prince William and Frederick counties in particular.  The city of Baltimore, Baltimore County and the southern part of the state are hid hard by delinquencies.  Montgomery and Howard counties are not stressed but the lower end DC suburb of Prince George County, like Prince William in Northern Virginia, shows real signs of a wave of defaults and foreclosures. West Virginia struggles economically even in good times.  While there are counties with no signs of financial stress, the more populous regions show problematic signs of late payments.

Massachusetts and Rhode Island are virtually one state geographically and will share the troubles brought on by these irresponsible nonstandard loans.  But the real worry is Michigan.  It looks like, at the very least, many at GM will lose their jobs  This will increase the risk rate for all types of mortgages, not just nonprimes.  It will also be a showcase for personal and financial suffering.  It may be the flashpoint for serious publish unrest caused by this crisis.

The hardship is just beginning.  The new plan from Washington seems to indicate that the crooks who generated this crisis will be protected and receive every cent possible from actions against homeowners.  They've already raided the general coffers, now they're working on creating wage slaves of all of us.

Michael Collins

The Money Party Series

Information Sources:
The Federal Reserve Bank of New York Nonprime Loans Dec. 2008

Subprime Home Loan Market as of Dec. 2008 xls

Alt-A Home  Loan Market as of Dec. 2008 xls

Interactive Maps of Loan Status Data by Zip, County, State, Na