Wednesday, May 27, 2009

Bankruptcy Filings are up, up, up!

The Associated Press reported that the number of individual (consumer) and business bankruptcies are up again this year. This increase is despite a 2005 Bankruptcy Reform Act that endeavored to make it much more difficult for individuals to file for their Federal Bankruptcy Protection that has been around since the beginning of our country.

According to court records analyzed by the AP last month, in the past 12 months more than 1.2 million people filed for bankruptcy protection. Bob Lawless, a law professor at the University of Illinois College of Law predicts that there will be 1.5 million bankruptcies this year, followed by 1.6 million next year. In Broward, Palm Beach and Miami-Dade counties 2,007 people filed for bankruptcy in March of this year.

In a speech to Consumer Bankruptcy Attorneys by Scott Forgey, citing current unemployment intensity of both numbers and durations, and extrapolating from the NAFTA bankruptcies that his firm filed in the 90's in the mid west, Scott expects that the number of filings will be nearer to 1.5 million for the next five to seven years. That the economy may turn around in 3 years is years too late for the average worker.

Most workers and consumers have less than a 3 month cash reserve, instead relying on credit. Workforce One of Broward County confirmed that most employees that are unemployed past 3 months after any severance pay are beginning to miss payments and are in danger of defaulting on major items, like mortgages.

There is no safety net. Credit Cards debt is the worst of all possible solutions to most of the desperate, but it is their last solution. The new legislation will do nothing to stop the increase of unsecured and high interest loans that people turn to as a last resort.

Who is going to help the working class?

What is going to happen to all who feed on their consumer spending?

With the working class officially bankrupt, the domino effect is inevitable.

Thursday, March 5, 2009

Flordia now leads!

Yes! Florida has the dubious distinction of having the highest foreclosure rates in the country.

In an article from the South Florida Business Journal, the following stats were displayed:

"The survey found that 20.1 percent of mortgages on Florida homes were delinquent or held in foreclosure. Nationwide, more than 11 percent of American homeowners are either delinquent or in foreclosure.
The survey covered 85 percent of the country’s 1-4 family residential mortgages.
In the fourth quarter, 11.1 percent of Florida residential mortgages were past due by at least 30 days – with 4.4 percent past due more than 90 days.
Nationwide, the number of borrowers at least one month behind in their payments – but not in foreclosure – rose to nearly 8 percent during the fourth quarter. That is the highest rate of delinquency ever recorded by the survey, which began in 1972. It reflects a record 13 percent jump compared to the third quarter.
Nearly 9 percent of Florida residential mortgages were held as foreclosure inventory at the end of 2008 – the highest rate in the nation. An additional 2.4 percent of Florida residential mortgages started foreclosure during the fourth quarter.

What does this mean?

Well...think how long the inventories of "dead properties" (properties that are not producing revenue or value for consumers) will stay out of the marketplace. The average foreclosure, sale and sale to the public is well over two years...and that is if the bank can find the notes.

This property value issue is going to drag along as properties will continue to flood the market, exceeding demand (and credit availability) for years to come.

Anyone who is remotely connected to housing and construction is effectively out of work.

The ripple effect will intensify.

Bankrutpcy would allow for a quick adjustment of the valuation of the real estate...just like a stock market correction...but the banks oppose any mention of allowing the bankrutpcy courts to write down equity values...prolonging the death throws.