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Monday, December 10, 2007

Foreclosures and the neighborhood

Have you got a house that looks like this in your neighborhood? Maybe the foreclosure on your block isn't boarded-up. Maybe it just looks a little worse for the wear or the lawn was a little long and ratty looking (thank goodness for the snow). In some urban areas the foreclosed houses are easy to spot - they're the ones that have been stripped - aluminum siding gone, plumbing gone, anything of value gone. In nicer neighborhoods it may be harder to spot a foreclosed and empty house, until you get a lot closer, then the lack of maintenance and attention shows through.

Various groups in Washington are wrestling with what to do with this foreclosure mess. Much attention has been focused upon working out a way to avoid foreclosures by freezing the ARM resets that are coming due. Little has been discussed about what to do for the homeowners who are already into the foreclosure process. Many of these people had ARM resets this year and couldn't handle the new rates. Lots of those folks are now in the 6-month redemption period. Hundreds of homes have already been lost to foreclosure and now sit on the market - abandoned and decaying. All of these empty houses are now driving down the neighborhood values for the other homeowners who aren't in foreclosure.

One proposal being put forward to help epople already in the foreclosure process is to do "value resets" on the properties - limit the recovery claims of the lenders to the current market value of the homes, rather than the amount that was originally borrowed. That might allow the foreclosed homeowners to remortgage on the new, lower values of the properties and save their homes. Of course, the bankers don't like that idea at all. They would rather take over the houses and sell them at a loss than "forgive" any part of the original debt. It's sort of like the neighborhood loan shark who doesn't want to be perceived as a softy, in fear that others will take advantage of him. So he says, "I'd like to let you off the hook on this loan, but I'm afraid I'm gonna hafta break your leg instead -you understand, I can't look like a soft touch." You gotta love the logic of this approach.

The other argument by the lenders and bond holders is that many of these loans were based upon fake statements of income and assets, and backed up by hyped-up appraisals; so, they should be allowed to fail. I have no sympathy for any buyer who used those methods to fraudulently obtain a loan; but, I also cannot let the lenders off the hook for running their businesses so loosely that they had no mechanisms in place to spot these frauds. Now, they're claiming to be the victims not the bad guys. Well, duh! You hired the bad guys to go out and sell these loans in the first place and then didn't do any due-diligence in the management of the process.

It's amazing how pious the greedy can become when their plans to rape and pillage the landscape go bad. Their "poor little me" cries should be falling on deaf ears everywhere. As I stated before in this blog, it's also amazing how many of the clowns in charge of the biggest messes this time are the same clowns who lead their S & L's into the S & L debacle years ago. They did no jail time then and they'll likely get off this time, too. They'll be back with the next big idea of how to get you the home of your dreams for no money down - no matter how much you owe. Now, that's the American Dream.

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