Since the inception of the so-called “mortgage crises” industry veterans have waited for the all-too-important signal from the federal government that an escape plan had been hatched. Those of us in the industry are well-aware of the importance of government’s endorsement and support for a strategy that would result in:
1. A return to sanity in mortgage lending standards which were previously ridiculously low, and are now egregiously high.
2. Dilute the excess inventory that sits idle, allegedly due to compliance issues discovered post-crises, that are not only a blight on communities – but a drag on existing homeowners values.
3. And, return the country to economic growth that is heavily dependent on appreciation in the residential real estate markets.
That incessant sound of crickets is going to drive me crazy….
Last week I came across an article that predicted that the backlog of foreclosures was likely to be a drag on the U.S. economy through 2012 – “Eureka!” As I thought of this novel admonition, it struck me as odd that the writer would submit such a known commodity as if it wasn’t a universally understood truth? I wondered, “Is it just me, or is it obvious that the same linchpin has continued to strangle the U.S. economy since the last quarter of the George (“HW”) Bush reign?” So I went back and reviewed a number of articles that I had read over the past couple of years to make sure I wasn’t recollecting through premonitions. Sure enough, I found several articles that offered the same prediction (see a few below). I think it is time to start discussing the possibility that our political leaders are operating as a singular political Godhead. While I realize the vitriol that various partisan species will spew in response to my preposterous claim, I operate in the Missourian motto – ‘The Show Me State’ – and I have seen the same lack of assertiveness from both political dichotomies when it comes to offering real solutions to the obvious….None.
As my colleagues and I attempt to resolve the mortgage dilemmas of our clients, we are constantly faced with bankers that are reticent to entertain creative solutions yet willing to accept trustee sale offers that net less to their institution, while costing significantly more in legal fees than the “short sale” offers that they summarily reject. I am told that the incentive to do so is the result of compensation that paid through U.S. governments collusion (yes, I said it), sometimes referred to as the “mortgage bailout,” which creates a stipend of sorts (through mortgage insurance) for properties that survive the foreclosure process and sell at trustees auction. If true, it would not only explain why banks illogically reject fair priced offers on the open market that supersede trustee sale, it would also explain a surreptitious benefit to delaying the release of foreclosed inventory: “How better to sustain the reimbursement system than to modulate how much demand you put on the claims department (the Federal taxpayer)?” The worst part about this potential financial Zapruder film is that, if true, the citizens are being hornswoggled into paying for the sins of the bank in triplicate:
1. They’re paying with an economy that is a virtual shell of its former self. Remember, the Clinton Administration had erased the deficit.
2. They’re paying because government contributions are ultimately picking up the tab for the mortgage insurance reimbursements.
3. They’re paying because in rejecting equal to or higher pre-foreclosure offers for the trustee sale offer, the values of existing homeowners are being unnecessarily depressed. Resulting in less property tax revenue, lower asset values, etc.
In essence, we can only solve this problem by honestly assessing the overall impact of our policies, arriving at a strategic response, and proactively moving in the direction of real solutions. None of the “decisions” of the current of prior administrations has moved the U.S. economy any closer to removing this albatross.