As the economy continues to tumble and Washington seeks to address only the effects of the economy, Senator John McCain has unveiled a long-awaited policy that seeks to attack the root problem of the failing economy head-on.  According to McCain, “Government assistance (to lenders) should be based solely on preventing systemic risk that would endanger the entire financial system and the economy.”  McCain’s program would require lenders to modify borrowers’ loans, reduce principal debt and interest rates.  Effectively corporations would be held responsible for their own actions of writing poor loans.   In addressing the issue of an increase in home foreclosures, McCain observes that many homeowners “have found themselves owing more than their home is worth because they never had much equity in the house to begin with.”  Consequently he proposes to increase homeowners’ equity through raising minimum mortgage downpayments.  “Policies should move toward ensuring that homeowners provide a responsible down payment of equity at the initial purchase of a home.”   

Although the current housing market has been nothing but a headache for many owners, a lucky handful of people are finding their hopes and dreams within reach.  As the foreclosures increase and prices plummet, the houses have become prime targets for investments.  While some are finding their long-awaited retirement homes, others are purchasing property ideal to become rental homes.  And, of course, there is no shortage on parties seeking to flip a home and re-sell for profit.  Even a few renters are finding their aspiration of becoming property owners within reach as their landlords seek to sell the property for an affordable price.  With economists forecasting that the number of foreclosed homes to likely quadruple before the year is out, real-estate investing has high stakes, but if the luck of the draw is in your favor, you just might find yourself living the high life!

According to the Commerce Department, new-home sales averaged a seasonally adjusted annual rate of 590,000 in February, the lowest it has been in over 13 years.   The median selling price for new-homes was $244,100 in February 2008.  This is a 2.7% drop since February 2007 when the median price was $250,800.  Potential buyers are steering clear of real-estate purchases due to the tighter restrictions of loans and prospect of lower prices in the future.  Not only has the real-estate market taken a hard hit, capital spending have dropped 2.6% and the demand for luxurious goods, such as cars and aircraft fell 1.7%.  However, The National Association of Realtors indicated that existing-home sales increased 3%.  Assuming the economy does not collapse and crumble, these numbers just may bring some long awaited hope to the real-estate market.

In a report issued last week by Standard & Poor, subprime mortgage delinquencies have risen sharply, resulting in an increase of delinquency for mortgage-backed securities.  Delinquencies for subprime mortgages for 2007 have increased 10% and loans for 2006 subprime mortgages have increased 8%.  Loans which are considered seriously delinquent – at least 90 days past due or in foreclosure – have also increased significantly.  Many of these loans are being pooled together into mortgage-backed securities in which the grouped mortgages are then sold to investors.  According to the report, for securities rated by S&P in 2005, 35.6% are considered delinquent – an 8% increase since January.

Bear Stearns executives sold over $20 million of stock in the firm throughout December 2007.  According to Thomson Financial, James Cayne, chairman of Bear Stearns has sold nearly $182.7 million worth of stock since 2000.  $15.4 million of this was sold in December 2007.  In addition, President Alan Schwartz has sold nearly $67.2 million worth of stock since 2000, with $15.4 million in December 2007.  Alan Greenberg, chairman of Bear Stearn’s executive committee sold $8.8 million worth of stock in December and Chief Executive Officer Samuel Molinaro sold almost $2.5 million in the same month.  A total of over $75 million worth of stock was sold by insiders at Bear in the year 2007. However, despite the December selling frenzy, executives at Bear remain major shareholders of the firm.  All together, Bear executives own at least 25% of the firm’s shares with Cayne owning nearly 5% and Schwartz nearly 1% of the firm, according to Thomson data.