HUD Finally Hand Slaps Housing Vultures

Daniel Vasconcellos

Illustration by: Daniel Vasconcellos

Madison   The Housing Urban Development (HUD) department needed a weatherman to see which way the wind was blowing, and, finally, years after hurricane level damage has been done to families and communities around the country and amid constant calls from housing advocates, they has finally put some restrictions on private equity and other investors who have vulture shopped through the housing crisis. We’ve talked about this recently. Lone Star, Nationstar, and Blackstone have been the worst of the lot, and in Blackstone’s case have emerged as the largest private landlord in the country, doing so by buying up properties on the cheap to get them off the federal books during the housing crisis of the Great Recession.

The new rules are good news, but inadequate, just as all of the foreclosure avoidance and modification programs have been nearly worthless, but up to now private investors in non-bank entities have been allowed to ignore any efforts to remediate loans, so this is one of those things we have increasingly been forced to accept in the age of neoliberalism, “something is better than nothing.” The new rules would require, as a condition of the auction, that buyers take some steps including reducing the value of the mortgage in order to modify the terms sufficiently to prevent foreclosure for some of the families.

This is a hand slap though rather than a reform. Not only is the gate being closed after more than 100,000 cows, I mean houses, have already been swooped up these vultures, but it also won’t take effect until the next auction in late September. The vultures could escape this poison pill by simply refusing to bid and hoping that people will take their eye off the ball or that the political climate changes in November. Sadly, this is the case where there is a desperate seller – the federal government – trying to offload troubled mortgages which is why the vultures are able to gorge at bottom feeding prices.

The private investors can also do pretty much what banks have done and continue to do, which is lose the homeowners’ paperwork, delay and obfuscate and whatever until the clock runs long and then take the home. None of that is against the rules, and the rules are fairly toothless even for banks, since it is a program run by the foxes who are feasting on the chickens with no supervision or penalties. For example, one well reported practice they have employed is lowering the monthly payments for five years and then moving the payments back to the level required in the original mortgage which triggers the foreclosure.

But, as I said earlier, it’s better than nothing, and some families with homes on the chopping block might get enough of a reduction or modification allowing them to save their home, so we’ll have to live with this lame placeholder until there’s enough pressure to finally force a real plan. In the meantime, Wall Street and its financiers will continue to use the housing crisis they created as their own private playground and ATM. Who’s to stop them?

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Private Equity Sabotaging Working Communities

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the map is a few years old

Madison   Auction off tens of thousands of homes during the housing crisis to private equity companies without rules or wherefores other than to offload the problems, despite knowing that private equity operations only care about their bottom line, what could go wrong? Not surprisingly, it turns out, just about everything, and nowhere is this truer than when the private equity bunch is led by Lone Star and the robber baron of our time, John Grayken, the American-born pirate who renounced his citizenship in order to pay less taxes, and now pretends to live in Ireland.

The New York Times is finally taking a look at the disaster that has followed the government’s policy of cut-and-run on the housing crisis and found the biggest culprits were Lone Star and its servicer, Caliber, Nationstar, also with Texas roots, and of course Blackstone, which has come out of this bottom feeding crisis as the largest private landlord in the country. Private equity firms are money machines and make it clear that if they make more money foreclosing, they won’t hesitate. Most hardly participated in the HAMP, housing modification program, to try to allow families to keep their homes, and because the government turned the whole modification process over to banks and financiers, there was no requirement that they do so.

Neither of course was there any obligation under the Community Reinvestment Act to benefit lower income, racially diverse communities and not discriminate in lending. As the Times reports:

But much of this investment has not benefited poor neighborhoods. Banks are expected, under the Community Reinvestment Act, to help meet the credit needs of low-income neighborhoods in areas they serve. Private equity has no such obligation. The idea is that banks should follow an implicit social contract: In return for government loans and other support, they are expected to serve a community’s needs. Private equity, which unlike the banks does not borrow money from the government, is answerable to its investors. Those investors include some of the nation’s largest pension plans, whose members — teachers and police officers among them — may support improvements to such lower-income areas.

And, that’s putting it mildly.

Private equity makes no bones about any of this either.

 

Lone Star explains to investors one way it profits from delinquent loans. Lone Star’s mortgage subsidiary will lower a borrower’s monthly payment if “the net present value of a modification is greater than the net present value of a foreclosure, loan sale or short sale.” Translation: If foreclosing on a homeowner is the most profitable option, Lone Star is likely to foreclose.

Not surprisingly, the new bosses for the housing market are much like the old bosses, except worse. Paperwork is misplaced or disappears. Homeowners can’t get responses or assistance. Modifications come too late to prevent foreclosures, and the beat goes on.

Pretty simply when you turn over the chicken house to the fox, you don’t just have a problem, you have no chickens, and in this case all of us, especially in low-and-moderate income communities are the chickens, clucking all the way to the slaughter.

Think I’m exaggerating? Here’s a perfect example from the Times on the vicious circle of predatory exploitation that Nationstar is able to practice directly and through its subsidiaries:

The whirl of transactions illustrates how Nationstar can control nearly every stage of the mortgage process, posing potential conflicts of interest as it earns fees along the way. Nationstar collects bills and, when people don’t pay, can foreclose on homes. Nationstar earns fees auctioning those homes through Homesearch. Ads on Homesearch, which is now known online as Xome.com, direct bidders to Greenlight. Nationstar can then collect on the new mortgage, bringing the process full circle.

As banks have pulled out of housing and private equity has swooped in, low and moderate communities are also being starved of needed investment, which also feeds into yet another cycle or deteriorating conditions for our communities. What’s the government doing about all of this? Not much. There’s talk of some new regulations by HUD, but who knows at this point, that may be too little and it’s definitely too late. Some Congressmen are moaning about their folks and foreclosures, but most of this is wishing-and-a-hoping. Looks like we’re headed for the wall again, unless there’s big change in the relationships between Washington and Wall Street, and that’s not looking so good this minute either.

Source: The New York Times

Source: The New York Times

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Leaders Talk Politics and the Need to Hunker Down

DSCN1367-1Baton Rouge   The last session of the Local 100 annual leadership conference looked at politics. The Local 100 leadership from Louisiana, Arkansas, and Texas is largely African-American and Hispanic and numbers more women than men. Eleven of the more than thirty in attendance were over sixty-years old. Talking to members about how they had voted in their state primaries, there weren’t any Trumpeteers in this bunch. The vast majority had ended up pulling the lever for Hillary Clinton, but Bernie Sanders had significant support as well, and the Clinton voters were sympathetic to those voters and tended to argue a more realpolitik rationale in troubled times. There was little enthusiasm or passion. Most saw it as a job to be done, and they had done their duty.

On the other hand, as the conversation tilted to November and showdown, there was deep conviction and some real excitement, not so much about Hillary, as about beating Donald Trump. They thought there was work to do and the task was unambiguous. There was no talk of “sitting it out,” but only commitments that they were “all in.” Trump had put the fear of God in the union leaders, and it translated into battle cries.

Admittedly, this is hardly a random survey. These are all leaders with long experience fighting for their rights on the job, so none hesitate when faced with another fight in another forum.

It was interesting how closely people were already following the race and the polls. Part of their motivation was to see if there was a way to pile up the score sufficiently around the country to flip the Senate and provide some margin for getting some real work done and some change from the Supreme Court to the Congress. One impact of the Senate’s refusal to hold hearings on the nomination particularly, as judged by these African-America union leaders, is that it was seen as unprecedented and therefore arguably just the latest example of a racial insult only happening because there was a black President. Who could say otherwise? The outcome of the Senate Republicans’ refusal seems to be labeling the Supreme Court as partisan as Congress, rather than a neutral administration of justice. The legacy of these actions will cast deep shadows over the future.

A chance to flip some seats in the Senate in the telling of most was less about payback and more about the chance to actually make change. In looking at the intersection of worker and community issues, the leaders had discussed their campaigns to eliminate lead in the schools and pry loose more dollars from tax exempt hospitals to fill the gap that has been created by Texas refusal to expand Medicaid and tight-fisted employers providing insurance with deductibles ranging in Local 100 companies from $3500 to $6500. A different Senate might mean real relief, and that’s also a big incentive for hard work on big turnout for November.

Not than any of the candidates are campaigning on these kinds of fundamental meat-and-potatoes issues, but people have had enough of the gridlock and stalemate. They’re swallowing hard to see if they can send a message in November and make a difference, regardless of the candidates.

workshops for stewards involved spirited participation

workshops for stewards involved spirited participation

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Leaders Assess Progress and Map Out Plans

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reports and campaign discussions in Baton Rouge Local 100 Union Hall

Baton Rouge   Thirty Local 100 United Labor Union leaders gathered together for the 36th annual leadership conference for the union, this time in Baton Rouge, Louisiana. Leaders were there from Little Rock and Warren, Arkansas, Dallas and Houston, Lafayette and New Orleans, and points near and far in the three-state areas. We met in Local 100’s big 5000 plus foot union hall in Baton Rouge, so that the members could see first had what had been done to improve the space, and what still needed to be done. It was a hot, mid-90’s June day, but the 10-foot ceilings and thick cinderblock walls made the large meeting room pleasant with five fans running. That is not to say the leadership won’t take a harder look at the thousands needed to repair the air conditioner, but it was a lot better than people had any reason to expect. They were surprised, and I felt lucky, or as I reminded many of them, “tell me you can’t remember visiting your grandmother in the country and hearing the ceiling and attic fans humming?”

A lot of time in the morning was spent reviewing our progress on living wage campaigns or more accurately moving the minimum wages up. In Houston, we had success in both our Head Start unit as well as moving the ages up past $10 per hour for our cafeteria workers. The lesson we had learned, according to Houston office director, Orell Fitzsimmons, was to not try to grab all 30,000 workers in the district at once, but to concentrate on one segment after another. Having raised the hourly wage in the cafeteria, the union is now hunkering down to try to extend the hours from seven to eight to move people up more solidly. In Arkansas, the union with our allies are trying to push a statewide petition of workers and supporters to set the floor above $10 per hour. Winning an election could be difficult, but having our members who are state workers living in poverty is even harder. In Dallas and New Orleans there have been efforts that have met with some success at establishing levels past $10 per hour for subcontracted workers, but in those cities, especially New Orleans, the issue is enforcement. One cleaning contract we organized recently is now six-months overdue on paying the new city standard of $10.55 per hour. I can remember years ago a hotel union in San Jose-Monterrey saying they didn’t want to support our living wage fight because then why would workers need a union? It turns out part of the answer is: they would still need a union to actually get it!

On other fronts, the union is preparing campaigns to advocate to get lead tested and removed from schools and workplaces to protect our workers, children and clients. We are also going after nonprofit hospitals to hold them accountable for providing charity care, especially in Texas where there is no expanded Medicaid and elsewhere in our private sector contracts where the deductibles are pricing our members out of the company-sponsored plans and into the penalties for not having Obamacare.

Will we come up with the money to fix the air conditioner? I don’t know, but we’ll win some big campaigns because of leadership meetings just like this!

reports and campaign discussions in Baton Rouge Local 100 Union Hall

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Beat Goes On But Ecuadorian Economy Reeling

DSCN1351Quito    I had not visited Ecuador for three years. I sat for hours in the sparkling new airport that opened after my last visit or more specifically in the Airport Center across the street from the actual ticket counters, security, gates and airplanes. If modern airports have become shopping malls serviced by airplanes and runways, Quito has essentially built a mall across the walkway from their airport. There’s a patio. There are plenty of chairs and free Wi-Fi. There are many worse places in the wide world to spent hours waiting for a plane.

Walking through the main streets of the city near our hotel not far from the major park and Botanical Garden, everything seemed clean and well-ordered. The coffee shops were active and on the streets people bustled along in well-turned sport coats or high heels and big leather purses. Talking to friends, colleagues, and organizers we had worked with us on campaigns either in the United States or Ecuador or both, a more unsettling picture emerges.

This is not Venezuela where food riots have become almost daily occurrences and political and social unrest is intense, but nonetheless Ecuador at all levels is feeling the pain. One former political activist we knew well from our work on field operations in the last presidential campaign in Ecuador in describing the impact of the falling price of oil, remarked that 60% of the national budget was derived from oil revenues and even as the price moves towards the $50 per barrel that is essentially breakeven in the United States, Ecuador needs the price to hit $60 to $70 because of the extra cost of bringing their crude to the market. An organizer I had worked with at Casa de Maryland, back home now and working at a governmental ministry, told us that this year the budget of her department had been cut from $20 million to $6 million. Needless to say, the impact was devastating and the layoffs severe. She was surprised to still have a job!

Many don’t! An activist we knew, was now living at home. Her brother had lost his job with the state, and her sister in another job had her hours cut in half. An old friend, comrade and former organizer who had worked with us in Florida on our Walmart campaigns a decade ago, told me when he responded to my email and arranged to meet us for breakfast at the hotel that he would do his best to make it because “he was so busy.” When we met, I asked him what kind of jobs he was handling now that were keeping him so busy. “None,” came the surprising answer from my well-connected friend. He was hustling just to keep above water. A job in another country had mysteriously fallen through a week before. When I asked after his father, an elegant and sophisticated gentlemen, whom I admired and knew well and would have thought traveled smoothly in the upper class of the country, I learned he was also now unemployed and in danger of losing his home.

I worried that our members, many of whom depended on the “bono” or basic, cash welfare assistance that President Correa had raised unilaterally in the previous political campaign, might have seen that cutback. The answer from everyone we talked to was, “Not yet,” which was hardly reassuring. Higher oil prices had led to more robust economic projects, expanded public programs and public employment, and increased debt for Ecuador, both externally and internally. Like any bubble of sorts, the country, like Venezuela and smaller states like Louisiana, was caught still standing when the music stopped and everyone raised for a chair.

After the encouraging gains in many Andean countries where recent economic growth in Ecuador, Peru, and Bolivia had lifted education, citizen wealth, health, and living standards, one gets the sense that this is unraveling in a case study of what globalization gives, it then takes away. We met with two young doctors. They were originally from Honduras, but had trained for seven years in the vaunted Cuban healthcare system. They wanted to practice in rural areas where the need was greatest, but Honduras had no government program to support their work, so then ended up in Ecuador about 4 hours by bus from Quito. I asked them to rank the healthcare systems they knew and how the economic situation was impacting healthcare. Not surprisingly, they said of the three, Cuba was first, Honduras last, and Ecuador in-between. As for the economy, they were still getting paid, so at least that was something they said, but they could already see shortages starting to show up in medicine supplies.

Being forced to root for the price of a barrel of oil to go up just about says it all about the unsustainable economy we have built in the world.

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Who Cooked Adam Smith’s Dinner and Why Care Counts

Kirkcaldy_High_Street_Adam_Smith_PlaqueQuito    The title of the book had a nice hook, Who Cooked Adam Smith’s Dinner by the Swedish journalist Katrine Marcal, but the subtitle was equally engaging: The Story of Women and Economics, so I grabbed it. And, so should you!

The answer to the book’s leading question is Martha Douglas, the name of Adam Smith’s mother, who along with one of his cousins took care of the famous Scottish economist, promoter of the “invisible hand” and industrial capitalism, all of his life. That’s not a spoiler alert. Marcal’s point is that Smith and many economists who followed him created economics as a new priesthood, built a lot like the old priesthoods, around an idealized “economic man” presuming, pretending, and perhaps believing that economic self-interest ruled the world and most of its functioning. In so doing she argues, I found importantly and convincingly, that this ideal type is actually not only devastating for women in general but has contributed to warping our view of how the world works and should work.

Most simply this critical, routinely vital but unpaid work continues to fall inordinately on women, regardless of significant progress made over recent decades, and the default social, cultural and political assumptions that women would handle the “caring” tasks and men would handle the rational or business side, so to speak. None of this part of the equation is calculated in our GNP, and it should be. Because caring is too often uncompensated, even caring professions are lower waged unfairly, because they are still feminized. Looking up the Times review after I had read the book, they were not as big a fan of the book as I was, but they did justice to part of the core argument citing these statistics:

Because that care work often happens without any dollars and cents changing hands, it does not show up in G.D.P. reports or economic outlooks — and does not figure as prominently in our own minds as it arguably should. Canada’s statistical office took a stab at figuring out the value of uncompensated care, and came up with roughly one-third of the country’s annual G.D.P. Here in the United States, that would mean something like $6 trillion a year.

Although Marcal did not use this figure in her book, a recent report unpacks the differential in men’s and women’s wages and lays the weight squarely on the economic penalties for caring. It turns out that married mothers are paid 76 cents on the dollar compared to men. Unmarried, childless women make 96% of what men make. Marcal would argue that is because women fitting into the conception of economic man can escape with relatively less adverse impacts where their bodies are ignored, but where their bodies dominate, there are penalties.

Past the shouting arguments about economists or the calculations, the real plea that emerges from Marcal’s book is not about counting or her general rage, but an argument for what our economy and society would look like if we reordered our priorities more equally, including around gender. Marcal writes, “It’s one thing to organize the economy so that the quality of life will continue to rise. It’s another thing to subordinate all of society’s values to profit and competition.” That’s what we do now and it’s worth arguing about. She also in the same vein quotes economist Julie Nelson wondering what our society and economy would look like, “if we had…defined economics as the ‘science which studies how humans satisfy the requirements and enjoy the delights of life using the free gifts of nature.”

That’s worth serious thought.

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