Private Equity Sabotaging Working Communities

lone-star-foreclosures

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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John Sayles and “Amigo” Doing it His Way

New Orleans John Sayles is a filmmaker with some skills and some politics.  I had read his book, Union Dues, and his famous short story about the Anarchist Convention years ago and like them.  I had watched some of his historical dramas like Matewan, a great movie about a rough coal strike,  Lone Star with its solid view of tensions and contradictions on the Rio Grande borderlands, Passion Fish a good piece set in Louisiana’s Cajun country, and of course Return of Secaucus Seven, when he broke in.  I had sometimes wondered whether or not I had crossed his path in one of my two hitches at Williams College where he had graduated a couple of years after I had done hard time there, but who knew.  Anyway, the blurb in the paper that said he had done a movie, Amigo, set in the Philippines, a country where ACORN International has many friends and partners, about the Spanish-American War, was not enough to get me moving, but the fact that he was actually going to be in the house and answering questions after the flick at Chalmette Theater only a couple of miles from my house made it a “can’t miss” event.

The movie was ok.  As always some great Sayles lines, my favorite was “The revolution burns whatever fuel it is fed.”  Another was the concept of “blood simple,” but about de gustibus non dispuntandum est – about taste there is no agreement.  The basic story was like if the rural villages outside of Luzon and the impact on the community and the cross cutting pressures on the “mayor” when the Americans took over and garrisoned there as his son went over to the local guerrillas led by his own brother.  As you can imagine, none of this was likely to end well for anyone, and it didn’t.

More interesting to me was Sayles continuing, categorical commitment to his artistic and political vision that leads to unique works like Amigo and the Spanish-American War finding a place on the screen and an audience in the chairs to watch a movie (in captions!) both beautiful and boring about war, colonialism, and conflict among people and a place most don’t care about in the grand scheme of their own lives and concerns, but still shapes a great part of the experience both here and there, no matter how dimly recognized.  In the Q&A he indicated that this is the third consecutive film he has done in recent years that was both self-financed and self-distributed.  He works on a union exemption from his guilds that lets him get paid in residuals, even though there are none, and the actors, many of them veteran Sayles-hands like Chris Cooper, work for one set of straight wages or essentially nothing at all.  He makes these films happen at $1.5 to $2 million a pop by doing other Hollywood work including rewrites and hack horror films so that he can do these films.  I admire everything about that kind of commitment to a vision and the discipline to realize it.   From the answers he gave to some of the technical questions, it was clear from his own mixture of contempt and regret that he does not believe there is a real independent film movement or industry at work anymore, which essentially leaves him no choice to go silent or push forward to realize his own vision and voice.

Also admirable continues to be his commitment to the defining distinctions in experience triggered by race and ethnicity, particularly as his career has developed.  Certainly that conflict and the hypocrisy around it had been stark in Lone Star. Sayles was clear that there was also no way to get around the issue in his writing and filming of Amigo after he had done the research and been on the ground.  Standing in Chalmette where local officials are dragging themselves into rebuilding from the Katrina devastation with court orders at their throats, forcing them all the way, and looking squarely at an audience, albeit perhaps mainly art house fans, but also virtually all lily white save for one fella sitting in the middle, I respected the fact that his commitment was so deep and categorical that he was willing to either pull his audience along with him or leave them gasping in the ditch.  Sayles has picked a lonely path where he cannot even expect too much in the way of praise for these themes and his steadfastness to them, because as a white filmmaker the applause there could sound begrudging.

I couldn’t help identifying with the experience, while thinking of organizing and what it takes to build something distinctive, keep it alive in unique and different ways, and allow it to survive and get to some scale.  I was pleased to hear that there were fellow travelers out there like Sayles.  The roads may be different but they are all long and hard, and when we’re lucky, as we were in Chalmette the other night, they meet at the crossroads and give hope to all of the travelers moving on the waysides to a better future.

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