The Mess: Ugly Numbers Get Uglier.(Mortgage Scene)

Byline: Paul Muolo

Over the past eight weeks I've been promoting a book I co-authored on the mortgage mess called "Chain of Blame, How Wall Street Caused the Mortgage and Credit Crisis." I've done more than 25 radio and TV interviews during this time and one question I keep getting asked is this: When is the housing bust going to end?

If only I was that smart and knew the answer. It's like getting a copy of tomorrow's paper a day early and buying shares in all the stocks that go up. There is no easy answer because every time we think a bottom has been reached another shoe drops that takes the industry down another step toward the basement (which is filling up with water).

For instance, in early September right after the share prices of Fannie Mae and Freddie Mac recovered somewhat from their ugly multiyear lows (after a few analysts said they had enough capital to last through early 2009), GMAC/Residential Capital LLC lopped off 60% of its production workforce, sending 5,000 mortgage workers toward the unemployment office. (Chances are many of these employees have mortgages - probably with GMAC.)

A few days before GMAC dropped its bomb, it felt like perhaps we had reached a bottom - that maybe the worst was over. The inventory of homes for sale was starting to decline and the rate of home purchases was no longer in a freefall. I thought, maybe we're resting on the basement floor where we'll remain for a few months before light begins to shine through a window.

Then in early September the unemployment rate reached a new multiyear high (6.1%) and the feeling that the flesh-eating zombies had stopped banging on the basement door vanished. Poof. It was "Night of the Living Dead" all over again. As anyone in the mortgage industry knows, unemployment is the straw that stirs the delinquency cocktail. When unemployment rises, so do late payments.

And let's talk about late payments. ...