With the US government now having taken over the functions of such pristine subprime lenders as New Century, with the provision that it not only is not checking borrowers' credit scores, income potential, or other "facts" that the mortgage lenders at least pretended to care about, but also giving away massive incentives to promote housing bubble V2, it was only a matter of time before the taxpayer's balance sheet would start looking like an Angelo Mozilo wet dream. Today, Freddie Mac released its September Monthly Volume Summary and, as expected, it is beginning to look just like the subprime debacle is among us, only this time all of America is on the hook thanks to a brilliant Fed and the even more brilliant geniuses in D.C.
In September, Freddie Mac's loan defaults set an annualized record, after hitting a stunning 7.3%. Even worse, the rate of decline among single-family loans increased substantially month over month, from 3.13% in August to 3.33% in September, (and 1.22% in the prior year, just after the GSE's ended up being nationalized: a 270% increase YoY). The rate of defaults has now climbed for 28 straight months.
Scariest is that even as the Fed itself is now a key mortgage lender thanks to $1.45 trillion in QE, Freddie's holdings actually expanded by $4.8 billion to $784.2 billion in September, after four months of declines.
Without the bankrupt GSEs and the increasingly more bankrupt Federal Reserve (which, yes, does have a few Heidelbergs stashed away in the basement so it can delay the day of reckoning for a few years), there would be absolutely no interest for anything even closely related to housing. So this is what a housing recovery is supposed to look like...