Foreclosures have doubled over last year, according to a new industry report. Coupled with the exit, demise or sale of more than 120 mortgage banking divisions and stand-alone mortgage firms, the outlook for real estate is grim. It no longer matters whether the Fed pours more money into a system choking on easy money already spent, or dries up the well, because real estate sales will suffer either way.

Fewer providers means that the pipeline is narrower, which means only people with the best credit and highest scores will be able to get loans. It also means only the best-funded firms can make those loans.

That's why big banks will sweep in and be the heroes of this subprime/foreclosure mess, as soon as they figure out how to get the feds to insure higher dollar amounts in conforming loans as well as more alternative loan products to conforming loans.

We'll see the return of Alt-A loans and higher-priced subprime loans, but they'll have new names that won't remind Wall Street and Main Street of the ugly recent past.

No documentation loans will become Trust Signer loans. Subprime loans will become Replay Loans, and zero-down loans will become Equity-waived Loans.

In fact, big banks are just about the only ones who may come out of this mess unscathed because they have the biggest backer -- the U.S. Treasury.

It will be the savings and loan crisis all over again, only mortgage bankers and brokers will be hitting the road, not blue-chip bankers.

Countrywide is in a world of hurt because all they do is mortgage loans. They've all but shuttered their subprime unit, Full Spectrum Lending.

Capital One is among the first of the big banks to close its Alt-A branch, Greenpoint, and analysts are bracing for similar news from Bank of America, Wachovia, and Wells Fargo.

When big banks start hurting, the Fed (U.S. Treasury) will act quickly.

A meeting already took place yesterday between Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke, and Senate Banking Committee Chairman Christopher Dodd, D-Conn.

Attempting to soothe the markets, Paulson admitted there wasn't a "quick solution, but he shushed, "We are going to work through this problem just fine."

The Federal Reserve has already taken action, pumped another $3.75 billion into the financial/banking system on Tues, after pouring in more than $100 billion the week before. Further, the Fed cut its discount rate -- the rate at which bank members of the Fed can borrow money directly from the reserve -- by 50 basis points to 5.74 percent.

Senate Banking Committee Chairman Christopher Dodd urged Federal Reserve Chairman Ben Bernanke to use "all the tools available." He also urged the Treasury to raise the amount of loans in dollars that can be held by Freddie Mae and Freddie Mac.

All actions stopped short of demanding the Fed to lower the key federal funds rate -- the target or suggested rate at which banks borrow money from each other. This is widely known as the rates that are then marked up for consumer loan products such as credit cards, home improvement loans and mortgages.

What will happen is that whether the Fed suggests a lower funds rate or not, mortgage interest rates will be manipulated lower, but not as many alternative loan products will be available, forcing those who want to take advantage of lower interest rates to refinance into a standard loan product or buy a home using the closest conforming loan possible.

The idea is to keep the volatility that we're seeing now out of the future as a record number of loans adjust to higher interest rates.

This will keep the greedy banking snake from eating another cow too soon that it is unable to digest.

Published: August 22, 2007

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.