Two landmark developments on August 16th give momentum to the growing interest of cities and counties in addressing the mortgage crisis using eminent domain:
MERS is the electronic smokescreen that allowed banks to build their securitization Ponzi scheme without worrying about details like ownership and chain of title. According to trial attorney Neil Garfield, properties were sold to multiple investors or conveyed to empty trusts, subprime securities were endorsed as triple A, and banks earned up to 40 times what they could earn on a paying loan, using credit default swaps in which they bet the loan would go into default. As the dust settles from collapse of the scheme, homeowners are left with underwater mortgages with no legitimate owners to negotiate with. The solution now being considered is for municipalities to simply take ownership of the mortgages through eminent domain. This would allow them to clear title and start fresh, along with some other lucrative dividends.
After the housing bubble burst there was sympathy for first-time home-buyers who had been enticed in by the easy loans and rising home prices and wound up in trouble.
But investors in single family homes came to be castigated as 'flippers', 'suckers', and worse. They had played a significant role in creating the bubble, signing contracts, often on multiple homes, making virtually no down payments, not intending to ever live in or even rent out the homes, but to simply flip them for a quick profit. Builders could hardly keep up with demand for a while, but wound up with wastelands of partially completed developments and condo projects, especially in the sun-belt states.
That 'investor' activity resulted in much of the subsequent pile-up of defaulted mortgages, foreclosed properties, and record high inventory of unsold homes that has had the housing industry in a five-year depression.
During the summer of 2006, our analysis indicated that the top of the housing market was likely in place and we predicted several years of financial market turmoil as the most speculative real estate bubble in US history imploded. The initial phase of the secular decline in housing prices has proceeded exactly as expected since then and it has now been more than five years since the market turned down.
Although this last bubble was unprecedented with respect to the speculative excesses that were introduced into the system, the ten-year housing cycle has been very reliable historically, so we have been expecting the next bottom to form in 2011 or early 2012.
Over the past two years or so, I have continually written about the problems that exist in commercial real estate lending, especially the problems faced by many commercial banks in the United States.
Many commercial banks, especially the less than gigantic ones intent on growing and becoming more of a force in their local or regional areas, turned to the commercial real estate area over the past decade to "scale up" their organizations. These larger loans allowed the "smaller" banks to increase their asset size quite rapidly and, given the means and the encouragement of the regulators, could finance this loan growth by "purchased" funds rather than rely upon "local" deposit growth.
Of course, many of these organizations knew little or nothing about commercial real estate. But, they could hire an "experienced" commercial real estate lender and then, with the support of their regulators, could write a policy document on their commercial real estate lending operations and forge bravely ahead to greater fame and glory.
Lenders have become increasingly cautious about lending on properties that have been "flipped." For those of you that aren't aware of the term, a "flip" of a property refers to the rapid sale of a property from the time it is first purchased to when it is sold. In the lending world, if a sales contract is written prior to a seller owning a property for 90 days the transaction is a flip.
As a consumer or a seller or a real estate agent, how does this apply to you and why should you care?
|1.||Obama’s $3 Million IRA Cap|
|2.||Here’s Why Next Week’s Economic Reports Are The Most Critical in Months|
|3.||What Next When Dividend Stock Holdings Become Overvalued?|
|4.||Warning Signs For Market Are Becoming Ominous|
|5.||Real Estate, Especially Commercial Real Estate, Still A Major Problem|
|6.||Can a Court Revoke your Advance Health Care Directive?|
|7.||Bond-Choking Central Banks Expand Investment Menu|
|8.||Understanding How Seasonal Market Strategies Work|
|9.||M&A Bankers Away as Elephant Hunters Play|
|10.||4 Key Facts About Gold Investing That You Might Not Know|
This video requires a membership subscription with greater access rights than you have currently.