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US Is Facing a "Truly Extraordinary Slump" Says a Well Known Economist

No one is really questions that the stabilization of the US economy.  But for many who have lost their job or are facing foreclosure this is meaningless.  Even though stabilization is here the economy is described as remaining weak.

University of Texas professor James Galbraith says it’s going to take a very long time for the U.S. to recover from a “truly extraordinary slump.  Galbraith says. “There’s very little sign the benefits that are being felt on Wall Street will be felt in the broader country anytime soon.”

I believe the word recession is now a misnomer and that the weakness is a symptom and not the disease.  The curse was cheap capital and the willingness to create too much debt.  Until we complete this period of debt destruction the economy will remain weak.  The danger, it seems to me, is that we try to bypass the process by moving debt from the private sector to the government’s books.

•  The new first-time homebuyer tax credit extension is in place and ready for action on December 1.  It is being joined by a tax credit for move-up or move-down buyers.  Certain time and income restrictions apply.  For more details see our New Homebuyer’s Tax Credit.

•  OCC Calls for Worldwide Ban on Pay Option/Negative Amortization Loans
Comptroller of the Currency John Dugan said regulators worldwide should prohibit lenders from making payment-option adjustable-rate mortgages and other negative amortizing products.

We disagree.  If they are done as full documentation loans with substantial equity required from the borrower these loans serve a purpose for a percentage of borrowers who have uneven, lumpy income such as commissioned salespeople.

•  Single-Family Starts Drop 6.8% as Multifamily Plummets 33%
Single-family housing starts dropped 6.8% in October from the previous month while multifamily starts plummeted 33% to the slowest pace on record.

•  Counseling, Favorable Loan Mods Seen Aiding Struggling Borrowers
Struggling borrowers are less likely to lose their homes if they take advantage of housing counseling services and they receive more favorable loan modifications than other borrowers, according to a NeighborWorks America-commissioned study.

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