"So, yep, they are squatting."

I'm glad you're not a lawyer..... total lack of understanding of what a purchase money agreement (and associated lien) is.

The lender loans money to the borrower and the borrower uses those funds to purchase a house as a condition of the loan.  The borrower pledges the house (and wages) as security for the loan repayment.  The lender does not own the house.  If they did, you'd be a renter... the lender would have to pay the taxes out of their own pocket each year and the deed would be in the lender's name.

You can't be a squatter in your own property by definition.  So until the lender gets a  foreclosure judgment and gets the property back in their own name, the borrower is not squatting.  It's their property until a judge says differently.  Wether they are paying the loan has nothing to do with ownership.

geez.

But what we're missing are people who can take advantage of the low rates and the low home prices and do some buying. You can't get that loan if you don't have a job. The banks aren't going to give you a mortgage. They have tightened to the point that unless you have solid employment, without risk of being laid off, they will just decline your application.

To put is another way, I use a fishing analogy. What has occurred is predatory over fishing. This over fishing has crashed the population of qualified buyers and overwhelmed the lender price supports. What is needed is a breeding program called real and adequate job creation in excess of 300,000 non farm payroll jobs per month for years.  We are in a downward facing demand driven spiral and it isn’t over until it is over. The media can try to push perfume all day, but the stench is still there.  

There are ways to speed up the breeding process, but short term solutions lead to long term consequences. I think that is the best way to describe the borrow and spend provisions that were Reaganomics. Tax policy is a mute point in a downward facing demand driven spiral because unemployment has become a leading indicator of economic output. In addition, deregulation has created some market functionality problems in all the markets. Problems that have and will continue to reach across markets until the structural problems are fixed.  Too big to fail and excessive leverage in the market place must be addressed period.  Wealth disparity is a symptom of a far greater problem then just the perception problem created by lender price supports and media mind manipulation. We need a winning national industrial policy, not the globalist expansionist policies both parties indorse today which will eventually lead to a complete loss of sovereignty.  

We are doomed to repeat history if we don’t learn from it locked in Einstein’s paradox of insanity.

I can tell you how to turn the housing market around in less then a year without borrow and spend, but what is the point if we don’t fix the other problems. We are at a cross road. A time of deep reflection where you have to ask yourself do we want to go back to the tread mill economy caused by the existence of lenders in the housing market or grow into something better?  Who is John Galt?   

Duh...The bottom is still a long ways out! There are so many homes underwater as well as the shadow inventory that the banks still haven''t put on the market.

We will be in this housing disaster meltdown for a long time to come!  I just love all these "so-called" expert opinions that don't know any more than the average US citizen or even less depending on how they wish to spin it on any particular given day.

forget it.  the loss of jobs hasn't stopped yet.  the foreclosed homes haven't been sold off yet.  the exodus of usa jobs has yet to end.  inflation is about to take off.  people moving in with friends or relatives leaving the inventory of homes yet again higher than needed. 

housing will not bottom out for another 3 years

That's why the key to stabilizing housing is creating jobs. And I think that's starting to happen. Plus, the potential massive stimulus from the payroll tax cut could make a real difference.