By Dan Ferris in the S&A Digest:

In addition to FHA loans, people are buying houses because of the $8,000 first-time homebuyer tax credit and mortgage rates just above 5% – which are artificially depressed because the government pledged to buy $1.45 trillion in mortgage-backed securities and $300 billion in Treasuries.

Kenneth Rosen, who chairs the Fisher Center for Real Estate and Urban Economics at UC Berkeley, argues the government stimuli are just pulling demand forward... "All [the tax credit] does is move demand forward in time." Rosen says the housing stabilization we've seen in the past six months could "easily" disappear.

Rosen is right. The "Home Affordable Modification Program" (HAMP) has pushed foreclosures farther out in the future. That'll mean more of them rather than less – exactly the opposite of HAMP's intent, and exactly the kind of perverted unforeseen outcome you get when the government interferes.

According to housing and mortgage researcher Mark Hanson, the number of homes in the foreclosure pipeline has never been greater. Hanson has been expecting a wave of foreclosures. Now, he's calling it a tsunami. Just like with a real tsunami, the ocean is swelling as HAMP acts as a foreclosure moratorium.

HAMP was first announced in February and finally rolled out in August. Mortgage servicers pushed back foreclosures while they retooled for the program. Re-default rates for modified loans are as high as 70% in some areas.

Crux note: Dan Ferris is the editor of Extreme Value... and he's currently recommending one of the safest and most lucrative investments you can make in the gold industry—yet it has nothing to do with mining stocks... or gold mutual funds... or gold bullion. Learn more about Extreme Value here...

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