The downward spiral that has sent this nation’s real estate market reeling out of control is far from over yet. For all the election year rhetoric flying around these days about the general state of the national economy, although the situation is not all doom and gloom, the news does not look as good as the politicians would like you to believe…for right now at least.

Being realistic for the moment, for those of you who like to follow market trends, how about these:

• Home prices in 17 out of 20 MSAs posted record low declines in February
• The number of vacant homes in this country have hit a record high
• Consumer confidence fell sharply in March
• Home sales volume in the largest real estate market in the country was down significantly for March

And it’s only Tuesday!

Check out the reports for yourself (see the links above). No matter what you want to call it — a housing slump, a housing sector contraction (thank you Federal Reserve), a mortgage meltdown, etc., one thing is evident…after years of an absurd overheating of market activity we are now in the midst of one heck of a market correction!

It took six years this time for the bubble to burst (although many industry analysts denied it would ever happen). So don’t be surprised now if it takes at least that long to work its way through the cycle no matter what you call it.

The downside of the business cycle is not over yet. And until it recovers, these latest reports are clear evidence that foreclosures are not going anywhere anytime soon.

This is the greatest window of opportunity in a decade for wishful homebuyers and savvy real estate investors to get into the marketplace on a national scale and pick up some good opportunities on the bargain side of the price list.

It’s not over yet, so go for it!

While foreclosure activity in the first quarter of 2008 was up on a year-over-year basis in 90 percent of the nation's 100 largest metropolitan areas, according to the RealtyTrac Q1 report issued today, there were a few notable exceptions that could prove to be a harbinger of hope for the nation's battered housing market. On the other hand, those exceptions could just turn out to be a source of false hope, perpetuated in part by short-term foreclosure solutions that are about as effective as a five-gallon bailing bucket on the sinking Titanic.

The notable exceptions included Detroit — a longtime posterchild for the foreclosure meltdown — and Philadelphia, along with a few other Pennsylvania metro areas. Foreclosure activity in Detroit was down nearly 4 percent from the first quarter of 2007, although the city's foreclosure rate still ranked No. 6 among the nation's 100 largest metropolitan areas. Philadelphia's foreclosure rate ranked No. 82, thanks in part to a 30 percent year-over-year decrease in foreclosure activity.

Dispatches from Detroit indicate that free-market forces may be the catalyst. The Detroit Free Press reported that "Detroit home sales shot up 30.8% in March, spurred by investors taking advantage of low prices on foreclosed properties." Detroit home prices have hit a low enough threshold to become appealing to bargain buyers and investors. That in turn allows lenders to start unloading foreclosure inventory, easing a heavy burden that has been weighing down the city's housing market.

Different forces may be at work in Philadelphia, helping that city's foreclosure rate remain relatively low. A moratorium on all foreclosure sales scheduled in April there has now been replaced by a pilot program that delays foreclosure proceedings on owner-occupied properties until the homeowner and lender meet in a "conciliation conference," according to the Philadelphia Business Journal. Foreclosure sales originally scheduled for April and May will be postponed until at least July.

Meanwhile, foreclosure activity continues to increase at a torrid pace in many of the now-familiar foreclosure hot spots: up 291 percent annually in Stockton, Calif., which posted the highest foreclosure rate among the 100 largest metro areas; up 134 percent in Las Vegas, No. 3 on the list; up 294 percent in Phoenix; and up 249 percent in Orlando.

View full Q1 2008 foreclosure report.

The only kind of whopper a person with this kind of ‘BK’ is going to get is a whopper of a headache. In this, the legal sense for the abbreviation, we’re talking about BANKRUPTCY. And for struggling homeowners it often represents what they think is the last stand they can take before losing their home to foreclosure.

And the scary part is, bankruptcies seem to be back in vogue.

Back in the early 1990s, in addition to double-digit interest rates, high unemployment and a flood of foreclosures on the market, another telltale sign that we were in a recession was an abundance of personal bankruptcies — especially Chapter 7 which wiped out all of a debtor’s unsecured debt.

The federal government clamped down on that “loophole” with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. According to published reports, more than 2 million Chapter 7 bankruptcies were filed that year (an all-time high) right before the new bankruptcy law went into effect.

Well, the American Bankruptcy Institute just released its numbers for calendar year 2007 and consumer bankruptcies were up 37.6 percent over 2006 to 822,590 filings (60.9 percent of those being Chapter 7 filings and 39.1 percent being Chapter 13 filings to come up with a supervised repayment plan).

“The latest figures ratify trends that began last year, depicting households under growing stress from heavy consumer debts, now in homes they can’t afford and can’t sell,” said ABI Executive Director Samuel J. Gerdano, who expects consumer bankruptcies for 2008 to top 1 million, according to a Reuters report.

As Bloomberg.com recently reported, the likelihood of Gerdano’s prediction coming to fruition is more than a possibility given that more than 90,000 bankruptcy filings were reported for March 2008 alone, a 30 percent increase from a year ago.

Of ABI’s top 10 states with the highest per capita filing rate for 2007, four of them — Georgia, Michigan, Ohio and Nevada — were also some of RealtyTrac’s top 10 foreclosure states for much of the year.

In the meantime, executive search firm A.E. Feldman reported that law firms have already started gearing up their staffs to handle the anticipated increase in bankruptcy workload.

What all this does is add more fuel to the recessionary fire just like back in the 1990s. What consumers/distressed homeowners need to understand is that bankruptcy does not STOP a foreclosure proceeding, but merely delays it. Once the foreclosing lender gets clearance from the bankruptcy judge on the case by dismissing the stay on the foreclosure, the lender can proceed with the process.
 
In the end, more bankruptcy filings may translate into more short sales down the road, or possibly more people simply walking away from their homes — with or without a deed  in lieu of foreclosure — in essence handing the keys back over to the lender.

Whether the net result is a short sale, a walk away or going through the whole foreclosure process, it seems like the foreclosure fires are likely to be fanned still higher, with more properties being available for home buyers and investors looking to find a bargain in many parts of the country for the foreseeable future.

At present it does not appear that there is enough evidence yet to declare that a market comeback is in the offing. The bottom line is that no one can say anything with 100 percent certainty given the current state of our national economy.

Even the National Association of Realtors, which has come out with its latest report documenting a two percent decline in existing home sales for March 2008, down 19.3 percent from March 2007, can’t be certain. Although industry analysts were anticipating this monthly decline, according to Mortgage News Daily.

The NAR tried to be positive about the nation’s situation earlier this month in stating that, “Existing home sales could start to show a sustained increase within the next few months.” But, obviously, it’s too soon to make such a bold statement.

The median home price nationally also declined for the month, down 7.7 percent from $217,400 in March 2007 to $200,700 last month. Home inventory continues to be a huge problem for the Realtors, currently up to a 9.9 month supply (that’s up from a 9.6 month supply in February).

While everyone is worrying what the Federal Reserve is going to do next to try and stabilize the economy and keep it from falling deeper into recession, a slight bit of good news also came out this week with the announcement that home prices rose 0.6 percent in February.

According to the official statement of the Office of Federal Housing Enterprise Oversight (OFHEO), a monthly increase in prices was reported between January and February 2008 for seven out of the nine census divisions tracked by the agency. Only the Mountain and South Atlantic regions documented price depreciation for the period, while the Pacific, West North Central, West South Central, East North Central, East South Central, New England and Middle Atlantic regions all reported an upswing in prices.

Still, prices nationally are down 2.4 percent on a yearly basis from February 2008, and down 3.1 percent from their peak back in April 2007.

Given the overall mood of the nation at this time, and the lack of consumer confidence reported by many analysts, investors and prospective home buyers don’t need to worry about a market comeback anytime soon. There will be plenty of time and a large selection of properties to choose from when deciding which ones are in the right locations for them and at the best bargain prices.

In desperate times people resort to desperate measures. Facing foreclosure, some homeowners are setting fire to their homes for the insurance money. But they usually end up with a criminal conviction instead of cash.

Consider the following:

In South Carolina, a homeowner was charged with burning her home on the eve of foreclosure.

In Massachusetts, there’s a growing concern that foreclosure arson is becoming a problem around the state as more and more properties are abandoned.

In Colorado, a homeowner was convicted for setting his home on fire to prevent the lender from repossessing the property.

“We’ve seen a dramatic increase in this kind of fraud,” Dan Bales, the head of fraud investigations at Mercury Insurance, told the Los Angeles Times. “People upside-down on their house with variable-interest-rate loans, or upside-down on their cars, are pretty quick to burn their property right now.”

Foreclosure arson has doubled in California from 7 homes last year to 14 homes so far in 2008, according to insurance officials. These crimes are expected to rise as the economy continues to worsen.

Even after being convicted of the crime, the homeowner still has to pay off the lender — and the damage doesn’t end there. Neighbors are getting burned too, when higher premiums are passed on to them by insurance companies.

What are your thoughts on this hot topic? ForeclosurePulse wants to know.

In a statement delivered before the Committee on Financial Services of the U.S. House of Representatives earlier this week, John M. Reich, Director of the Office of Thrift Supervision (OTS), offered an alternative foreclosure prevention plan to the one under consideration from the Federal Housing Administration (FHA).

Representing the interests of the 826 thrift institutions under his agency’s supervision, Reich began by explaining to committee members just how much of a stake the thrift industry has in loan originations in this country and how much the subprime meltdown has impacted its members’ businesses.

Having such a vested interest in how many borrowers will continue to go into foreclosure as more and more subprime loans reset to higher interest rates in the immediate future (the OTS report estimates that 1.3 million American families with 2/28 and 3/27 mortgages are scheduled to reset by the end of 2008), Reich relied on a number of sources to support his point, including foreclosure numbers from RealtyTrac.

Reich used these figures to back up his claim that more than one foreclosure prevention plan is needed in order to assure lenders they will receive as much of their money back as possible given the current state of the nation’s economy.

“We continue to stress that prudent workout arrangements conducted in accordance with safe and sound lending practices, are generally in the long-term best interest of both borrowers and lending institutions,” Reich said in his report.

Unlike workout arrangements, loan modifications — by contrast — are not working as well as originally anticipated. Reich pointed to the FHASecure program as an example, where 116,000 loans have closed since the program was launched in September 2007, but only 1,500 of them were made to refinance delinquent conventional loans.

Now with the new OTS plan, there are at least two options on the table to be considered. Although there are some similarities between the two plans, there are enough differences when it comes to the eventual outcome for lenders.

Under the FHA Housing Stabilization and Homeownership Retention Act of 2008 (the HSHR Act), the FHA proposes to guarantee up to $300 billion in new mortgages to refinance existing eligible mortgages originated between January 1, 2005 and July 1, 2007, the report notes. Loan-to-value ratio cannot exceed 90 percent of the current fair market value of the property, and FHA is requiring a 5 percent fee payable to it at the time of origination, PLUS an exit premium payable at the time the property is either sold or refinanced.

By contrast, the OTS Foreclosure Prevention Proposal does ask for FHA guaranteed loans for distressed borrowers in owner-occupied homes. Basing the loan on the current fair market value of the property is the same as well. Using the proceeds of the new FHA loan for existing loan holders via a short sale or a partial payment to pay off the existing mortgage is likewise similar.

However the way the two plans go about paying off the existing loan is where the similarities end.

The intent of their plan, the OTS says, is to “provide a negative equity position to the original loan holders in an amount equal to what they are giving up by taking the partial pay-off or short sale from the proceeds of the new FHA-guaranteed loan.”

In essence, the OTS believes that the FHA backed plan allows for the possibility of a windfall to the borrower down the road, by enabling him to recoup the entire gain on the sale of the property after five years.

Under the OTS plan, however, there is no time limit on when the original loan holder can recover the amount of the initial shortfall. Basically, the OTS feels it is a proper incentive for borrowers to show responsibility and accountability for their financial affairs by allowing them to keep any proceeds in excess of the amount due the original loan holder upon the eventual sale of the property.

In either instance, borrowers who fell victim to the excesses brought on by the lending industry would have a viable option to get out from under a potential foreclosure and stay in their home, so long as they can continue to make timely mortgage payments.

The bottom line is: since neither of these plans has received outright approval by the federal government yet, the steady stream of foreclosures addressed by the OTS statement will continue forthright until such time as the problem works its way through the system — either bureaucratic or economic.

In the meantime, investors and potential home buyers have plenty of time to sort through an abundance of bargain properties nationwide that can satisfy their investment or personal lifestyle criteria.

If the results of the latest Associated Press-AOL Money & Finance poll are any indication, prospective home buyers will be keeping their wallets closed and remain on the fence at least until the latest economic downturn blows over. And that could be years down the road.

A majority of those polled for the survey expressed pessimism over the nation’s housing contraction (as the Federal Reserve calls it) enough to not consider buying a home anytime soon.

Other survey results included:

• A quarter of the 769 homeowners included in the random sample of 1,002 adults surveyed nationwide were worried that their homes may continue to lose value over the next two years.
• One in seven mortgage holders were also concerned about their ability to make timely mortgage payments over the next six months.

Conducted between March 24 and April 3, 2008, by Abt SRBI Inc., the survey’s sample was selected from all states except Alaska and Hawaii. Interviews were done in both English and Spanish, with adjustments made to ensure responses accurately reflected the population’s makeup by such factors as age, race, education and region.

If the results of this latest survey are at all a true representation of current public opinion, the repercussions are obvious. For one, existing home sales — which went up in February — may be nothing more than a momentary blip on the radar screen. The idea that home prices may indeed have much further to fall before finally recovering next year or even in 2010 has people nervous and unprepared for what the future might hold.

And most importantly, the steady stream of foreclosures will continue for the foreseeable future, presenting plenty of opportunity for investors to get involved, helping to alleviate the fears of distressed homeowners facing uncertain financial consequences and almost certain foreclosure.

For the third month in a row U.S. foreclosure activity registered at more than 50 percent above the level it was at a year ago, according to the March RealtyTrac U.S. Foreclosure Market Report. And for the second month in a row, the number of bank repossessions, or REOs, was up more than 100 percent year over year.

The implication: while significantly more homeowners are falling into foreclosure, there is an even bigger increase in the number of homeowners already in the process who are losing their homes to foreclosure — whether through the typical foreclosure sale mechanism or whether by pre-empting the public foreclosure sale through what is called a deed in lieu of foreclosure.

In the latter case, the homeowner offers to convey ownership of the property to the foreclosing lender. The lender also has to agree to the DIL arrangement, which may involve clearing out other liens secured by the property. But that may be better than the alternative — a costly and lengthy process that will quite likely end with the bank repossessing the property anyway.

The year-over-year increase in bank repossessions was even more dramatic in some states: 619 percent in Arizona; 597 percent in New York; 557 percent in California; and 464 percent in Florida.

View full March report.

Anyone who has checked out this blog on a regular basis should be familiar with the national heat map RealtyTrac produces every month that correlates with the release of its national data for the month.

Now, a recently developed partnership has gained some national attention from the media, taking the heat map phenomenon to a whole other level.

The story that ran last Friday in the Wall Street Journal’s “Developments” blog featured these new multi-colored foreclosure heat maps developed under a partnership agreement between RealtyTrac and HotPads.com.

HotPads has taken RealtyTrac foreclosure data and used it to produce interactive heat maps that allow viewers to zoom in from a view of the whole nation, to a particular state and even drill down to a specific property.

The color-coded maps provide enough detail to show even slight variations in foreclosure activity within a distinct section of a state. Such detail can be of great assistance to real estate investors and prospective homebuyers looking to pinpoint various levels of foreclosure activity in a particular geographic area of interest when seeking out pockets of potential bargain properties.

It’s another worthwhile tool in the arsenal of anyone who takes doing their homework seriously before investing in any property.

It doesn’t take a mental giant to do the new math of the foreclosure crisis. As a matter of fact, it’s as easy as two plus two.

Here’s all you have to factor into the equation in order to successfully perform the new math:

1) There are many areas around the country where foreclosures are abundant. Pick your favorite.
2) Commodities prices are soaring — especially for metals like copper, bronze, platinum and aluminum.

Add the two together and what do you get? A steal!

In this case literally. Stories are starting to appear from all over the country, particularly from areas where foreclosure saturation is pretty heavy, about metal scrappers breaking into vacant foreclosures and ripping out copper plumbing, stealing kitchen stoves, and anything else metallic they think they can take and sell for a profit.

The problem is so rampant in areas like San Bernardino County, Calif., and Cleveland, Ohio, that homebuilders are putting out signs stating that the homes are built with PVC plumbing and no copper in order to dissuade the thieves.

Public officials have taken notice as well and are proposing legislation to deal with the situation, including holding lending institutions financially responsible for the upkeep of their REO properties until such time as they sell. Some places have even proposed that the lenders pay a registration fee for every foreclosed property when it comes back to the bank.

In any case, foreclosures have obviously spurned a cottage industry of the sort that public officials fear will further bring down local property values. In the process, the thieves have turned off prospective homebuyers and lenders from dealing with properties in those neighborhoods.

And this is a trend that is not good for real estate investors and would-be homebuyers looking for bargain properties to purchase. It just doesn’t add up to their advantage.

Two reports came out Tuesday that are prime examples of conflicting opinions and the confusion they can cause the average consumer or investor when it comes to assessing the state of the economy.

One report, the IBD/TIPP economic optimism index (published by Investor’s Business Daily and TechnoMetrica Market Intelligence), dropped to 39.2 in April, the largest drop in consumer confidence measured by the index since it first started keeping track back in February 2001.

The other report, released by the National Association of Realtors, reported that pending sales of existing homes were down 1.9 percent in February, a much larger drop than expected, to the lowest level the index has reported since NAR began keeping track in 2001, according to published reports.

Yet, in the NAR announcement, chief economist Lawrence Yun states his belief that existing home sales will see little change over the next few months before making a notable improvement during the second half of 2008.

“The slip in pending home sales implies we’re not out of the woods yet, though an era of successive deep sales declines appears to be over,” Yun said. “Existing home sales could start to show a sustained increase within a few months, unless there are some additional economic problems or excessive inflationary pressure.”

The problem with all this, from the standpoint of an investor or prospective homebuyer, is that pending home sales, by definition, are not closed sales. They are pending and may yet fall out of escrow. In the present economy, that is a likely possibility that must be considered.

Plus, how many of those pending sales might be short sales trying to avoid foreclosure? Given the time it takes to get a bank to accept a short sale arrangement, and the extended time on the market, plus larger inventories of unsold housing (and let’s not forget about the glut of new housing out there and available as well), what are the chances that ALL these sales are going to go through?

The answer is…who knows? With consumer confidence in the economy waning, plus recent reports about higher unemployment nationwide and the expectation that home prices have not hit bottom yet, these sales may be pending for a long time.

It’s no wonder that many investors these days are holding their tongues and keeping their wallets closed.

It was bound to happen. With government officials at the local, state and federal levels clamoring to clamp down on the nation’s financial institutions and other loan originators, plus the recent bailout of Bear Stearns by the Federal Reserve after the Wall Street giant became so heavily invested in subprime backed mortgage securities, it was just a matter of time before the Federal National Mortgage Association (better known as Fannie Mae) did something to tighten the reins as well.

Well, this past Monday it finally did. As one of the two main Government Sponsored Enterprises (GSEs) in this country — the other is Freddie Mac — Fannie announced new guidelines that will effect the loans it buys from lenders all over the country, securitizes and then sells to Wall Street investors. In the process, these latest changes will affect potential homebuyers nationwide, but especially any homebuyer who has suffered a foreclosure in the recent past.

“The dramatic shifts in market dynamics over the past several months have prompted us to continually review the full spectrum of our risk appetite, eligibility requirements, automated underwriting risk assessment, and pricing. It is important that we have underwriting and eligibility criteria that foster sustainable homeownership for the borrower,” Fannie said in an official release Monday.

So it looks like Fannie is finally tired of shouldering the burden themselves. They’ve been pretty big shoulders until now. And one of the most dramatic changes that will relieve some the tension in those big shoulders has to do with former homeowners who lost their homes to foreclosure.

Effective June 1, 2008, Fannie will require a potential borrower’s credit history to be free from any foreclosure activity for five years before it will consider buying a mortgage taken out by that borrower. Prior to this announcement Fannie required only four years to elapse before it considered a borrower’s credit history to be re-established.

The time period is shorter for borrowers who can document that extenuating circumstances resulted in the foreclosure action in question. Still, even that period is being extended from two years to three years under the new guidelines.

Elapsed time, in this situation, is measured by Fannie as the time between the application date for the new mortgage and the completion date of the foreclosure action as documented on the borrower’s credit report.

What happens after the five years are up is different as well. Now to obtain a new mortgage on a principal residence requires a minimum 10 percent down plus a minimum credit score of 680.

That’s right. A minimum credit score! Until now Fannie hasn’t required credit scores in its analysis of creditworthiness. With the new guidelines, however, for the first time ever Fannie is requiring credit scores for any and all mortgage loans delivered to it by lenders.

Even in standard situations, without a foreclosure to consider in the mix, the minimum credit score required is now 580. There are only three exceptions to this requirement:

• Manually underwritten loans with non-traditional credit
• Loans originated in limited cash-out situations, or
• Loans insured by an agency of the federal government such as HUD, FHA or VA

Although it does not appear that these new standards will apply to investors, they will make it harder for low-income and first-time homebuyers looking for a principal residence to purchase a home, especially it they’ve had problems with foreclosure in years past.

For real estate professionals, these new guidelines will most likely make it harder for their clients to obtain financing for that bargain property they’re looking to purchase, whether a property in foreclosure, a bank-owned property or even a conventional listing selling at a reduced price.

Gentle Ben Bernanke has been careful not to ruffle any feathers on Capitol Hill since assuming his role as the chief caretaker of the U.S. economy.

But during his first day of testimony before Sen. Charles Schumer’s Joint Economic Committee this week, Bernanke reportedly admitted that the nation may actually be headed toward a recession. Oh no! He finally used the “R” word. What a surprise.

Many economists who were once naysayers — like Bernanke — are finally owning up to the fact that they may have been wrong, and that a recession is already here. Gentle Ben has been taking his sweet time about it, but it seems like he’s thinking about joining the chorus.

Our present situation is starting to look more and more like the recession of the early 1990s, but for the high interest rates. The foreclosure spigot is wide open as it was back then, with no end in sight of the flow drying up anytime soon.

Job losses, which were a big part of the problem back then as well, are starting to gain momentum.

Friday, the U.S. Labor Department announced the loss of 80,000 jobs in March 2008, taking the nation’s unemployment rate from 4.8 percent up to 5.1 percent. That makes for three straight monthly losses and a total loss of 232,000 jobs for the first quarter of the year. These statistics come at the end of a week that saw two airlines — Aloha Airlines and ATA Airlines — turn off the lights, close their doors and layoff employees while filing for bankruptcy protection.

Plus, let’s not forget that the U.S. dollar is a joke compared to international currencies these days and inflation is raising its ugly head again (lest we forget about rising food prices and energy costs).

All that seems right with the world this time around is that we don’t have double-digit interest rates like back in the 1990s. Gentle Ben was hoping that lowering interest rates would make for a soft and “gentle” landing — which it hasn’t.

Frankly, it you add all this together, you can see why investors from around the world (I’ve heard especially that Canadian investors are showing increased interest in U.S. real estate holdings) are looking to our shores for great deals. Their dollars go a lot further these days in purchasing U.S. commodities — like our real estate.

Still, for investors and potential homebuyers watching this happen from the grandstands, all these factors seem to be saying that the stream of foreclosures is not going to stop flowing anytime soon. At least not in 2008.

Although home sales are starting to see some recovery, most experts are predicting that home prices have a while to go before they hit rock bottom. But since you can’t really time the bottom, now may be a good time to take the plunge and start looking for those good bargains that foreclosure properties can offer.

After all, by the time you do your research, find the property that’s right for you, and actually close escrow, who knows? The market may have hit bottom, be set for recovery and your investment may start paying off sooner than you think. Buy and hold. That’s the strategy that will work best for most investors and homebuyers while Gentle Ben and his comrades work out the economic details.

He gave himself a couple of weeks to clean out his desk, clear out of his office and say his final goodbyes to his staff. After that, Alphonso Jackson will probably be looking for something a little less in the public eye…at least for a while.

Jackson gave notice on Monday of his intention to step down as secretary of the U.S. Department of Housing and Urban Development. The official press conference came in the afternoon. However, like on so many occasions the press got wind of the announcement before it happened and started writing about it ahead of time.

For President Bush this is a pretty significant blow, since Jackson was helping to spearhead the Administration’s efforts to increase homeownership nationwide, as well as dealing with the mortgage crisis which has befallen this country.

The official release put out by HUD Monday addresses all of the positive accomplishments and impact Jackson has made while in office. One of the biggest projects Jackson was working on with HUD was the modernization of the Federal Housing Administration (FHA), an agency that insures home loans for approved lenders against borrower default.

This project allows for a greater number of mortgages at higher loan limits to be sold on the secondary market, providing FHA insured loans to potential home buyers in more costly areas of the country. This will be a good thing in places like Southern California, for example.

The crux of the media stories, on the other hand, go to how some Democrats on Capitol Hill have strived to push Jackson out of office amid allegations of criminal behavior through political favoritism toward his friends in awarding HUD contracts.

Jackson has also been chastised for public comments he has made that have infuriated members of Congress up on the Hill.

The 13th HUD secretary since the agency was established in 1965, Jackson announced his official last day on the job as April 18. No potential replacement has been announced as of yet. HUD oversees a $35 billion annual budget and employs 9,200 workers.

But despite Jackson’s best intentions, and all of his hard work to promote homeownership, the bottom line is that given the present economic environment, many homes that were insured against foreclosure by the FHA are now sitting in HUD’s portfolio. These “HUD homes,” like any homes that go back to a lender who forecloses, are a good potential pool of resources for investors and wannabe homebuyers looking to purchase bargain real estate.

The Wall Street Journal is reporting that more and more homeowners forced out of their homes by foreclosure are turning to vandalism to lash out in some tangible way in a situation where they feel powerless. Las Vegas is used as a backdrop for the story, not surprising given that the foreclosure rate in Las Vegas consistently ranks among the top 10 metro foreclosure rates, according to RealtyTrac.

The article claims that "real estate agents estimate that about half of foreclosed properties to be sold by mortgage companies nationwide have 'substantial' damage, according to a new survey by Campbell Communications, a marketing and research firm based in Washington, D.C." And there are some real horror stories described by agents cited in the article: ferret droppings along the baseboards, walls pocked with holes, appliances and light fixtures ripped out, a trail of motor oil dripped on all the carpets throughout a house.

But it seems there is a certain urban-legend element to these stories as well. One agent quoted in the video that accompanies the article says that he's even heard of homeowners pouring cement down the toilet. That seems to be the most common story used when people talk about foreclosure vandalism, although I've yet to hear one concrete (pun intended) example of this happening in real life. But even if it isn't true, the lesson taught by these types of urban legends is still very important for foreclosure buyers and investors: when you buy a foreclosure property without being able to conduct a full inspection first, make the assumption that the property is substantially vandalized and calculate rehab costs into your offer.

And if you happen to have any cement-pouring stories, or any other horror story of vandalized foreclosure property, please share it here. With apologies to Prison Mike from "The Office," we want to scare rookie foreclosure buyers and investors straight.