Friday, April 4, 2008

US banks don’t want the empty houses!

Lenders Swamped By Foreclosures Let Homeowners Stay

Banks are so overwhelmed by the U.S. housing crisis they've started to look the other way when homeowners stop paying their mortgages.

Posted by tyrellcorporation @ 06:57 PM (734 views)
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12 thoughts on “US banks don’t want the empty houses!

  • mark wadsworth says:

    TC, that is a brilliant find, well done.

    Reply
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  • Mikelivingstone says:

    It’s like one of those arcade games with the piles of coins and the sliding arm. A big pile is forming at the edge of the precipis and very soon will fall off whilst yet more coins make their way to the edge.

    Eventually someone will collect the winnings. Probably us STRers.

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  • This is in fact exactly the same process of putting off Debt that has inflated this problem. Instead it is now the Banks who no doubt are borrowing themselves to meet their debts in the hope that everything will be OK in a little while.
    Are they able to recoup their losses through normal and new business?
    I wonder how long the Central Banks can support them and how much the Tax Payer and the Economy can take.
    This seems to be an ever increasing problem feeding itself. Perhaps the clever people who started this can sort it out.

    Any theories other than disaster ?

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  • I wonder if actually the banks in some circumstances cannot reposes properties as, due to the exotic nature of structured credit derivative products, they don’t hold the physical deed. Therefore, it’s better for the banks to turn a ‘blind eye’ as they would hate for the populous to question this fact, perhaps.

    There was a post a few weeks ago about a guy in San Fran who told the bailiffs to come back when they had the deed document and the bank let it go as they didn’t. At the time it was said that some 30% of all mortgage debt couldn’t be linked to the actual deed docs. The situation, if this is accurate, could be very interesting and I wonder if applies to the UK market too?

    @Plato “I wonder how long the Central Banks can support them and how much the Tax Payer and the Economy can take”: I think the issue is about confidence as any amount of money can be ‘created’, but it’s still borrowing which raises questions about solvency, and I can’t see how this can change until this cathartic process has run its course, which won’t be anytime soon. We’re still at the beginning here.

    And I too would like to hear some opinions other than ‘disaster’.

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  • Good one Mr ‘layers’….but I dare say in the UK there is some fiendish loop hole that lets the banks off the hook.

    Still it’s a nice thought…….free homes for everyone, so we can spend our money on essentials like food and clothing, or God forbid help pay off the kids student debt!

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  • Note the median property value – £100k – down from £115k in the summer of ’06. Now remember that US houses are a lot bigger (on average) than UK ones – they’ve jumped off a molehill, while we’re jumping off a mountain…

    If the banks don’t foreclose, more people will stop paying their mortgages, which could lead to a culture of ‘they can’t evict us all’

    That, in fact, is a much bigger risk in the UK – when the downturn really bites. Remember that UK local authorities have an obligation to find housing for evictees..

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  • TC

    I remember that.

    If I understood it correctly, it centred on a judge ruling that a bank that only had one part of a mortgage that had been chopped, diced and parcelled up as CDO’s could not foreclose. That to do so they had to own the full mortgage – implying that the CDO’s would need to be dismantled, and the individual mortgages re-constituted.

    I’ve not heard any more about this though.

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  • @layers, titanic…. As I understand it, when a mortgage is securitised and sold on to investors, the title deed legally stays with the lender. In theory this should make it easy to file suit or send round the bailiffs. However in America over 200 mortgage-lenders have gone bankrupt (see the The Mortgage Lender Implode-O-Meter), and when companies go bust they tend not to pay much attention to paperwork. So your theory could be accurate, they don’t bother evicting because they can’t prove ownership.

    It’s also possible that the banks see little point in foreclosing. The bank could conceivably get more money by allowing homeowners to skip a few payments while they’re out of work, then continuing payments when they find a job again – rather than repossessing and trying to re-sell in a stagnant market.

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  • So the more up to your eyeballs in debt and the lower the amount of equity in your house, the less chance of getting repo’d!

    I guess if making the margin call is going to cost more than you are likely to get back, then there is no point going after reposession. If so STR makes even more sense if you have any equity.

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  • There was also this story before my previous quote:
    “Deutsche Bank got a hard shock a few days ago when a judge in the state of Ohio in the USA made a ruling that the bank had no legal right to foreclose on 14 homes whose owners had failed to keep current in their monthly mortgage payments” Nov 2003 http://www.globalresearch.ca/index.php?context=va&aid=7413 – original article was mainstream and I can’t be ar*ed searching google, but the quote is as I remember it.

    So I believe this is more evidence of potential forthcoming financial turbulence – let alone Corporate debt and the bond market, but then this is only a best quest estimate.

    @drewster – interesting point re: mortgage lenders. Anyone know where the papper trail actually leads, or how the process works?

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  • Sittingitout says:

    People in these situations won’t be let off the hook becuase the lenders are in a fragile situation. My guess is that they may “overlook” the the problem now but when things turn/stabilise 5 years+ they’ll be be after the the rolled up interest.

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  • sold 2 rent 1 says:

    WOW.

    This could turn out to be “a safety in numbers” event
    Remember our non-payment of poll tax back in in 1990s.
    Can this situation be maintained or is there a “tipping point” where non-payment of mortgages goes mainstream?

    “And I too would like to hear some opinions other than ‘disaster’.”

    I’ve been telling you guys that there is optimism in the end, but this destruction process is here for a reason and is a necessary part of evolution.

    May is looking interesting.

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