The average time that a home sits on the market when it is for sale is now 11 months.

So what does that mean to you and me? It means nothing. Despite what is said by the professionals, we are still facing the largest portfolio of mortgage resets from right now in May 2008 to September 2008 (Mortgage reset chart).

So what does this really mean? Now we are on to something. Until the underlining mortgage issues are resolved, meaning the homeowners with mortgage resets that become unaffordable, of which only 30% of the affected homeowners are being helped, expect further home depreciation.

CNN.com has stated within the last few weeks that even with all the programs developed by the government, only about 30% of the homeowners can be helped. The reason is obvious. Why does any, for profit banking institution, want to take on the problems of another bank?

And the math is so simple. Add the inflationary pressures of oil, energy and what they mean to consumers discretionary dollars, as well as, the volume of adjustable rate mortgages that are resetting (remember that it takes between 6 months and 12 months to foreclose on a home - every state has their foreclosure laws) and you have a formula saying that we will be having credit and housing deterioration until at least 2010.

It is not just Bank of America that is reeling from subprime problems, the largest banks in the world have posted $290 billion of credit losses, since the beginning of 2007.

The Senate has pieced together a rescue plan for homeowners facing foreclosure, offering states money to help them refinance their subprime mortgage loans. Wyatt Andrews reports.

Subprime Mortgage Defaults Still Rising

The default rate within the subprime mortgage market has jumped 170 basis points to nearly 19.5% in October, according to Friedman Billings Ramsey Investment Management. A weaker job market and declining house prices are the primary causes of rapid credit deterioration in credit performance - not resets.

The default rate on nonagency securitized subprime mortgages jumped from 17.7% in September to 19.4% in October.

The default rate on Alt A Mortgage Market jumped 75 bps to 5.4% in October. “These substantial changes in a single month suggest that labor market conditions are worsening broadly across the United States,” FBRIM managing director Michael Youngblood says in the report.

“Indeed, we continue to believe that these conditions are characteristic of a recession in economic activity.” The managing director of fixed income research noted that subprime mortgage resets of adjustable rate mortgage were not responsible for the October jump in default rates. However, the upward adjustment of mortgage rates “may drive the default of hybrid ARMs higher in the year ahead,” he said.

The report also shows that 8% of subprime mortgages and 2.5% of alt-A mortgages are in foreclosure.

The default rate includes loans that are 90 days or more past due, in foreclosure, or real estate owned.

Bush Praises Subprime Mortgage Strategy

President Bush says it is “going to take a while to work through this mortgage bubble,” but that his administration does have a strategy for helping subprime borrowers refinance or restructure their mortgages.

Bush said in a speech on the economy that the Treasury Department has worked with mortgage servicers so borrowers don’t “get pinched as their interest rates reset”. He also noted that the Federal Housing Administration is helping to refinance subprime borrowers and could do more if Congress passes an FHA modernization bill. (The Senate just passed such a bill, which now has to be reconciled with the House version).

Former Federal Reserve Board Chairman Alan Greenspan has suggested that the federal government could provide cash assistance for distressed homeowners who can’t afford their mortgage payments.

Mr. Bush stressed in his speech that he is against bailouts for lenders, speculators, and people who bought a house they couldn’t afford. “But we can mitigate some of the issues, and I’m concerned about people who are credit worthy enough to live in their homes not being able to deal with these resets,” he said.

“As Director of OFHEO, the regulator of Fannie Mae and Freddie Mac, I believe that the foreclosure prevention initiative announced by President Bush is a major step forward. I thank Secretary Paulson and Jackson and everybody from the private-sector involved. Fannie and Freddie are the largest investors in AAA subprime mortgage backed securities. They hold $160 billion of these securities and they are the major buyers of the refinanced [tag-cat]subprime mortgage[tag-cat]s. This plan is a win-win for homeowners, neighborhoods, investors and the markets.

But more has to be done. Fannie Mae and Freddie Mac have played an extremely important role in supporting the mortgage market as all the problems erupted this summer. Since then, they have been buying and securitizing almost $100 billion a month in mortgages. Their market share of all new mortgages has grown from 38 percent last year to over 60 percent.

We need to make sure that they will continue supporting the mortgage markets. That is why we need now, as President Bush and the Secretaries have just said, GSE reform to strengthen the regulator of Fannie Mae, Freddie Mac and the Federal Home Loan Banks. For the last six years Congress has been considering GSE reform legislation. Given the problems faced by Fannie Mae and Freddie Mac and the current market conditions, it is time to act to ensure that they will be here to support the mortgage market, especially affordable mortgages for lower income families, now and in the future.”

Mortgage Reset Plan To Be Unveiled Later Today

Hoping to prevent a tidal wave of residential foreclosures, the White House will unveil its mortgage rate “reset” plan Thursday afternoon, according to industry officials.

Details were sketchy at deadline time, with two major issues still undecided: whether subprime ARM rates would be frozen for three years or five, and what specific criteria would be used to determine which home owners are eligible for a rate freeze.

Commenting on some of the proposals being bandied about, one investment banker said: “How do you freeze the subprime rate and tell the conventional guy who has been paying steadily that he doesn’t get a rate freeze?”

Many opponents to the Teaser Rate Freeze

Some of the biggest opponents to the teaser rate freeze are home owners and potential home owners. The Bush administration’s plan to give subprime borrowers a break on their mortgages is already catching flak from an unexpected source: other homeowners.

Treasury Secretary Henry Paulson, at a housing conference yesterday, said he is “aggressively pursuing” an agreement with lenders and investor groups to freeze rates on subprime adjustable rate mortgages at their original levels.

The proposal, aimed at helping homeowners who would fall behind in their payments at higher rates, is designed to prevent a surge in foreclosures next year. About 1.5 million subprime adjustable rate mortgages are scheduled to reset to higher rates in 2008.

As outlines of the plan become known, some homeowners are complaining that the effort isn’t fair to borrowers who didn’t overextend themselves. Others argue that the government shouldn’t be involved in perpetuating a mortgage bubble that needs to deflate.

A key question: How far should you go to help borrowers who can’t pay their bills?

“People have to be responsible for their own actions,” says Harry Lancz, a small business owner in Traverse City, Michigan. He holds a pair of fixed rate mortgages, one for his primary residence, which has been for sale for six months and one for a second home in Louisiana. “What are you going to do when their credit cards get due and they can’t pay? Are you going to bail them out on that, too?”

Good point Harry!