Tag Archives: housing

Bank Mortgage and Foreclosure Problems Won’t Go Away

zombies1-300x237New Orleans  No matter how many billions banks pay to try to whitewash their devastatingly destructive behavior in milking home owner mortgages and turning homeowners every way but loose, they can’t make the mess go away.  The stains and scandals are indelible and their refusal to change their culture or their standard operating practices guarantees that no matter how much they run, the stench – and headlines – will surely follow.

            Here are yet more recent examples.

·      A judge has refused to allow Wells Fargo to offload $49 billion worth of home mortgage servicing to Ocwen Financial of Florida, because the judge is not convinced that Ocwen will not make a mess of it.

·      A nonprofit, public interest group called Better Markets, Inc. sued the Department of Justice claiming that the $13 billion with JP Morgan Chase, just doesn’t get it.  Better Markets argues that there should have been criminal charges and the bill of particulars should have been presented in court where everyone could view the full range of conduct. 

But, my favorite is the action being taken by New York’s Attorney General, Eric Schneiderman, who has signaled that he is going after banks for their failure to take responsibilities for what the industry affectionately calls “zombies.”  So what are zombies in this modern banking nightmare of the walking dead?   After banks foreclose and push a family out of their homes or a family just realizes there is no hope and abandons the property, the banks don’t do what it takes to maintain the property, thereby extending the damage past the affected family to the entire community.  Numerous studies have found that an abandoned house can lower the property values in an entire neighborhood from 1 to 2% if such a house is located within blocks of your home up to a half-mile away. 

The response from bank spokespeople?  The long whine!   They claim they do their best.  They claim that they keep boarding up, but it is those damn vandals.   But, who believes this?  It is well established that the maintenance and security of a property can cost a bank $50,000 or more, and in negotiating with banks about modifications, we were always careful to remind them that pushing a family out of their home was not a free ticket to ride.  They know there are costs, but here’s rooting for New York, and then all of the rest of states to make them pay.

The real reason we have zombie properties rather than homes where families live, is because we still have ghost banks protecting the inflated values of their supposed assets on home values before the recession rather the reality of the market now.  But in the land of the walking dead, where ghosts and zombies are now part of American communities, banks need to learn that there is no running from them or themselves, until they finally, simply do right.


Submerged State

submergedstateNew Orleans   A frequent theme in the years leading up to the complicated and star crossed rollout of the Affordable Care Act or Obamacare among the pundits, editorial writers, and commentators tried to nick the President for his weak kneed efforts to “sell” the program to the American public.  Reading Cornell Professor Suzanne Mettler’s Submerged State:  How Invisible Government Policies Undermine American Democracy, you get a better idea of not only the entrenched interests that have to be conquered to achieve any changes but also the codependency of both parties and virtually all politicians in hiding the hands of government on the real levers leading to such critical confusion that democracy itself is endangered.  In short, it’s hard to sell a product that is almost deliberately designed to be obscure.

            Mettler takes her starting point at the Tea Party absurdity of people yelling at politicians that they hate Obamacare but wanted the federal government to keep its “hands off my Medicare,” seemingly not realizing that Medicare is of course a federal program.  She marshals extensive evidence, easily available, that the complexity of government programs is such that the vast majority of Americans are also unclear that Social Security is a government program as well, even though we have now had such a federal program since 1935, a full 46 years after Germany created the first government retirement scheme.  

If Mettler were writing her book now, she as likely would have combined the farcical Medicare point with Obama’s apology for his blanket promise that, “if you liked your current policy, you can keep it,” without spending the time and trouble to explain that he was specifically not talking about the total ripoff, though sometimes cheap, policies that some people had that are vastly inferior to the requirements of Obamacare.  In this case a man had to bite the dog as well, since Obama’s one-year extension allowing these fake policies another year of life given all of the rollout troubles, severely weakened the transition required under the Affordable Care Act to such a degree that a number of state insurance commissioners refused to go with the President’s change.  Mettler would have quickly pointed out that this stumble was due to an unwillingness to confront the “submerged state” represented by the insurance companies and call them out for selling crap in the name of real protection.  Needing their acquiescence and that of their hordes of lobbyists, the President was eating crow when he should have been spitting fire.

It’s hard to argue with Mettler.  If you conceal how things really work and what they really cost and who really benefits, because having the people understand how things really work might mean the deluge, then getting them to fully understand and act under a democracy is more and more daunting.  Her argument is a healthy antidote even to the “nudgers” and “default option” approval advocates among behavioral, libertarian paternalist economists, who mean well, but are also trying to “hide the hand that throws the rock” in their case for “peoples’ own good” perhaps, but for those of us still holding out hope for democracy, it’s another rock to push up the hill.