Jun242015

Moratorium on mortgage defaults would solve housing crisis

Is the crisis in housing due to toxic mortgage products or people refusing to pay their mortgage obligations?

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Have you noticed that eight years after housing collapsed and three years after housing bottomed, people still refer to housing as being in a crisis? As long as millions of delinquent mortgage squatters refuse to pay their mortgages, and as long as lenders refuse to foreclose on the deadbeats, then housing is still in crisis.

362,000 American delinquent mortgage squatters refuse loan modifications, so obviously we can’t modify our way out of the problem. Further, bailouts like loan modifications by their nature create moral hazard by preventing an individual or family from enduring the consequences of their bad decisions. Nathanial_J_FriedmanIt simply is not possible to have a bailout without moral hazard; it’s only a matter of degree.

So what would happen if we simply banned all evictions? Is this solution any better?

Housing-rights group seeks changes to eviction policies

Meaghan M. McDermott, Staff writer 4:54 p.m. EDT June 18, 2015

Following a failed effort earlier this week to keep a Rochester man from being evicted from his foreclosed Webster Avenue home, a local housing-rights group is asking the city to modify the way the Rochester Police Department handles eviction actions.

“We want a conversation between the banks and the homeowners…”

Banks communicated with homeowners; the problem is no lack of communication. The problem is a lack of agreement on terms: banks want to get repaid with interest on the loan; borrowers want a free ride at the expense of those who provided the loan capital in good faith with the belief they would get repaid according to the terms on the promissory note. The banks offered to modify the loans with very generous terms, and 362,000 Americans simply refuse to take the deal.  monopoly_loan_owners_get_out_of_debt

and the only way for that to happen is if the city doesn’t make it easy to remove the homeowners by supporting the banks via police enforcement,” said Julie Gelfand, with the Rochester chapter of Take Back the Land.

They can’t change the law, so they are asking police not to enforce it. Really? Do I need to explore the insanity of that idea further? Perhaps the mafia should lobby local police not to enforce laws that infringe on their business activities? Oh wait, we already have that — it’s called bribery and extortion.

The national network of Take Back the Land organizations is dedicated to elevating housing to the level of a human right and securing community control over land.

(See: What is the minimum level of housing quality people are entitled to?)

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Last week, the group vowed to help Joe Woods of Rochester stay in the home he’s lived in on Webster Avenue since 1990 despite an eviction order filed with the City Marshal.

On Wednesday, Gelfand said, the marshal and police arrived at the house to enforce that order around 9 a.m. She said volunteers attempted a blockade, but Woods was coaxed out of the house after police arrested his 20-year-old daughter Audrey when she stepped outside to see what was going on.losing_foreclosure

Ultimately, six volunteers and Audrey Woods were arrested, with charges ranging from trespassing to obstructing governmental administration, Gelfand said.

Woods said he and his daughters are temporarily staying with other family members for the time being. He is working with lender MidFirst Bank to set up a time he can re-enter the house to retrieve his family’s belongings.

He and his wife Glenda purchased the house in 1990 for $59,000. It currently has an assessed value of $28,000. According to foreclosure documents filed in 2010, the couple owed at least $58,000 on the property following two mortgage modifications.

How many times have we seen this before? The couple bought the property 25 years ago, but rather than having their mortgage paid off, they actually owe more than they originally borrowed. How do you suppose that happened? It certainly wasn’t due to the two mortgage modifications as the report suggests.

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Woods said he was simply unable to work out agreeable payment terms with lender MidFirst.

“All I ever wanted was a fair deal and a fair negotiation on the home,” he said.

The bank did not respond to emails seeking comment.

terminate_ownershipWhat is there for the bank to say. They obviously don’t want to foreclose on a house worth $28,000 when they have a $58,000 loan on it, so they were undoubtedly very amenable to modifying the terms to avoid foreclosure. They only way they couldn’t come to an agreement is if the borrower was asking for what amounts to a free house. Any payment the bank could get from this borrower is better than foreclosure.

On Thursday, Take Back the Land called on the city to take four actions, including: impose a moratorium on police-enforced bank actions; an investigation into allegations of civil and human rights violations related to Woods’ eviction and the eviction of other struggling homeowners;

Human rights violations?

the implementation of community land trusts that would allow for community control over housing stock;

rejectedAnd what would this community land trust do with the land? Remember, Socialist solutions to housing affordability problems suck.

and a civilian control board over the Rochester Police Department.

They already have that; it’s called a city council. If they don’t like the civilian control board in place, they can work to replace them at the next election.

Jessica Alaimo, city spokeswoman, said Warren’s administration is “always concerned about residents and homeowners and tries to strongly advocate for ways to keep people in their homes.”

There are better ways to keep people in their homes: they could pay their mortgages.

David_J_Stern

A better solution to the housing crisis

The following is fiction… or is it…no-evictions

Washington D.C., June 23, 2015 — Housing and Urban Development Secretary, Julian Castro, announced a moratorium on defaults today. “We have been considering a moratorium on foreclosures,” said Castro, “but a moratorium on defaults will be much more effective.”

While other lawmakers are still considering foreclosure moratoriums, Castro is convinced a default moratorium is a better approach. He hopes others in State and Local legislatures will follow his lead. “We want to keep people in their homes,” said Castro, “and we need to keep our lending institutions healthy.”

When asked how a default moratorium would help, Castro had this to say, “Foreclosures are the result of defaults, and defaults are also causing lenders to take write-downs on mortgage loans. By putting a moratorium on defaults, we solve both problems.” Castro provides clear guidance on how the program would work, “Homeowners need to keep making their payments. That will put an end to the housing crisis.”houses_for_everyone

Experts agree that falling home values are not the root of the problem. Castro goes on, “But let me emphasize that we do not need a system-wide solution for the vast majority of loans where a homeowner temporarily has negative equity. Negative equity does not affect borrowers’ ability to pay their loans. Homeowners who can afford their mortgage payment should honor their obligations.”

When pressed for more details on how such a moratorium would be implemented when so many homeowners cannot afford their payments, Castro responded, “We are still working on the details. Lenders are already modifying as many loans as possible, and we may provide direct government assistance to the banks through paying citizen’s mortgages directly. The American people are kind and generous, so they certainly won’t mind helping out their fellow citizens with tax dollars as necessary.”

When confronted with the possibility of creating a moral hazard, Castro scoffed at the notion, “Homeowners need this help to stay in their homes. It would be immoral to throw them out on the street.”

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