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I just saw this link to some fascinating December real estate sales data for Sacramento County on an excellent housing industry blog www.calculatedrisk.com.

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I applaud the recent announcement by Secretaries Geithner and Donovan expanding the government’s ‘Making Homes Affordable’ Initiative to include the ‘Foreclosure Alternatives’ Program…which was in my mind the #1 missing piece in the Administration’s policies to date…and should vastly increase the ability of Americans in trouble to avoid foreclosure and get back on their feet faster…even they cannot afford to continue to own their home.

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There are a lot of people who have gotten “unlucky” recently, in one way or another, and are finding themselves unable to make payments on their debt because their income and expense equation is no longer what it used to be (i.e., their income is down, or their expenses are up). Of the millions of homeowners currently not making their full monthly mortgage payments, it’s hard to tell which ones were unlucky, who got defrauded or lied to, and who just plain made a stupid (intentional or unintentional) mistake and bought something they couldn’t really afford.

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I had the privilege of participating on an exciting panel on the future of short sales at the REOMAC semi-annual conference in Palm Springs this week. REOMAC is the non-profit trade organization for REO industry participants – realtors, servicers, lenders, asset managers and other service providers –who focus on the (tough) job of helping Banks manage and sell properties they have acquired through the foreclosure process.

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I am pleased to see the Obama administration attempting – much more aggressively than the Bush administration ever did – to help (3-4 million) at-risk homeowners stay in their homes through a variety of loan modification initiatives and incentives which are designed to lower the at-risk homeowners’ payments to levels they can afford to sustain going forward. Creative and aggressive loan modifications are absolutely a critical part of any well designed foreclosure prevention and housing market stabilization program, and the Obama team’s plan included 2 additional elements I liked:

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I believe that in the current housing and economic environment (with declining home values nationwide) it never makes economic sense for a Bank/Servicer to foreclosure on an owner occupied home. In a declining home price environment, a foreclosure is always the least attractive option for a Bank economically, as the time and cost of foreclosure result in lower economic returns compared to other pre-foreclosure options. As a result, I believe we can successfully and rightfully place a temporary nationwide foreclosure moratorium on homes occupied by cooperative owners/borrowers - if we design such a moratorium right and support it with appropriate private sector initiatives.

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Please find below a brief proposal I have put together on the issue of foreclosure prevention and housing market stabilization based on what I and the team at HausAngeles as well as our colleagues, clients and strategic partners are actually seeing (and not seeing) on the ground in Los Angeles/Southern California. I and we do not claim to have all the answers on this “massive issue”. Nor do we claim all of the ideas below are mine or ours (please see footnote 1: acknowledgements). However, refining and executing on some or all of these ideas will be a key focus for me and the team at HausAngeles for the foreseeable future and until the housing market stabilizes. Our primary geographic focus is Los Angeles, but we plan to share learnings and information widely and freely to maximize impact at the ground level.

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There is widespread agreement among key national political, economic and housing stakeholders (the government and regulators, consumers and Banks among others) on the need to help prevent foreclosures, keep as many people as possible in their homes, and “clear the housing market” of troubled assets quickly and fairly. This would help the housing market find a bottom more quickly - which housing market bottom will mark a turning point in our nations’ economic recovery.

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