Charting 2010, Part 3: Fraudclosure, Halted Traffic, An America Divided: A World Stuck In Its Tracks

Tyler Durden's picture

Continuing with the key words to describe 2010's New Normal, promptly after "Jobs" (and the lack thereof) and "Currency" (it is a very fitting metaphor that recently terrorism takes place in the form of weaponized printer cartridges), the 3rd one that should come to mind is "Stuck" - as in the quicksand the economy has found itself, whereby it sinks with every second there is no fiscal and monetary stimulus, and all other primary aspects of the new normal that are going nowhere fast. One of the better illustrations of this newly-found immobility has to do with the Fraudclosure scandal that sizzled in October and November, then fizzled as the banks and the media have done everything in their power to keep it out of sight and out of mind. And Stuck describes far more than just a state of pervasive mortgage insolvency (and bank undercapitalization): it has become a state of mind, whereby the entire nation is seemingly permanently divided on virtually all key issues. We review some of the more salient 'adhesive' trends in the past year.

Probably nowhere is the fraudclosure scandal better encapsulated than in the case study of the Ernie and Teri Hassell. BusinessWeek's Devin Leonard summarizes how their life has recently gotten stuck in fraudclosure limbo hell, and how they are coping:

Ernie and Teri Hassell are currently in a place millions of Americans call home: mortgage hell.

In 1997 the couple used their solid credit rating to buy a house in St. Petersburg, Fla., for approximately $200,000. After Teri became sick with a gland disorder, the couple refinanced twice—once in 2003 and again in 2007—taking on additional debt to pay for her treatment. In 2008, Ernie Hassell, 62, lost his full-time job as a risk-management consultant, and the couple fell behind on mortgage payments. As a result, they tried to sell their home, on which they then owed $537,000. The best offer they got was for $259,000. The deal fell apart, and their lender tried to foreclose.

By that time the Hassells' mortgage was already making the rounds. Their most recent lender, American Brokers Conduit, transferred custody of the loan to Mortgage Electronic Registration Systems, a digital database owned by huge lenders such as Bank of America (BAC). When the Hassells defaulted in 2008, MERS kicked the debt to American Home Mortgage Servicing, a company that specializes in handling subprime mortgages. AHMS filed a foreclosure suit against the Hassells—admitting in court papers that the couple's promissory note had been "lost, stolen, or destroyed."

AHMS now says it has rediscovered the document. A company spokeswoman blames the mishap on AHMS's own financial woes: The firm's parent filed for bankruptcy in 2007. Yet Matthew Weidner, the Hassells' lawyer, is still fighting the claim. "This is a microcosm of the financial crisis," he says. Meanwhile, the Hassells' debt is again on the move. In November, AHMS passed the debt to Residential Credit Solutions, a Texas operation that buys busted home loans. For now, the Hassells aren't budging. "We own this home," Ernie says. "Even if they say we don't."

The chart below shows how one mortgage in a declining price environment may still be feasible, how two HELOC piggbybanks is stupid, and how three is suicide for all involved, and why rising rates, contrary to what Goldman would like the general peasntry to believe, is pure weapons grade semtex for the economy.

But being stuck is far more than just a side effect of pervasive banker fraud. It has become a national state of mind. Americans are terminally divided on issues from security, to the military, to immigration, healthcare, and, of course, the economy itself. The divide and conquer plan is working.

And far from purely philosophical, being stuck was a very physical reality for many: in China, 10 day traffic jams are becoming an accepted part of the new normal. LA drivers rejoice: your horrendous commute times are only 7th in the world in terms of going nowhere fast. Beijing, Mexico City and Johannesburg round out the top three cities for worst commute times.

Stuck will also be a very sad reality for thousands of east coasters trying to depart by airplane over the next 24 hours as most airports in the tristate area are now closed indefinitely. We got an appetizer of how reliant on air traffic the world is earlier, when resurgent Iceland volcano Eyjafjallajökull halted all traffic in and out of Europe for nearly two weeks.

And while discussing the global stickiness in 2010, here are some other adhesive fun facts:

  • U.S. Postal Service volume declined 3.5 percent, to 170.6 billion pieces; operating revenue fell 1.5 percent
  • Average cost of a wedding increased 21.9 percent in the first half of 2010, to $23,867, up from $19,581 in 2009.
  • Sugarless gum sales grew at 3 percent, to $2.3 billion; a slower growth rate compared with recent years.
  • The U.S. Army's decision to use buttons instead of Velcro on uniforms will save the military nearly a buck per outfit.
  • Oreos: The sandwich cookie's 2010 sales reached $290.5 million, an 11 percent gain from 2009 sales.
  • The Band Aid economy: Johnson & Johnson saw sales of wound-care products paradoxically decline by 9 percent in the first nine months of 2010.
  • The average retail price of honey per pound grew this year. In August the price rose to $5.04, a 44 cent year-over-year increase.
  • The tape and Post-It Notes manufacturer (3M) posted a sales increase of 17.4 percent in the first nine months of 2010.
  • Salmonella fears receded and total U.S. sales of peanut butter rose 2.1 percent, to more than $950 million in the first half of 2010.
  • Big Adhesive is up 4 percent in 2010, says market research firm
    IBISWorld. And duct tape—known as Jesus tape in Sweden—has become
    particularly trendy. Avon, Ohio, the self-proclaimed "Duct Tape Capital
    of the World," is the home of Duck Tape. Duck sponsors an annual
    contest in which students make prom attire out of tape. (It also has
    3 million friends on Face­book.) Stuck at Prom rewards kids for their
    creativity with a college scholarship.

    Cash prize awarded to each of the two winners: $3000
    Number of hours spent by winners creating their duct tape outfits, which included hair extensions: 300
    Weight in pounds of this year's winning prom dress: 50
    Number of couples submitting prom duct tape entries in 2010: 240
    Votes cast in this year's contest: 44,000

All in all, look for more stickiness in 2011, as the most important number, the unemployment one, continues to be superglued to 10%.

All charts courtesy of BusinessWeek