The end of May, federal unemployment benefits began to expire leaving 1.2 million jobless Americans cut off.  The House passed a bill providing a six-month extension, but the Senate has not been able to pass such legislation... despite three attempts.  All of the Senate Republicans have blocked the effort. 

This will certainly worsen our already troubled economy as well as pile on to our crippled housing market.  One economist has noted that we may be setting the stage for a Third Depression.  While our Congressman are busy playing politics, Americans are suffering... and it is going to get worse.

We seem to be getting mixed signals from the media about the economy and the housing and mortgage markets. I do not doubt those who say this is the worst economy since the Great Depression.  In response the Government bailed out banks, insurance companies, Fannie Mae and Freddie Mac, and even GM and Chrysler.  But has the billions of dollars in taxpayer money really helped?  Let's take a look...

Have you been wondering what the Treasury Department has been doing with the first $350 billion of the biggest government bailout in the world?  It has been less than three months and the Treasury only has about $15 billion left in the Troubled Asset Relief Program ("TARP").  And, $14 billion of that could find its way to the U.S. automakers soon.  Most likely, they will be asking Congress to release the other half of the TARP funds.

Now its time to ask what the funds are being used for and who is benefiting?  Despite the hundreds of billions of dollars injected into the nations largest lenders, they still aren't lending money. Before Congress authorizes the Treasury to spend another $350 billion, someone needs to start asking the tough questions.  To get a handle on the situation, Congress created the Congressional Oversight Panel ("COP") and it has issued its first report.

An article in Barron's is predicting that title insurance business could be up by as much as 50% in 2009, mainly due to falling interest rates.  That would certainly be very good news for all of us.  However, I am skeptical of the prognostication.  I do not think that falling mortgage rates will do much for our industry, and I do not expect things to get much better until the end of next year.  Maybe I'm a glass-half-empty kind of guy, but, I'd rather not get my hopes up and be pleasantly surprised if I am wrong.  Now let me explain why I think Barron's got this one wrong.

On average, homeowners had 56.3 percent equity in their homes in 2005, according to Demos, a public-interest research group. In 2007, that dropped to 50.4 percent. In 1973, equity averaged 68.3 percent; in the 1950s, it was upwards of 80 percent.

Purchases fell 2.2 percent to an annual rate of 4.89 million, the National Association of Realtors said [on January 24] in Washington. For all of last year, sales of single-family homes declined 13 percent and prices dropped 1.8 percent, the first decrease since records began in 1968 and probably the first since the 1930s, the group said.

"Would-be homeowners are not going to jump into the market to buy new homes no matter how much prices have dropped until they get a solid feeling that prices have bottomed," said Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.

Mr Bernanke is expected to reaffirm the Fed view that the risks are now roughly balanced, implying that rates are no more likely to go down than to go up. However, he will likely also emphasise that the Fed will remain flexible in the face of economic uncertainty. The bank's new policy stance is neutral but it will respond in an activist manner to incoming data.

The meltdown in the US$2-trillion subprime mortgage has led to the bankruptcy of dozens of mortgage firms and is threatening to spill over into the broader economy as more and more homeowners face foreclosure.

The U.S. Center for Responsible Lending recently estimated that 2.2 million subprime home loans made in recent years have -- or soon will -- end in foreclosure.

However, Mr. Tannenbaum [president of NABE and chief economist at La Salle Bank/ABN-AMRO] said he expects the crisis will soon pass, largely because of the strength of the broader economy, the world's largest.

"These concerns appear to be somewhat transitory as the five-year outlook for housing remains positive," he said.

Unusually bad winter weather in February curtailed home shopping, slowing sales that closed in March, which may have been dampened further by a decrease in subprime lending volume, according the the National Association of Realtors.

...

David Lereah, NAR's chief economist, expected the drop. "For the last couple month we've been expecting a weather 'hit' on home sales finalized in March, but looking at overall activity in the first quarter we see that existing home sales averaged 6.41 million - a figure that is moderately higher than the sales pace during the second half of 2006."

...

"It's too early to measure a significant impact from tighter lending standards, which should moderately dampen activity, but we're still looking for existing-home sales to gradually improve during the last half of 2007," Lereah said.