Home Prices Rise In September: Only 28% Of Mortgages Now Underwater

All 20 cities tracked in the Case-Shiller home price index rose for the third consecutive month.

The following shows the city by city breakdown.

Every months that home prices rise it helps the millions of homeowners who continue to be trapped under water. There are currently 12,472,262 mortgages under water or 28% of all mortgages in the country.

Of this number only 451,652 are in foreclosure. This means the other 96% of the mortgages underwater continue to make their payment every month in hopes prices will continue to rise (or they are living payment free while the bank just holds their loan in the shadow inventory).

The race is now on for Bernanke and the federal government to get these loans back above water before the rest of the 96% realize that it makes no sense to continue to make payments.

They are working very hard to accomplish just that. The federal government (the tax payer) is currently purchasing, guaranteeing, or insuring 97% of every new mortgage created. 

Risky you ask? 

Nope. The Federal Reserve, after last week's QE-to-Infinity announcement, is now purchasing every government sponsored loan with printed money. Forever.

The goal is to give every possible borrower in the country the chance to over pay for their monthly cost of living through home ownership like they did in 2003 - 2006. Rather than let home prices fall and let every American enjoy this savings on their cost of living, they want this cost to surge. After all, the interest payments are now just going to the government and the Federal Reserve - which is a privately owned bank. After they try to get interest rates down as close as possible to 0%, they will then offer 100% financing, then maybe even 125% financing as was offered during the peak of the subprime mania.
If that does not get every mortgage back above water the government will probably start offering cars, televisions, and 6 month paid vacations to go with the 125% loans (the extra 25% you just take home as cash with 0% interest).

They may very well succeed. Maybe they can get home prices up another 30%.

Gold owners will watch their portfolios rise at least 500% in comparison, as we sit back and enjoy the complete insanity from the sidelines.

h/t Calculated Risk, The Big Picture