Jan192017
The weak case for occupancy after foreclosure
Some progressives want people to occupy houses they don’t own and don’t pay for.
It’s sad when someone is forcibly evicted from their family home. People develop strong emotional attachments to real property, so many people feel compassion and empathy for those enduring such a difficult loss. Since nobody wants to feel the pain of loss, many people suggest we should stop foreclosures — or at least the evictions after the fact.
(See: Should evictions be banned to stop hurting people’s feelings?)
When people rally to stop foreclosure, they forget there is a next chapter to the story. What happens to the family and the house after the foreclosure?
First, the house doesn’t sit empty. The distressed debtor who rented money from the bank to occupy the house and appear on title will turn over the property to a new buyer who is not as indebted. This new buyer will be able to sustain ownership under stable, government-backed financing terms.
Second, the family who left the house generally enjoys an improved financial life. With the crushing debt and onerous mortgage payment removed, the family was free to move into an affordable rental, generally in the same neighborhood.
For most staying nearby was a practical decision because their children had friends in the neighborhood or school, and most delinquent borrowers still had jobs — contrary to the popular spin, most foreclosures were not caused by job loss but by toxic mortgages.
People with jobs stay in the area to keep it; plus, with few jobs created elsewhere, most people had nowhere else to go. As a result, there were no mass migrations associated with the Great Recession — no breakdown of the social order.
The Case for Allowing Tenants and Owners to Remain in Their Homes Post-Foreclosure
Rachel Bratt, January 11, 2017
Although federal guidelines allow foreclosed homes to be sold with occupants, in a recently published article in Housing Policy Debate, I report that the guidelines are largely irrelevant in practice. In fact, data obtained from HUD through a Freedom of Information Act request shows that in Fiscal Years 2010-2014, there were a total of 23,746 requests for FHA-insured foreclosed properties to be conveyed while occupied. However, only 87 of those requests—much less than one percent—were approved by the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA), which is part of HUD.
The reason HUD and the FHFA don’t allow former owners to retain occupancy is simple: an occupied house sells for less than an empty one.
For one, a recently foreclosed owner isn’t going to assist in the resale of their former home. They won’t be cleaning up for showings or be accommodating to potential homebuyers. In fact, since they squat and pay nothing, their incentive is to drag the process out as long as possible.
No owner occupant will want to buy the property because then they will have to evict the former owners. Who wants to deal with that headache? And there is no assurance they will be able to get the deadbeats out easily.
Further, most of these properties need repairs due to deferred maintenance while the house was in the foreclosure process. A few cosmetic repairs and a good cleaning — something only possible after the former owners are gone — will add far more value than the cost.
There is no benefit to HUD or the FHFA to leave a former owner in place after a foreclosure.
The data—along with interviews done with key stakeholders in Greater Boston—raise troubling questions about the extent to which HUD/FHA as well as the Federal Housing Finance Agency (FHFA) and housing-related Government Sponsored Enterprises (GSEs)—specifically, Fannie Mae and Freddie Mac—are continuing to view foreclosed homes more as financial assets, whose value they seek to maximize by requiring that they be vacant when they are sold.
This is troubling? These properties are financial assets, assets that must be sold to recover the capital on the loan they insured.
She implies HUD and the FHFA should view these properties as the family homes of the foreclosed, and therefore, they should let the former owners stay as long as they like. The reality is that whatever family emotional attachments were involved, the family no longer has any claim to the property. HUD and FHFA should view these as financial assets and recover the most they can.
In doing so, they ignore the fact that the buildings also are dwellings for financially strained households who, if evicted, may need additional housing subsidies
How is that the problem of HUD or the FHFA? What she’s really arguing is that these people need a handout, so we might as well give them a house.
Allowing them to stay on after the foreclosure merely delays the inevitable. These people must move on and find other housing. If they qualify for a subsidy at that time, then they can apply and get one. A few months of extra squatting might save the Section 8 program a few dollars, but it will cost HUD or the FHFA much more than that on the recovery from the foreclosure resale.
as well as the fact that continued occupancy by prior owners and tenants can be part of an effective strategy to preemptively stabilize neighborhoods.
Feel-good bullshit.
While there have been some changes in an FHFA policy that could soften the GSEs’ “no occupants at conveyance” practice, it is not yet clear whether this will result in former owners and tenants being allowed to remain in their homes following foreclosure. …
What is clear is that allowing post-foreclosure squatting is a bad idea.
To enable former homeowners and tenants to continue living in their homes following a foreclosure, greater public resources and commitment are needed.
She wants to commit my tax dollars to implement this stupid idea.
Programs and financial assistance that would enable nonprofits to purchase foreclosed dwellings, then rent them back to the prior owners and tenants, and to successive low-income households, would result in a long-term source of affordable housing. …
Do we really want non-profits to generate income from renting properties to low-income tenants? Will they be kinder and gentler landlords? Or will they take the rent from those who bother to pay to subsidize those who don’t bother to pay?
It seems likely that when vulnerable, low-income households are facing the loss of their homes, other units of government may need to step in to help them find and pay for their new housing.
The long-term costs under this scenario—both financial and otherwise—are virtually certain to far outweigh a short-term, up-front investment in keeping these households in place.
The long-term costs will be there regardless. The short-term costs are virtually certain to go up significantly because neither HUD or the FHFA will recover as much as they should on their foreclosures.
Absent these changes, the various agencies will continue to implement a highly problematic set of procedures that promote family instability, potentially increase homelessness, and result in vacant homes, which have adverse neighborhood impacts.
Complete and utter bullshit.
Banks gave people a large number of homes. Think about it — banks paid for the house when the loan owners purchased, then when these people stopped paying the loan, lenders did nothing about it. And now people lobby to allow former owners to squat indefinitely.
Do you think squatting is a viable long-term solution? I think not.
When is some renter going to take a case to the supreme court under the equal protection clause of the constitution. Oh I forgot if you rent you don’t have a banker or realtor to lobby for you.
Did anybody catch the news that California is running a budget deficit again? How is that possible with such a strong economy? I think flat stock returns for the past couple of years probably explains it. The fascinating aspect to me is that a huge chunk of the California budget is dependent on Federal subsidies (about $100 billion of the $180 billion budget). The lack of fiscal restraint in this state gives Trump huge leverage against our lawmakers. The battle over sanctuary cities and many other left wing policies will be entertaining to watch.
A new poll of Californians show a huge lack of support for Trump (not surprising), but interestingly, a plurality of Californians supports Trump’s immigration policies and his plans to lower taxes:
On Trump’s plan to suspend immigration from countries with links to terrorism, a plurality of California voters, 42 percent, said it would make California “better off.” That compares to 35 percent who said “worse off,” and 23 percent who had no view.
Regarding the effects of Trump’s promise to deport illegal immigrants, 44 percent said it would make California “better off,’’ 39 percent said worse off,’’ and 18 percent undecided, the poll showed.
On Trump’s plan to end “sanctuary cities,’’ 41 percent expressed support, 36 percent said they were opposed, and 22 percent were undecided. On the president-elect’s intention to withdraw federal funding to “sanctuary cities’’ like San Francisco and Oakland, 38 percent expressed support, 40 percent were opposed, and 22 percent had no view, the poll showed
California voters had a positive outlook on some of Trump’s key positions on fiscal issues, the poll showed. Fifty-five percent said Trump’s vow to lower personal income taxes would make California better off, compared to 23 percent who said it would make the state worse off, and 22 percent who were undecided, according to the poll.
http://www.politico.com/states/california/story/2017/01/new-golden-state-poll-low-expectations-for-president-trump-but-support-for-some-of-his-immigration-plans-108769
Just wait till we find out what the real budget deficit is (way more than 1.9 billion). They will begin doing revision after revision so the people don’t freak out at the true amount.
Very true. The accounting gimmicks they used under Gray Davis and stretching into the Governator’s term, were downright laughable at times. The type of stuff they were booking as income would result in jail time in the private sector. This time we do have that law passed by voters that if the budget is not balanced, the legislators don’t receive paychecks. It could motivate them to act prudently, but my guess is that some unintended consequences may result. The true test will come in April when tax receipts are lower than expected due to a mediocre stock year in 2016. After that, they only have 2 months to balance the budget before the fiscal year begins.
If their pay depends on it, I would look to them to find an accounting gimmick to ensure they get paid.
They will pass a revised tax and assume it causes no changes in peoples behavior. Next year when tax receipts are lower than their “estimates” they will do it again.
I don’t know if you remember, but they tried this a few years back and the state Treasurer, John Chiang, called it for what it was and withheld their pay. That was pretty gutsy on his part and I was glad to see that some Democrats have a backbone when it comes to spending.
I heard John Chiang speak at a BIA function. He struck me as bright and capable.
The world of pretend of housing shows on television: Blowing through budgets and simply making it up to induce consumption.
Fake it until you make it. No truer words have ever been uttered especially when it comes to Hollywood and the make believe of reality TV. Just because you put the word “reality” in front of TV doesn’t make it so. Yet people flock to housing shows in mass because it feeds into their world view that real estate is always a winning bet. Whether the show is about a couple looking to buy their first home or a show where prospective investors take a chance at rehabbing a former meth home and turning it into a puppy daycare, these shows put out some unrealistic scenarios especially for those that actually buy and invest in the real estate market. Yet that is the rub. Most people never purchase investment property. Most that do own real estate own it as their place of residence. And that is why these shows do so well because they highlight an alternate reality that only works out in scripted reality.
Ridiculous budgets and emotional buying
I must admit to my chagrin I enjoy the episodes where they have first time buyers and how they analyze the situation:
“Currently, we live in a 700 square foot studio apartment but with a baby on the way, we need to upgrade to a 2,500 square foot home so we can have space for our 6 pound baby. Oh, and a sauna and a walk-in closet would be nice.”
Then you get the agent slash personality TV star asking about the budget for the couple:
“We can comfortably afford $400,000. If it is a dream place we can stretch to $425,000”
Next thing you know they are buying a $500,000 place and panning to the couple:
“I guess one of us can get a second job flipping burgers! I can wash the smell of grease off in my faux marble tiled shower.”
http://www.doctorhousingbubble.com/wp-content/uploads/2017/01/realestate-couple-on-tv-shows.jpg
My family lived in a 800 sq ft condo with two babies before we felt like we needed to move. One of our old neighbors has four kids in a place that small. It can be done when you don’t live in a world of entitlement.
Latching on to yesterday’s discussion about baby boomers, yes they did have more opportunity but it should also be remembered that they didn’t grow up very entitled. Living in a small house (by today’s standards) and sharing bedrooms with siblings was the norm. Post-war housing in LA/North OC was not very big. My mom grew up sharing a small bedroom with two sisters and there was only one bathroom being shared by six people. They each had 10 minutes of bathroom time in the morning. If you went over your time, too bad, because my grandpa was getting in there at his allotted time slot no matter what. If you weren’t done, you were outta there.
The baby definitely needs an extra 1800 sq ft of space. They also need to purchase a large 7 seat SUV as well because they baby needs at least 5 seats for itself.
It is interesting how often the “growing family” excuse is used to justify excess.
Sunnyvale: 1,076 housing units proposed for AMD site
The Irvine Company has submitted a plan to the city of Sunnyvale to bring 1,076 housing units to the Advanced Micro Devices campus on Duane Avenue. The move will end the chip company’s 47-year run in Sunnyvale, as AMD is moving to Santa Clara.
According to the project application submitted to the city, the plan for the 34-acre site at 1090 E. Duane Ave. is to build 136 units of for-sale housing, 651 mid-rise apartment units, 289 walk-up rental apartments and possibly a 6.5-acre park. Plans also include 1,954 parking spaces.
Buying a house is getting even harder for millennials
The rise in interest rates since the election is presenting yet another obstacle to young people trying to enter the housing market.
The spike has lowered the median size mortgage that borrowers can qualify for by 9 percent, according to a new report from Fitch Ratings cited by the Wall Street Journal. It’s an added burden on top of rapidly rising house prices, which means young investors need to shell out larger down payments.
The report, released Thursday, compared the average 30-year fixed mortgage rate of 4.2 percent in the first week of January, compared with the average 3.4 percent average at the beginning of October. It found the median mortgage someone under 35 would qualify for has now dropped from a maximum $120,000 to maximum $109,000.
“Many first-time home buyers have already seen their mortgage capacity eroded,” the report said, according to the Journal. “If rates continue to rise, particularly if they rise rapidly over a short time period, they could add yet another obstacle to homeownership.”
In the wake of Trump’s victory, bond yields and mortgage rates jumped significantly.
How driverless cars can empower Americans with disabilities
The hype over driverless cars often paints pictures of the incredible freedom riders and former drivers would obtain when they can take their hands off the wheel and let the car do the work. The futuristic life of leisure, however, doesn’t always take into account the significant population of Americans for whom any regular transportation access would be revolutionary. For those with disabilities, access to public transportation, much less control of their own vehicle and life, would be empowering. The possibilities of autonomous vehicles designed for everyone could impact a huge swath of the population: a recent government report found that 6 million Americans with disabilities have difficulty getting the transportation they need.
According to a new report, Self-Driving Cars: The Impact on People with Disabilities, released yesterday by the Ruderman Family Foundation and Securing America’s Future Energy (SAFE), the potential of driverless vehicles to liberate Americans with disabilities from transportation issues, bring more people into the workforce, and save substantially on health care, is vast. By engaging with government and private industry to make sure that tech firms and carmakers address the needs of drivers with disabilities, the report suggests new transportation options can be designed that would create 2 million more job opportunities and save $19 billion annually in health care costs.
The landmark Americans with Disabilities Act, which mandates equal access to transportation, was supposed to help Americans with disabilities get around. But decades after its passage in 1990, the promise of equality hasn’t been met, especially when it comes to employment. Transportation is one of the key hurdles. A 2003 Department of Transportation study found 45 percent of Americans with disabilities didn’t have access to a passenger vehicle.
This is a great point that I had never thought of. One of my cousins has Downs and has to be driven everywhere. This would really ease the burden for her family.
This would also help millions of elderly folks that can no longer drive safely on their own, but still need to get out and about.
Think of all the seniors out in the burbs. Now they won’t need to sell their homes and move into the “walkable” city and instead just be driven around by driverless vehicles!
I really hope there is widespread adoption of driverless cars by the time I retire! I would really look forward to that!
Yes. Driverless cars will change society in ways we haven’t even conceived of yet — assuming Uber doesn’t make private car ownership obsolete.
METROSTUDY ECONOMIST WARNS OF COMING OVERVALUATION
Metrostudy economist Mark Boud has warned that, given the possible effects of rising mortgage rates, the nation’s housing market may be due for a coming price bubble – and possibly another recession.
He believes that, while the market is currently “undervalued and underbuilt”, the nation’s homes will be 18% overvalued by 2019 or 2020. “As mortgage rates go up, we will increase the magnitude of overvaluation,” he said. “Overall, the housing market is going to become overvalued.”
In North Texas and the Dallas-Fort Worth market, currently the top U.S. home building market by total housing starts, the median sale price for existing homes has risen by more than 40% over the past few years, and currently sits at a record levels. In 2016 alone, the median sale price rose by 10%.
Boud’s outlook for the years ahead includes a greater likelihood of recession. He said new programs proposed at the federal level will add to national debt and cause interest rates to rise faster.
He is probably right, but referring to overvaluation as a “bubble” is incorrect. A bubble is when things are grossly overvalued due to irrational exuberance. Right now, things are overvalued because buyers are responding rationally to the conditions of the market, which are driven by a supply shortage and record low rates. There is still a limit to what people will pay, so there isn’t the psychology of a bubble right now. My guess is we won’t have a true bubble driven by irrational exuberance before the next recession decides to knee cap the housing market.
Well, that’s just “various agencies” of the federal government. It’s a darn good thing that the other government agencies, like the federal Education Department, are doing such a bang up job preparing millennials with a lucrative education for gainful employment that will enable them to buy lots of home…err….oh, wait a minute:
http://www.wsj.com/articles/student-debt-payback-far-worse-than-believed-1484777880
$1.4 trillion of US student loan debt. According to an analysis of the revised data, at more than 1,000 colleges and trade schools, or about a quarter of the total, at least half the students had defaulted or failed to pay down at least $1 on their debt within seven years.
Yeah, nevermind.
Maybe all of the “various agencies” have done enough damage?
Maybe they can do us all a favor and sit the next few plays out?
When people examine the student loan bubble of the last 20 years, it will go down as a massive waste of resources that mostly went to pay salaries of a bloated college administration.
It’s like the protagonist in yesterday’s post who borrowed $33,000 to end up making pizza. Not a great return on investment.
I guess nobody every thought that perhaps the hurdles to getting a college education ensured only those who would get a return on investment actually participated.
What do they call that system where the market determines the best allocation of scare resources again?