A whiff of less-bad news here and there has bred with it a subtle change of expectations on the part of some economists, if not the eventualities themselves.

Clearly, though, economists are best at using two words to begin talking about even their strongest convicitons. Those two words? “It depends.”

Here’s a roll-up of economists’ opinions from the Orange Country Register’s “Lansner on Real Estate” that limbs out the Silver Liners from the Doom and Gloomers as to when that most-coveted of pieces of bottom might be in view.

Optimists

Fed Chair Bernanke:

• The worst of the recession has passed: “We continue to expect economic activity to bottom out, then to turn up later this year.”

Mark Zandi, chief economist, Moody’s Ecomomy.com:

• U.S. home prices will reach bottom by the end of 2009.
• “Notwithstanding the intensifying economic gloom, the bottom of the housing downturn is within sight.”
• U.S. home prices will fall another 11 percent on average before stabilizing.
• The Case- Shiller home price index will fall 36 percent from its 2006 peak to the bottom this year.

UCLA Anderson Forecast:

• Housing market to stabilize in late 2009, and “when it does, the contraction in residential construction will, finally, after more than three years, cease to be a drag on the California economy.”
• “As the housing market has completed most of its required adjustment prior to the downturn in general economic activity, it will not be as much of a drag on the recovery as experienced in previous recessions.”
• Orange County: Home prices stabilizing in 2009 and starting to rise in 2010. But appreciation rates remain in the single digits and prices will still be at 2004 levels in 2013.
• “This could well be the worst post-WWII downturn yet.”
• “If there is any good news in the picture it is that the correction in the housing market is almost complete.”
• “We are due for significant increases in unemployment through the 2nd quarter of 2010.”
• “Continued job loss in California is going to lead to more foreclosures and more uncertainty about the ultimate bottom in housing prices.”

California Association of Realtors:

• Recessionary conditions through the first half of 2009, “before we begin to see a turnaround in the second half of next year.”
• Prices down 28.4%. That’s revised from an earlier projection that prices would drop just 6% this year.
• Sales up 25%. CAR forecasts that 550,000 homes will sell in 2009, pretty good considering that the state was down to 347,000 sales a year in 2007. That’s revised from an earlier projection of 445,000 home sales.
  

Pessimists

Michael Carney, director, Real Estate Research Council of Southern California, Cal Poly Pomona:

• “I don’t see home prices leveling off in 2010. … The real reason we’re not going to see a recovery: The financing is not coming back for at least 5 years.”

Richard Green, director, USC Lusk Center for Real Estate:

• “I’d say we’re at bottom if it weren’t for the fact that the jobs picture is so dim.” … (Thinks market will turn around in 2010.)

Stan Humphries, VP of data and analytics, Zillow:

• “I’m doubtful that we’ll see the bottom until 2010, and thereafter it’s increasingly clear that we’re likely to have a long bottom before we see meaningful recovery in home values.”

Construction Industry Research Board:

• 2009 is expected to be the worst year on record for new residential building permits.
• Just 63,400 units will be produced in 2009, down 3% from the 2008 record-low of 65,380 units.
• 2008 construction was 20% lower than the lowest point during either the 1980s or 1990s housing downturns.
• The low in the early ’90s recession was 84,656 units in ’93. The worst year during the early ’80s recession was 85,656 in 1982.

The Wall Street Journal reports extensively on what it terms “one of the largest real-estate failures in U.S. history, capping a precarious, months-long effort to juggle the crushing $27 billion debt load it shouldered in past acquisition sprees.”

The Las Vegas Sun runs this story this morning.

Earlier Wednesday, debt rating agency Standard & Poors said it had learned that a loan backed by the Grand Canal Shoppes at the Venetian resort was transferred to special servicing after General Growth, the mall owner, couldn’t come to terms with servicer LNR Partners Inc. on an extension. This means General Growth is in danger of defaulting on the loan.

The balance on the loan, which matures May 1, is $393.7 million, S&P said.

The New York Times notes the list of the key creditors:

Among the companies listed as General Growth’s 100 largest unsecured creditors are Eurohypo, a unit of Germany’s Commerzbank that holds $2.6 billion worth of loans; Wilmington Trust and the Bank of New York Mellon, representing several classes of bonds; casinos including Mandalay Bay and the Venetian; and an assortment of retailers such as Sephora, Guess?, Borders and Macys.

In its bankruptcy filing, General Growth said that it sought permission to retain a bevy of advisers, including the investment bank Miller Buckfire, the turnaround consulting firm AlixPartners and the law firms Weil, Gotshal & Manges and Kirkland & Ellis. The document was signed by Marcia L. Goldstein, the chair of Weil’s well-known bankruptcy practice.

An industry observer draws our attention to dismaying specifics with respect to the residential development implications in GGP’s filing. Here’s our note this morning from “Jennifer.”

Click on image for access to Summerlin, Nev., info

Key to the discussion of which entities are in bankruptcy is the definition of “GGP Group”.   Page 62 of the document says “GGP, along with its approximately 750 wholy owned Debtor and Non-Debtor subsidiaries and affiliates, collectively “GGP Group”.  On that same page there is a footnote to the document which says that its Exhibit “A” lists all of the entities for which Chapter 11 bankruptcy was filed on April 16th.

At the bottom of page 64 of that document, I was startled to see the following comment blithely made by the Debtor:  “In addition to its core shopping center business, the GGP Group also owns and develops large-scale, long term master planned communities.  GGP Group has five master planned communities in and around Columbia, Maryland; Summerlin, Nevada; and Houston, Texas. These communities contain approximately 18,500 saleable acres of land.”

I then went to Exhibit “A”, listing the 200+ new Chapter 11 debtors and scrolled down.  I saw Chapter 11 Debtor names which included entities with Town Center Drive in them, and five entities with “Howard Hughes” in them, including The Howard Hughes Corporation and Howard Hughes Properties, Inc., as well as reference to a Canal Shops entity.

The standard “First Day” motions for the bankruptcy cases have been filed, including the all important motion to obtain authorization to keey paying the Debtors’ employees, and to pay them any unpaid prepetition wages. There is no indication yet as to when the first day motions will be heard.

In the Debtor’s Motion for Joint Administration of Cases (Court Document #2) which I read, it says that the GGP Group has a large unsecured line of credit, but it doesn’t say anything about how much money is available to be drawn. That document also says that most of GGP Group’s financing is through mortgages on specific properties. 

That does not bode particularly well for the Summerlin operation, because it means that any land sales which are occurring have their cash proceeds tied up, as “lender’s cash collateral”, which an angry mortgage lender is not necessarily likely to let them use.

I am afraid that this is not a good day in the history of Columbia, Maryland, Summerlin, Nevada and ??? in Houston, Texas.

The “Next Wave” of pain in real estate–based on trillions of dollars of commercial mortgage backed securities debt due over the next several years and not enough capital access to offset it–has now begun.

Residential gets another blow as a result.

Like almost everything these days, the housing crisis and broader, deeper economic crisis have polarized people into opposing sides of an economically, politically, and emotionally charged issue. One one side, there are those whose businesses’ interests focus mainly on multifamily for-rent units, and on the other, those who make a living doing single family for-sale housing.

It’s popular among multifamily executives to lay blame for society’s ills at the feet of home builders and residential developers of for-sale communities. Here’s a multifamily executive’s oft-chanted refrain these days, referring to the damage single family for-sale companies have wrought upon the universe.

• They overbuilt
• They overcharged
• They took our customers by seducing them with false come-ons and fraudulent financial processes and procedures into a homeownership dream those customers could not afford
• They ran their companies poorly, and sapped perfectly good lending institutions of their ability to sustain good healthy capital investments in multifamily deals and projects
• They are part of a conspiracy to expand homeownership in America, which devalues our competitive offerings in responsible housing

From October 1, 2008 on, the volume of the antagonism aimed at home builders by the multifamily industry sector’s leaders and trade association leadership has increased. Here’s how the National Multi Housing Council promotes its 2008 Annual Report:

2008 will long be remembered as the year that the easy credit days of the first half of the decade came to a crashing halt.  

The looming credit crisis quickly expanded into a global financial crisis and eventually into one of the worst economic downturns in decades. It is also the year that policymakers and consumers had to admit—as NMHC had been warning for years—that, yes, there is such a thing as too much homeownership.  

Last year, homeownership rates posted their sharpest decline in 20 years, falling from a peak of 69.1 percent in 2005 to 67.5 percent in 2008, a level last seen in 2001 and erasing all of the much-touted homeownership gains of the last administration’s “ownership society” initiative.  Meanwhile the number of renter households jumped from 30.9 percent to 32.2 percent.

Multifamily companies’ access to capital, their own balance sheet exposure, their redoubled challenge to cope with rising vacancy rates and deteriorating rent power amid a rising tide of unemployment in America, all got swept into the viscious-circle vortex of soaring foreclosures, declining home values, stress on mortgage lenders, and in turn stress on commercial real estate lenders… all impacting earnings, hiring, spending, and sentiment.

Still, we feel that it’s a red-herring and a misstep for multifamily strategists to pin responsibility for the enormous dislocation in the economy on their brethren and sistren from the single family side of the housing equation.

Multifamily operators, owners, developers, and builders have a long list of opportunities, challenges, caveats, missteps, and smart tactics for survival into the next up-cycle in housing whenever that might occur over the next couple of years. No need to paint home builders as part of an evil conspiracy to siphon away renters with a panacea about homeownership for all.

Housing’s crisis is, at the bottom, a household-by-household balance sheet correction that added up to global proportions. You can see this clearly in analyses such as the one Calculated Risk has done about how people–the you and I kind of people–save and spend.

In his post, Personal Saving and Mortgage Equity Withdrawal, Calculated Risk maps out the grim difference between where savings could and should have been as opposed to where it was and is. If people are spending the phantasmagoric appreciation on their owned homes as if it is income, then we get a glimpse of how far we need to correct to pay that back. People can buy a lot of things with play money if it’s accepted currency, but when everyone realizes it’s play money after all, the false economic bouyancy comes to a sudden end.

The aggregate saving rate captures the behavior of both savers (who probably didn’t change their behavior) and “dissavers” (who borrowed heavily). The saving rate declined to zero, probably because the dissavers were using MEW as income.

Now that the Home ATM is closed, the saving rate is rising because of less borrowing – as dissavers are forced to live within their incomes.

This is the current challenge. People, especially if they fear lost income or the lost ability to generate income, save cash. Banks act on similar fears, and so they’re stuck in the limbo of our current unemployment trends.

Savers and “dissavers” alike are saving all at once.

That’s not anyone’s fault, and it’s human nature, and it’s ultimately the source of opportunity for people in housing if they can get past blaming one another for what’s wrong. Housing has an over capacity problem. Too many companies can build and operate and develop housing, and that’s what our wacky market will correct.

Meanwhile, we’re seeing good examples lately of how pricing can be a lever to move inventory and close the huge gap between the number of vacant household units there are and the demand for them. The “V” for value is still hidden somewhere in that gap.

NEWPORT BEACH, Calif., March 17 /PRNewswire/ — At what just might be an indication of the tide turning for homebuilders, William Lyon Homes reports a phenomenal 39 new home sales in just three weeks at its Southern California neighborhoods. Division President, Brian Doyle noted that the company’s new lower 2009 pricing, generous State and Federal Tax Credits* and FHA** loan programs have generated the increase in traffic at William Lyon neighborhoods resulting in growing sales activity and demonstrating that the housing market could be at the pivotal point to recovery.

“When the tax credits were authorized, we began to see interest among those individuals who needed to have their confidence restored in order to return back to the housing markets where they have been absent from for so long,” explains Doyle. “In the past three weeks, we have experienced sustained momentum at our sales offices telling us that Southern Californians are feeling more comfortable and that the tax credits make a big difference in how they perceive real estate today. I sense we are seeing people who have waited on the sidelines for a year and they are anxious to get on with their lives, anxious to make the decision to buy now and feel good about it.”

Doyle is quick to point out that increased affordability is driving first-time and move-up buyers to take advantage of these historical opportunities. “We are excited to assist potential buyers as their interest level has accelerated, moving them out of the ‘wait-and-see’ mode. We stand ready to help every buyer find a home they love and financing that fits their needs so they too can achieve the American dream of homeownership.”

Both the State and Federal governments believe that the tax credits will spur sales, reduce inventories, stabilize prices and prompt new construction to aid in recovery of the housing industry and overall economy. The $100 million set aside for State credits is projected to cover about 10,000 homes on a first-come, first-served basis, based on when homes close escrow. “As sales continue to escalate, there is a sense of urgency for buyers to purchase now and benefit from these unheard of tax credits,” adds Doyle.

To benefit from new lower 2009 pricing, generous State and Federal Tax Credits and FHA loan programs, visit a William Lyon Homes’ Southland neighborhood for complete details.

An amenity-rich environment surrounds residents at the Columbus Square neighborhoods in the villages of Columbus in Tustin. Cambridge Lane’s townhome-style residences start from the low $300,000s. Verandas‘ single-family detached floorplans present a great value at $569,990. Priced from the low $1 millions, Ciara is now selling its final two homes.

Priced from the low $200,000s, the gated Amador enclave in Rancho Cucamonga on Route 66 has attached triplex townhomes.

Priced from the low $200,000s, Adelina’s townhome designs in north Fontana offer one of the most affordable new home opportunities with private recreation.

Rosabella boasts a versatile collection of townhomes amidst gated Shady Trails in north Fontana with prices starting from the low $200,000s.

Residents of Sollara and Canela at Vintner’s Grove in Rancho Cucamonga enjoy gated privacy and exclusive recreation. Priced from the $300,000s, Sollara offers single-family detached homes, while the townhome style designs at Canela start from the low $200,000s.

Nestled behind dramatic entry gates, the townhomes of Serafina in Eastvale offer prices starting at $199,990.

With no Mello Roos, an extremely low 1.1% tax rate and access to great schools Vintage and Tradition at gated Arboreta offer the right financial savings in Glendora. Vintage’s townhome-style designs are priced from the high $300,000s, while single-level and two-story floorplans at Tradition start from the low $600,000s.

Priced from the low $400,000s, Sunset Cove’s attached floorplans in San Diego offer a central location near Mission Bay and downtown amenities.

Altair has the only new gated, attached tri-level townhomes in Santee and some of the most attainable new home opportunities in all of San Diego County at prices from the high $200,000s.

One of the last neighborhoods to be built at 4S Ranch in San Diego, Maybeck offers single-family detached designs priced from the low $600,000s.

*The State Tax Credit reservation is being allowed on a first-come, first-served basis, and funding is subject to be exhausted before the March 2010 deadline. William Lyon Homes is not responsible for confirming whether the state tax credit is still available, nor is giving legal, accounting or tax advice or consulting of any kind. The Federal Tax Credit applies to qualified buyers who close escrow prior to December 1, 2009. Please consult with your tax professional or attorney for complete details.

**FHA program guidelines and loan limits are subject to change. All loans subject to credit approval; restrictions may apply. Down payment, payment terms and rates vary based on market conditions and qualifying requirements.

William Lyon Homes’ recent news of mounting sales activity is an early indicator that California’s building industry is beginning to rebound. The company’s new lower 2009 pricing coupled with the State and Federal Tax Credits* and FHA** loan programs are three positive factors for home shoppers to consider as they return back to the housing market in the weeks and months ahead.

For more information on the variety of William Lyon Homes’ neighborhoods throughout Southern California, visit www.lyonhomes.com.

SOURCE William Lyon Homes http://www.lyonhomes.com

The New York Times reports, “Real Estate Crime  Unit Established in Brooklyn.”

Brooklyn DA Charles H. Hynes

[Brooklyn, NY] district attorney, Charles J. Hynes, says the time has come for a specialized unit to investigate and prosecute them [real estate crimes].

The need for such an office has been building, Mr. Hynes said, announcing the new unit on Friday. As foreclosure rates have sharply risen in central Brooklyn neighborhoods like Bedford-Stuyvesant, Mr. Hynes’s office, with limited resources, has been forced to turn down real estate investigations, and instead has referred victims to civil court or relied on federal prosecutors, who generally concentrate on larger schemes.

Mr. Hynes said the new 12-member unit would be financed for two years with $875,000 in federal money and would help people like Levi Latham, 75, a Brooklyn retiree whose house was, in effect, stolen by a woman who took Mr. Latham’s personal information, a prosecutor said. After executing and recording a false deed, the woman is now listed as the owner of the house.

Our parents and grandparents told us times were hard during the 1930s, but we also may have gotten the impression that people pulled together and found ways to help one another during the Depression. We’re waiting to see evidence that this may occur during the current economic stretch.

Jan. 09 S.F. new-home sales – 309,000 [doesn't count cancellations]

Vs. Analysts’ Expectations — ↓4.6%

Year-on-Year Change — ↓48.2%

New-home inventory — 342,000 [13.2 months' supply, a record]

Median price — $209,000 ↓10% month-to-month; ↓13.5% year-on-year

Lowest Rate since 1963 — The year the U.S. Census begin calculating New Home Sales 

Here’s what this looks like, per The Big Picture blog’s pick-up of Barron’s Econoday Report.

Builderonline senior editor Alison Rice reports on the data. Still the question is “what does it tell us?” Plus, how can home builders be reporting better sales and traffic in January when these numbers would seem to belie those assertions?

Calculated Risk notes, along these lines, that not-seasonally-adjusted 23,000 homes were sold in January 2009. 

Were 15,000 home buyers–the difference between analysts’ expectations and actuals–waiting for Washington policymakers to get ‘em some bailout bounty?

Now, we know that public home builders were pulling out the stops on pricing and incentives in January in attempts to shed inventory, stick it to whichever private home building companies continue to teeter in markets where they compete for the one or two buyers a month who might still be trolling the communities. That “there-may-never-be-a-better-time-to-buy” mantra may continue to suffer fatigue as the months wear down, and new-home prices appear to want to party like it’s 2001 or 2000.

Here’s a topline take from JP Morgan executive director for home building analysis Michael Rehaut on what the numbers mean for at least the public bucket of home builders.

While absolute new home inventory continued to decline, months supply rose to a new record high. More importantly, however, we believe the core problem facing the housing market is still the highly elevated level of existing homes available for sale, which stood at 3.600 mil. in Jan., and is 10.5x the size of new home inventory. Accordingly, given our outlook for continued weak demand amid rising unemployment and low consumer confidence, tight credit conditions, and rising delinquency trends, we believe inventory should remain highly elevated over at least the next 6-12 months.

Citigroup home building analyst Josh Levin goes for the jugular in attempting to explain the difference between what home builders were reporting on traffic and sales, and what the Census Bureau was counting.

We note the disharmony between the government’s estimate of 1/09 NHS and what we heard from public home builders during the recent earnings season. Almost every public home builder stated that sales picked up in 1/09 when compared to late ‘08. Most, but certainly not all, private home builders with whom we have spoken also reported a bump in 1/09 sales compared to prior months’ sales. Few private home builders indicated that sales in 1/09 were worse than in late ‘08.

Looking for Explanations – We think there are at least two possible explanations for the aforementioned disharmony. First, a large proportion of “spec” sales in 1/09 could explain the difference. If a home builder sold a home in 1/09 that it had previously sold to another party sometime in ‘08 and that party backed out of the sale before closing, the sale in 1/09 would not show up in government NHS data. Second, what home builders were seeing in 1/09 could have been nothing more than the usual seasonal uptick. The government’s data attempts to adjust for seasonality.

We feel that if government stops setting up expectations that there’s a program in the pipeline to put a false floor in new home prices, and if home builders can ride out and keep working through their inventory with home buyers who absolutely need to spring for their offerings, then stability will begin to show up in the market.

But we shouldn’t hold our breaths.

Meanwhile, for gallows humor yucks which are never in sufficient supply, check out the comments in CR’s post on Record Low New Home Sales for January. His motley crew of commenters are literally in prime [time] form. This is for starters:

NYCityBoy writes:
After reading this blog last night I had an idea to start my own cable channel. I worked to develop my new fall programming. Here are the ideas for the launch of my new network.

The Dukes of Moral Hazard:
Follow our heroes, the cousins Barney and O, as they travel the backwoods of Kentucky in an orange Lexus taking out subprime and NINJA loans throughout the impoverished county. Watch as they bravely inflate their incomes and misrepresent their credit scores to score millions of dollars in 100% financing and government subsidized loans. Our heroes fight the tyranny of the market, and the long arm of the laws of economics, to snatch up houses and flip them from the front seat of their Lexus. Season 1 is sure to be a thrill ride, right to the steps of bankruptcy court.

Season 2 will find our heroes underwater and in danger of foreclosure. Bravely they will fight to be bailed out and receive cram-downs from judges sympathetic to these victims of predatory lenders. Is Kentucky ready for Barney and O? Ask yourself, “am I ready for Barney and O?” Sit back and enjoy the wild ride.

BJ and the Sheila Bair:
Hit the road with our little monkey BJ, and his sidekick Sheila, as they load up the 18-wheeler and travel the country to find buyers for wayward banks. The trip is sure to be great fun for the whole family. There will be danger and resistance met along the way. But our heroes will not be kept from their mission of finding every defunct bank a new owner. They will sweeten the pot, make backroom deals, give out winks and backslaps to make sure that no bank goes without a buyer. You will laugh. You will cry. You will think that this little chimp and his sidekick are modern day matchmakers worthy of Fiddler on the Roof.

Greenspan Acres:
Finding the city to be an inhospitable and unwelcoming place, now that he has helped to crash its economy, this big banker and his former news anchor wife flee the city to bask in the quiet and comfort of rural life. What they find is an adventure of foreclosed houses, foreclosed farms and meth labs as far as the eye can see. Our banker finds that the only friends he can make are with the 4-legged creatures that surround him. His wife, unable to find a plastic surgeon, tries to devise ever new and inventive ways to keep herself looking young. Join in each week as our city slickers find whacky adventures around every corner in Pottersville. NYCityBoy | 02.26.09 – 10:23 am

Seriously, this fellow’s programmed an entire week’s schedule of these shows. This is only a start. Which is more than one can say for the home building sector right now.

From BIG BUILDER

Former Masco finance whiz Bob Ladd set a new course for Choice that appeared to fit the company’s DNA down to the last gene, but alas.

Choice is no longer.

Big Builder senior editor Lynn Norusis reports today:

“Choice was focused on the affordable first-time buyer, and they had land positions that reflected that,” said Lisa Jackson, vice president at John Burns Real Estate Consulting. “Today, those are the areas that are hardest hit with foreclosures. Getting their target buyer qualified for sales would be very challenging given the mortgage environment.”

It’s not what we wanted, but since our membership dues pay good money for lobbying on Capitol Hill, you can be sure that we got our money’s worth from those efforts.

Really, what you can be sure of is that the moment the $15,000 tax credit for home buyers of new and/or existing homes came off the table, and the 4% or less home mortgage buy-down got eliminated from consideration, many home building and remodeling related businesses felt their hearts sink. Ask many of he proprietors of these companies do they want a government hand-out, and they’ll tell you absolutely not. What they do want is for people to be able and willing to buy houses again, and this is what they doubt after Congress wiped out the Fix Housing First agenda.

Lumber yards will lose from this bill, despite some of the jobs, spending, and housing specific programs that the Democrats left in it. Here’s ProSales editor Craig Webb in a day-after analysis of plusses and minuses of the legislation.

The National Lumber and Building Material Dealers Association’s (NLBMDA) statement today on the bill mixed pleasure and disappointment with a resolution to continue lobbying for housing industry relief. NLBMDA applauded how the American Recovery and Reinvestment Act includes an extension of bonus depreciation and Section 179 direct expensing as well as creates, continues, or expands tax credits for energy efficiency. But it then said: “We are disappointed that Congress did not adopt the more robust $15,000 homebuyer tax credit, limited the application of the net operating loss carryback provision, and rejected an amendment to provide 4% mortgage financing under certain circumstances.”

The statement also quoted NLBMDA chairman Paul Hylbert as saying the group “will continue to work with Congress, the Administration, our housing industry allies and our members to achieve an effective housing recovery plan as soon as possible so that we can develop, once again, a robust and vibrant housing market as a critical element of a strong economy.”

Lots of groups hope the stimulus works, but aren’t exactly betting on it.

Housing will sort itself out in a healthy free market way. Home prices will correct. Affordability will reign. People will live in homes, rather than use them to finance extravagence. And the clutches of Washington will be a phenomenon of the past.

Today, the top Google search for “housing crisis” is an essay from a young libertarian.

Have a look.

We have a housing crisis in this country, but the crisis is not rising foreclosure rates and rundown neighborhoods. After all, those elements have existed before and they are a natural part of the real estate market’s ebb and flow. There is another crisis unfolding, a crisis that the media will not report and the politicians will not acknowledge. War has been declared on every single American who in the past several years did all the right things and made all the correct decisions. Somehow it has been established that those suffering the impending housing doom are victims of greedy bankers and exploitative free marketeers unleashed upon America due to ‘deregulation’. It has been estimated that those suffering foreclosures number somewhere between 4 and 6 million people. For perspective, there are as many Facebook fans of Barack Obama. The remainder 295 million Americans due to sheer cunning shrewdness and genius escaped the prying clutches of money grubbing bankers and for this cunning mischief there will be retribution.

Dragons are everywhere to be slain.

Elizabeth Duke

New Fed governor Elizabeth Duke addressed the Global Association of Risk Professionals’ annual conference today in New York, and the Wall Street Journal’s Sudeep Reddy captured the gist of Duke’s remarks in a blog posting: Fed’s Duke Outlines Housing Options.

It’s sounding, from her description of what needs to happen to handle foreclosures, that a Resolution Trust Corporation type of entity will emerge before long. Have a look and weigh in.

Where foreclosures can’t be prevented, Ms. Duke urges firms and policymakers to focus more on “developing responsible foreclosure and real estate inventory management protocols.” Lenders and communities are “woefully under-resourced and unprepared for the volume of real estate that will need to be processed,” she says. Financial institutions can help by developing clear procedures to approve short sales and deeds-in-lieu-of-foreclosure. Options such as a “cash-for-keys” program — offering a payment in exchange for voluntarily surrendering a home — or allowing borrowers to remain as renters rather than owners can reduce foreclosure costs, she says.

In dealing with vacant properties, she notes that Congress set aside $3.92 billion last year to help local and state governments deal with the problem but says “it is likely that such efforts will require significantly more funding.” In addition, she says, “regulators should consider whether to review regulations regarding real estate held for extended periods of time on bank balance sheets to be sure that they do not preclude creative solutions to the foreclosure problem.”

Ms. Duke says dealing with real estate inventories that are likely to pile up is key to preventing a wholesale dumping of property that would lower prices and recovery rates. To prevent that, owners will need to fund the property servicers or managers to make repairs, offer seller financing or design bulk-sale strategies. “In the most recent credit cycle, much of the commercial inventory was sold through auction, and many of the buyers realized a substantial profit. Using today’s technology, Internet auctions could increase the pool of potential buyers as well as price transparency.”

Photo credit: The Wall Street Journal’s “Real Time Economics.”