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?