Wikinvest Wire

Mortgage lender blowback

Friday, May 01, 2009

Two stories in today's Wall Street Journal tell of a legal system that has become increasingly irritated by what the nation's mortgage lenders have left in the wake of the late, great housing bubble. First, from Indio, California, this report on how a law passed last year allows banks to be charged with a criminal misdemeanor if their foreclosed properties start to look trashy.

The upshot is that faraway banks have become the de facto landlords of Indio, and people here say the absentee lenders are letting the whole valley fall apart. Houses "look like dust bowls," says Gene Gilbert, the mayor pro tem, who thinks a glut of run-down homes may depress his hometown's local market long after the recession ends.

Criminalizing things like algae in a pool has given Mr. Ramos [the local police chief] a stick to make lenders snap to attention. Without that threat, the police chief says, "far-off banks, billion-dollar corporations, they could simply ignore us."
Isn't it about time that banks start abandoning foreclosed properties in large numbers, turning ownership back over to the local government?

Maybe not in Indio where the median home price is still well over a hundred thousand dollars, but, in other parts of the country, where prices are much lower, this would make sense.

Thousand of miles to the east in sunny Florida, another of the many former housing bubble locales, the Journal reports($) that former Countrywide CEO Angelo Mozilo was in the news again. It seems that a lawsuit filed by the state Attorney General regarding deceptive lending practices was remanded back to the local court where the environment is expected to be less favorable to the Orange Man.
This week, a U.S. District Court judge remanded a lawsuit against Mr. Mozilo, filed by Florida Attorney General Bill McCollum, back to Broward County Circuit Court. While the action is a procedural move, it increases the possibility that Mr. Mozilo, at one time the head of the nation's largest mortgage lender, could appear in court in the state of Florida. The state alleges that Mr. Mozilo engaged in deceptive and unfair trade practices involving mortgage loans made to state borrowers.

If Mr. Mozilo's case does go to trial, he would be the highest-profile mortgage executive to face such legal action since the mortgage-market meltdown began. "Angelo Mozilo should absolutely face a Florida court and Florida's citizens for his business practices, especially those which victimized Florida homeowners," Attorney General Bill McCollum said in a statement. Mr. McCollum added that his office "will continue to aggressively pursue its case against Mr. Mozilo."
Having been mentioned here at this blog on dozens of occasions in recent years, the world's largest Oompa Loompa is sometimes missed but, normally, that feeling passes quickly.

8 comments:

kwark said...

At this stage of the game, I'm not so sure that cash-strapped local governments would be particularly happy taking charge of hundreds, possibly thousands, of foreclosed properties. They're already at the point of considering "do we keep the keep parks open this week or patch pot-holes?" Keeping unused pools algae-free would probably be rather low on the list of priorities and not a welcome addition to the city's liabilities.

Anonymous said...

The solution is very simple. Drop those prices.

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John S said...

"At this stage of the game, I'm not so sure that cash-strapped local governments would be particularly happy taking charge of... foreclosed properties."But if they're trying to extort cash from banks by criminalizing algae bloom they deserve it. Perhaps the banks should sell the houses for 1 dollar to the first marijuana farmer or crack distributor that shows up, stimulating the local economy. Failing that, the government could print up another big load of Obama Bucks, buy every repossessed home in the U.S. from the banks -- at its 2005 price -- and burn them to the ground.

Bill Jones said...

What's this crap about "turning ownership back over to the local government?"

When did the "local government" own them ?

It's this kind of half-witted thought that has destroyed America.

Tim said...

Nice tone Bill. A couple related articles:

Governor Granholm, MSHDA Announce Over $7.5 Million for 15 Michigan Entitlement Cities LANSING, Mich., April 29 /PRNewswire-USNewswire/ -- Governor Jennifer M. Granholm together with Michigan State Housing Development Authority (MSHDA) Executive Director Keith Molin today announced over $7.5 million in grants to be distributed to 15 cities across the state through the Neighborhood Stabilization Program (NSP). The grants are the first round of NSP funding in Michigan that could total as much as $22 million over the next six to nine months. This initial funding will support the redevelopment of 116 residential units and the demolition of 276 blighted units throughout the state.
...
Molin pointed out that timing is critical because foreclosures and abandonment are threatening the property values of other community residents.

"Not only are foreclosures bringing down property values and creating blight, but many of these homes have been abandoned and are actually posing a serious threat to the surrounding neighborhoods, Molin explained."

Genesee County Land Bank: putting property back into productive useIn Genesee County, particularly in Flint, dilapidated and abandoned houses, empty lots, and vacant buildings abound, blighting neighborhoods and depressing tax revenues. The problem has many sources, and public policies have discouraged communities from regional planning.

A land bank is a public authority created to hold, manage and develop tax-foreclosed properties. Land banks in Michigan can borrow money and issue bonds; enter into contracts and agreements with local governments; invest funds; collect rent; and purchase, hold and sell property.

dangermike said...

the first anonymous hit it on the head. The only thing they can hope to do by pushing charges and fines on the banks holding these properties is pushing them to selling them faster, and frankly, that means dropping prices as much or more than the anticipated costs of maintenance and/or assessments over the amount of time it would take to unload the property.

albrt said...

In places where local governments are reasonably efficient, they clean up the toxic pools and such because they are health hazards. The local government normally records a lien against the property, with a priority similar to a tax lien.

And Bill, you're an idiot. All Anglo-Saxon land titles come from the king. Ever since the king was nice enough to start giving away some of his land, the local governments have been taking it back if the owners fail to pay taxes or comply with orders to abate public nuisances.

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