Atrios is right that the housing market isn’t going to recover while the crooked, thieving banks are all crooked and thieving.
I’m not sure how anyone expects “the housing market” to “recover” when buying a house now involves handing a bunch of money over to a bank which will then proceed to steal your house from you.
This behavior will continue until lots of people go to jail. And that, apparently, is off the table.
Of course there is another option. And that’s to make it impossible for the banks to steal your house from you. And it seems the simplest way to do that is by putting a moratorium on banks foreclosing until the documentation gets sorted out. It might increase the cost of lending since there are a number of legitimate foreclosures that wouldn’t happen.
Ideally this would happen at the federal level, but I don’t think it’s something you can get done with the current House of Representatives. So, it can happen at the states. It’s 4 years past time, but I’d like to see some creative state legislator here in Washington propose it in the next session.
I think that something akin to the French revolution is the only thing that is going to straighten out these bankers — and the ‘Masters of the Universe’ in general.
Why should anyone pay rent when they can buy a house, make no payments, and be legal squatters with all the same rights as homeowners for the five years it takes the bank to foreclose and
evict them?
Right now we have people that should be foreclosed on, but the banks wont do it because they don’t want the foreclosure on their books. We have “ghost subdivisions” which are sitting empty, the builders gone bankrupt, the loans used to build them bought and sold so many times we don’t know who owns them and who ever owns them would rather just walk away. We have banks foreclosing on people who are current on their house payments and we have people filing “quiet titles” to their homes because no one can figure out who owns the mortgage on the thing.
Beats the fuck out of me how we fix this mess.
I had a co worker abandon his condo in Snohomish after the units above and around him were taken over by squatters.
Dang. Is he still paying on it?
@3 “Beats the fuck out of me how we fix this mess.”
Just wipe out all the debts and start over, like the Bolsheviks did when they ousted the Russian aristocracy. The first thing Stalin did in power was send his minions out into the provinces to burn all the property records.*
Heh, just kidding! This is a harmless commie joke that I picked up in Fremont while attending the street fair. The real joke is that GOPers want people to vote for the jackals who created this mess.
Dang. Is he still paying on it?
I think so. I know co workers have told him to walk away.
@5
That sucks.
The best thing to do is to get the pain over with quicky. That means evicting those who don’t pay their mortgages, taking the property back, and selling it to the highest bidder. It’s a shame that borrowers can get almost 5 years of free living under current laws. The best thng to do is to throw them out and re-sell the houses to people who’ll make the payments. Prolonging the misery just makes it worse. Get the pain over with quickly.
Except that in many cases there is no bidder. No one’s going to buy all those vacant homes in North Las Vegas or 50 miles outside of Minneapolis. In other cases both builder and financier have gone bankrupt and we don’t even know who owns the homes. In other cases the homes have sat vacant long enough that they’re in need of a lot of work before anyone could move in and by the time you do the work the house is priced out of the market. Plus, we have more single family homes than we need.
In the end a lot of these homes are going to be owned by either cities or counties and they’ll get torn down and native plants will get replanted.
The banks could mitigate the mess by reducing mortgages to the current market value rather than foreclose. Owners would stay in their homes and keep making payments on the reduced principle. This avoids having a vacant property subject to vandalism and neglect. And this would be no greater loss to the bank because if sold at foreclosure the house won’t sell for the inflated original loan amount anyway.
I’ve been watching one foreclosure currently up for sale. The bank lowered the overly-optimistic price several times over the course of a year. Then last week the price jumped $30K. Hmmm, I think, interesting strategy. Asked realtor WTF? Says the banks do periodic re-appraisals and will then raise the price to match the appraisal price even when it didn’t sell for much less. I really don’t need to say anything more.
“In the end a lot of these homes are going to be owned by either cities or counties and they’ll get torn down and native plants will get replanted.”
Ok then. That’s likely to happen in some areas. It will be a great lesson for builders and banks who get over-zealous about building houses no one can afford or loaning money people who can’t afford to pay for them.
@11,
Reducing principal is a taxable event for the people whose principal is reduced. Should the IRS be forced to not consider such a reduction in principal as income? Should the banks be able to write-off the reduced principal against current income? Giving people free stuff doesn’t really do much to encourage individual responsibility, Doc.
Still, the best thing to do is go ahead with the foreclosures and cler out all the excess inventory of underwater loans.
Not free at all. The market was distorted by the easy money policies of Greenspan after the dot com crash which punished savers and encouraged excessive risk taking in the bond markets.. If you looked at the trendlines of property valuations till 2002 or so they were steady and then went crazy after that.
A cramdown is an appropriate correction to market distorting policies. Just cram down principal values to trend line.
Economist Dean Baker saw the real estate bubble forming at the very beginning.
http://www.cepr.net/index.php/.....er-bubble/