Cramming Reality Down their Throat

Posted: May 23, 2011 in Personal, The Economy

If you’ve been paying attention to the housing bubble and the resulting crisis in this country, you may recall that the banks opposed any and all efforts by liberals to assist struggling families to hold onto their homes. One great example is the concept of “cram downs”.  This is when the court forces a bank to reduce the amount of a home loan during an individual’s bankruptcy.  Of course, the banks fought like a cornered badger and Congress didn’t follow through on threats to allow “cram downs”.

While this may have saved bank profits in the short-term, in the longer term it will hurt not only the banks but the entire country.  A NY Times article points out some worrisome statistics:

All told, they own more than 872,000 homes as a result of the groundswell in foreclosures, almost twice as many as when the financial crisis began in 2007, according to RealtyTrac, a real estate data provider. In addition, they are in the process of foreclosing on an additional one million homes and are poised to take possession of several million more in the years ahead.

This is exactly what I predicted would happen back in February of this year (if I may toot my own horn).  At that time only a few economists were warning of this problem and everyone else was saying how the Economy was slowly recovering.  It was as if it was a starving, malnutritioned child that was eating more every day, looking healthier by the day but somehow still had a massive tapeworm it his belly.  No matter what we do to help him, it won’t do any good until the parasite is addressed.

Besides the obvious affect on the sale price of houses, the glut of foreclosed homes on the U.S. market, has and will continue to result in other problems.  First, there is theft and vandalism. A vacant house draws them like flies to sh*t.  Second, is the loss of income tax revenue for localities and cities.  Third, rental rates will rise because more families are competing for a limited number of rentable properties.  Fourth, the banks aren’t maintaining the homes, which causes the city or locality to expend resources on their maintenance.

I walked away from my house and can testify as that getting a rental turned out to be much harder than I imagined.  No sooner would I find a house, within less than 24 hours, I couldn’t even get a message into the Landlord than it would be rented out already.  I finally found a great house but only because I sat on the phone and in email and rushed to get an application signed and delivered through one agent working with another.  In all my years of renting, I’ve never had to do that before.

And while my home was vacant for a little bit, my personal situation turned out to be to my bank’s advantage. While I stay in the rental house, my soon to be ex is staying at the old house until it is either foreclosed on or re-negotiated.  Which is also nuts….because I’d been trying to get the bank to re-negotiate with for the last year, but they wouldn’t even talk to me until I was 90 days delinquent.  Can you imagine–you’re an upstanding citizen, paying your mortgage faithfully and on time and the bank encourages you to stop paying, forcing the house to go into foreclosure so that one sub-division will attempt to negotiate with you while another subdivision will actively work to take the house back, neither sub-division communicating with the other.   And in most cases, the houses sit empty becoming eyes0res, home to pests, flop houses for addicts, canvases for taggers, and a mini-piggy bank for the scavengers who strip it of anything valuable.

The problem has become so acute that some cities are getting desperate.  LA is suing the Deutsche Bank to force them to take care of their vacant properties.  Guess what the Bank’s argument is, “It isn’t our property so we don’t have to maintain them.”  That’s funny because you’re the bank that owns the titles and you’re the one that is saying you own the property and writing off the house as a loss on your taxes. You’re also the one that filing in court to foreclose on these homes, swearing that you own the land and houses, and are entitled to take possession of it because you haven’t been paid for it.  So which is it you blood sucking, greedy cocksuckers?  Do you own it or not?!

I hope the judge says, “Okay, you don’t own the properties.  The previous owners can have their property back free and clear and anything owed to the Bank is null and void”.  Then LA will have a bunch of happy homeowners who would be thrilled to move back in and take care of the houses.

But I ain’t holding my breath.  This glut of houses will bring about a second slump if someone, somewhere doesn’t take their head out of their ass and do something about it.

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