The implications of pending foreclosures greatly affect the most important issues facing any potential recovery in the U.S. economy, according to one industry analyst speaking at the Mortgage Bankers Association national technology conference in South Florida Monday. Bob Simpson, president and chief executive of Investors Mortgage Asset Recovery Co., or IMARC, said the nation's gross domestic product and employment levels are just a few economic indicators impacted by the ongoing foreclosure fiasco. Simpson said the sand states – Arizona, California, Florida and Nevada – are truly the only states that matter when discussing foreclosures, adding that 70% of all foreclosures are located in 10 states. "We are in a double dip and now heading back down," Simpson said. "And I think it's safe to say government policy affirmatively and actively hurt people by encouraging them to buy into a falling market." Simpson highlighted the problems in Santa Ana, Calif., by showing the negative equity for homeowners in some stage of foreclosure within a 2.5-mile radius stands at roughly $294.8 million. In a 5-mile radius around Glendale, Ariz., there are more than 6,500 homes in various stages of foreclosure and the cumulative negative equity of the properties is more than $1.23 billion, according to Simpson, who admitted his survey isn't a double-blind scientific study but nonetheless evidence of a significant problem. "I'm not sure policymakers understand how big the foreclosure problem is," he told the assembled mortgage lenders. He found one property in Santa Ana, Calif., in the midst of a loan modification on a $536,000 mortgage with a monthly payment of $3,751, while there is a comparable home for rent two blocks away for $2,100 a month. "It makes no sense to stay underwater when you can move two blocks away and go to the same school … go to the same dry cleaner," Simpson said. "If this was your child, what would you advise them to do?" He told the mortgage professionals "the ultimate solution is in our own common sense." "If you make $80,000, I'm glad you have a job, but you have no business owing someone $800,000," Simpson said. "You need to move. You need to find another place to live." But who bears the loss? Simpson said the financial institutions that made the loan, the investors that purchased the securitized loan and ultimately the federal government, which eventually means the taxpayer. He also encouraged lenders to take a more paternalistic approach. "We've always said 'I'll tell you what your qualified for,' and we've learned if you offer money to people, they will take it," Simpson said. But as the examples of Southern California and Arizona indicate, that's just no longer sustainable. Write to Jason Philyaw.