Well, let’s see. We have Jim Cramer tonight claiming that the bottom of the housing market will occur exactly 309 days from now. CNBC commentators were all over this morning’s Case-Shiller housing data saying that the rate of descent in prices means the bottom is near.

You know what’s coming folks. You know us too well by now We believe the housing market still has a very long way to go before it stabilizes and returns to a profitable business, both for builders and banks.

Let’s do a quick roll back in time. Sub Prime mortgages (those mortgages that were offered to just about anyone, irrespective of whether they could afford the home or not) have imploded, backfired if you will. But, the sub prime mess is not the only factor creating our deteriorating economy. The economy was already in bad shape.  This exacerbated the sub prime implosion, as people were getting caught in rising prices and unable to make their payments. Then it grew upon itself and has become a proverbial ‘china syndrome’. It is spreading from sub prime to all other types of mortgages. Everything from conventional high value loans all the way down to credit cards. There is NO foreseeable bottom in the housing crisis.

Any attempt to artificially create a floor under the housing market to give the illusion of a bottom, will result in many more disasters down the road. We know that banks and mortgage institutions have tightened up their lending standards considerably, cutting off many would-be home buyers from the market. But, wait a minute. Today, we learned that home sales were actually up a little bit. Gee, now what might be causing something like that?

Perhaps the story that CNN ran today might have something to do with it. CNN reports that a newly released report from the Mortgage Asset Research Institute (MARI) reveals that that the number of fraudulent loans issued during the first three months of 2008 skyrocketed 42% compared to the same period in 2007.

So what we now have are desperate buyers unable to obtain financing via traditional methods, because the standards have been raised.  And now these people are being taken advantage of by lenders willing to write more garbage loans that are likely to be the next wave of imploded loans to impact the industry. And it’s not just the home buyers that are desperate to find someone to lend them the money, but the lenders themselves are becoming desperate. With the number of people buying homes at multi- year lows, they are enticing them into “too good to be true” loans just to get some business.

The CNN article goes on to say:

Now, the credit histories of many applicants are not good enough to get approved for mortgages, except through some creativity – or chicanery – by brokers and loan officers.

The most common type of fraud that MARI found pertained to employment history and income. Many applications exaggerated how much borrowers earned and misrepresented their job descriptions.

The biggest increase came from a jump in the number of undisclosed or incorrectly reported debts, liens and judgments.

And it goes on to also say:

Despite these efforts, MARI doesn’t expect things to change any time soon. “Loan application misrepresentation continues to plague the industry,” the group said in a press statement. “Mortgage fraud will not disappear – in fact, it is expected to significantly grow, evolve and penetrate new areas within the industry.”

This does not sound like things are getting better. On the contrary, it leads us to believe that the road to recovery in the housing market is filled with land mines. Each one inflicting more and more damage to the economy and to the housing market. The only recovery for the housing market is when prices continue to decline back to normal mean levels, lenders completely stop all exotic loans, and return to the basic 20% down, 30 year mortgage for borrowers who are worthy. The truth is that many people will not be able to buy homes in the future, if lending standards return to where they should be. But this is the only way that this mess will ever end.

Jim Rogers, one of Wall Streets famous and very profitable investors was recently interviewed by a London newspaper. Mr. Rogers had this to say:

Rogers said the U.S. financial debacle is now so ingrained – and a so-called “Super Crash” so likely – that most Americans alive today won’t be around by the time the last of this credit-market mess is finally cleared away – if it ever is.

The end of this credit crisis “is a long way away,” Rogers said. “In fact, it may not be in our lifetimes.” 

“The next shock is going to be bigger and bigger, still,” Rogers said. “The shocks keep getting bigger because we keep propping things up and bailing everyone out.”

In this case Mr. Rogers, we agree 100% with you. As long as the Government keeps bailing out those who created this mess and as long as people keep trying to “prop” up the markets and/or home prices this mess will NOT end. So to Mr. Cramer and to all of the CNBC commentators today calling “the worst is over”: You may well be in for a “you ain’t seen nothing yet” scenario.

Lehman (LEH) has been the center of attention in the last few weeks with questions swirling around of buyouts, mergers, more losses, the CEO being kicked out. You name it and it has been rumored on Wall Street. The consensus on Wall Street is that Lehman is in trouble, but no one knows how are even how much. Just lots of conjecture on the part of the talking heads.

Today we learned that Lehman wants to create a separate company for the purpose of having that new company buy all of the bad paper off of Lehman’s books.

Ok, let me see if I got this right. You’re the captain of a ship and you realize that you have too much weight and it is sinking the ship. So you decide to launch your life boat and put all of the dead weight into the life boat and send it on its way to survive on its own while the main ship is ’saved’. But the life boat is doomed to sink. When I saw this come over the news I almost blew a gasket. How ridiculous of an idea is this. The company wants to avoid having to report their losses so they create an off shoot company, sell the assets to them (with money they will provide) and putting it on the books of this new separate company and now they don’t have to report the garbage is on their boat any longer.

But what happens to the new company? Well if its a private company, which I suspect it would be, there will be no stock to go down the drain and they only need to worry about finding a sucker… er,  buyer to maybe buy the assets at a slight profit. Good luck at finding someone willing to pay more!

This whole thing, if it plays out and becomes a reality, amounts to nothing more than hiding the bad crap and being able to say they are rid of it. What a joke.

Also in the news today was a story that came over the wires that Citigroup (C) has settled with the California Attorney General on charges that the company had been stealing from their customer’s accounts. Yes, you heard that right. Citigroup was stealing from their customers.

The California Attorney General said

The company knowingly stole from its customers, mostly poor people and the recently deceased, when it designed and implemented the sweeps,” said Brown in a statement.

“When a whistle blower uncovered the scam and brought it to his superiors, they buried the information and continued the illegal practice.”

Citigroup has been ordered by the court to pay $18 Billion in refunds and settlement charges for taking $14 million from their customers’ credit card accounts.

This is not the local gas station skimming credit card numbers. This is one of the nations largest banks in the nation and they have been intentionally stealing from their own customers. What we would like to know is where are the criminal charges? If you walk into a bank a steal $14 million  you will be in jail for a very long time. Where is the jail sentence here? Or for that matter, where are the criminal charges at all? There are none. Citigroup gets to pay the fines and move along as if it never happened. To Citigroup, I have but one thing to say to you:

“You are liars and crooks, your executive board should be in jail”

The American people put their faith and their money into a bank, and that very same bank took advantage of them. I would say much more about how I feel about Citigroup, but being a family site, I must refrain from using such language.