A Moratorium On Due Process

Atrios links to Felix Salmon's discussion of Tim Geithner's argument against a foreclosure moratorium:

I think its important to recognize, Charlie, that if you a national moratorium would be very damaging to exactly the kind of people were trying to protect, because the consequence of that would be in neighborhoods that have been most affected by the foreclosure crisis, where you see lots of houses on the block empty, unoccupied, what it means is those communities will be living longer with houses unoccupied, with more pressure on their house price with the people still in their houses.

Salmon recognizes that foreclosure is in fact the process by which many of these homes are emptied. In response, Geithner argues:

First, at least 40 % of all homes in foreclosure are vacant. Delaying conveyance of title and resale has devastating impacts on neighborhood values and increases demand for municipal services.

Also, a blanket moratorium equally impacts the banks that are acting in accordance with the law increasing costs for servicers and investors. This threatens the safety and soundness of smaller community banks that are not part of the document problem and ultimately limits market liquidity preventing low and moderate income borrowers from refinancing or buying a house as investors are ever more hesitant to lend to all but the most pristine credit borrowers.

I don't have time for a detailed analysis, but let me quickly say this- that what bothers me is the moratorium on due process in foreclosures proceedings. If Geithner wants to allow foreclosures to proceed on uncontested foreclosures involving vacant properties, I personally would not object (others might have reasons why this is a bad idea, I'm not familiar with these arguments.)

But Geithner is dreaming if he thinks the main reason the properties have remained vacant is due to stumbling foreclosure processes. There are few new buyers for these properties because the economy is in the toilet, not because a couple of weeks ago people woke up to the fact that foreclosure fraud was going on.

Geithner is truly one of the most incompetent Treasury Secretaries we have ever had.

Speaking for me only

< Wednesday Open Thread | A Moratorium On Due Process, Cont'd >
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    Why not focus on the fraudsters? (5.00 / 1) (#13)
    by roy on Wed Oct 13, 2010 at 07:42:52 PM EST
    I wouldn't mind stopping known fraudulent-foreclosers from doing more foreclosures, assuming the proof of fraud is strong enough.

    But I don't understand the appeal of stopping all foreclosures in the country.  Isn't it supposed to be unjust to punish people (or organizations of people) who haven't been shown to have done anything wrong?  When the story of the day was home-buyers who lied about their income to qualify for loans, we didn't declare a moratorium on home-buying.  When gas stations price-gouged during hurricanes Katrina and Rita, we didn't ban selling gasoline, we punished the stations who broke the law and let the rest make a responsible profit.

    I think a mandatory moratorium would hurt future home-buyers as well.

    One of the reasons home loan rates are as low as they are -- compared to other loans available to the same borrower -- is that the house is strong collateral.  Car loans are higher partly because the collateral loses value quickly.  Unsecured loans are even higher because there's no collateral at all.  A moratorium tells lenders that houses are worse collateral than they thought, and there's no practical way for the lender to counteract that change because even following the rules didn't exempt them from the moratorium.  After the moratorium is lifted, there will be some new and stricter rules, and the good lenders will follow those too.  But we've already proven to them that following the rules doesn't help.  Houses won't be as good collateral as they used to be.

    So lenders will charge higher rates.  Seen another way: borrowers won't be allowed to take full advantage of the value of the house as collateral.

    sir, i must vigorously disagree! (5.00 / 1) (#16)
    by cpinva on Wed Oct 13, 2010 at 08:08:32 PM EST
    Geithner is truly one of the most incompetent Treasury Secretaries we have ever had.

    clearly, you have no understanding of what the job of treasury secretary entails. no doubt, you suffer the delusion that it has something to do with the public good. not so. the job is simply to ensure that the banking and finance industries are well cared for.

    by that definition, secretary geithner may well go down in history as one of the best ever.

    There are few new buyers for these properties because the economy is in the toilet, not because a couple of weeks ago people woke up to the fact that foreclosure fraud was going on.

    surely that can't be! why, there must be potential buyers, lined up around the block, cash falling out of their pockets, just waiting to pounce on these properties, the moment title clears!

    ok, maybe not.

    Tim Geithner is a disgusting POS (5.00 / 1) (#20)
    by Militarytracy on Wed Oct 13, 2010 at 09:36:41 PM EST
    But his plan can't work if the banks can't "earn" their way to solvency.  In your earlier diary you point out that most of these mortgages are owned by Fannie now.  They were troubled assets that Fannie (me and the taxpayers) bought when we bought the mortgage backed securities.  The banks sold the notes into securities and those securities were in the end such junk I now own them.  So I don't understand how most of what is going on plays out with any sort of legality or how it has been going down before the facts became exposed somewhat to the public that the homes have been going to the big banks.  The homes are mine you phuckers, my grandchildren paid for them!

    If someone thinks it is unfair that someone should be able to stay in a home for free, the illegality of everything that has gone on has many facets.  Like people such as me, paying my mortgage on a house that there may no longer be clear title to.  Timmeh can suck it, he is a total slob and a noted failure at everything he has ever touched.....but as William Black points out such people have their political uses.

    Geithner is Not Incompetent (5.00 / 1) (#25)
    by msaroff on Thu Oct 14, 2010 at 02:52:19 PM EST
    He is corrupt, though one can use the term "regulatorily captured", if you want to be genteel.

    I would also note, as Prof Delong does, THE COSSACKS WORK FOR THE CZAR!

    It ia not just the Geithner is owned by Wall Street, it is that Obama is as well.

    Not sure yet on Obama (none / 0) (#27)
    by BobTinKY on Thu Oct 14, 2010 at 03:33:49 PM EST
    Geithner is defintely, knowlingly in the employ of Wall Street.  I think there's a chance Obama, a poly sci major and lawyer, may, like many lawyers I know, be ignorant and rather afraid of finance and math. He delegated all this to those most seemingly smart and smooth, Summers & Geithner, thinking Volcker was a fossil and Warren a non-expert lawyer like himself.

    It's pretty sad that I think that, that that is how one might most generously describe his actions/inactions.  The President is incompetent in these matters and being led around by crooks.  Not the first time, read about the Grant Administration.  Even after accounting for the decades long Southern Dem trashing of all things Grant, as President he allowed himself to be used by sharks not much different from those swimming around us today.


    Artios' Serious Question: (4.75 / 4) (#2)
    by Robot Porter on Wed Oct 13, 2010 at 05:24:46 PM EST
    has there been any step taken with respect to housing which wasn't in the banks' best interests? Any? Serious question.

    No steps that I can see.  

    And this, not some liberal over-reach, is why the Dems are in the state they're in.  

    Because it looks like they love banks, and hate people.

    And Who in Their Right Mind... (none / 0) (#1)
    by ScottW714 on Wed Oct 13, 2010 at 05:17:37 PM EST
    ... Is going to buy a foreclosed home today ?

    Yepper, the potential title clouds are huge (none / 0) (#3)
    by BTAL on Wed Oct 13, 2010 at 05:59:21 PM EST
    Not me (none / 0) (#21)
    by Militarytracy on Wed Oct 13, 2010 at 09:39:07 PM EST
    If you can't get title insurance on it you are playing with giant fire and begging to be screwed over.

    Not me either... (none / 0) (#26)
    by kdog on Thu Oct 14, 2010 at 02:58:05 PM EST
    might squat one of these seemingly abandoned dwellings if things ever went south with my sweet old landlady...but never buy.  

    How could you ever be sure the guy selling it actually owns it?  It would be like the old "wanna buy the Brooklyn Bridge?" scam, as the banks have as much rightful title to some of these dwellings as I have rightful title to the Brooklyn Bridge.


    There is a house I pass every day (none / 0) (#31)
    by Militarytracy on Fri Oct 15, 2010 at 06:09:06 AM EST
    taking Joshua to school.  I'm very visual so I've always admired it.  The shutters have always been carefully freshly painted, it has a large barn storage shed painted carefully to match the house.  The people who have lived in it put new lighting outside for the porch area, very attractive.  And they landscaped in such a way that they chose plants that were part of the color scheme of the house.  The lawn was always carefully and beautifully tended too.  It is an older home but they loved it and it shows.  It has been vacant for three months now, so strange to drive by and the landscaping and lawn are all growing out of control.  I wonder what happened to them.  Lots and lots of vacant houses around here now, but that one is sort of shocking.

    That makes me really sad (none / 0) (#32)
    by sj on Fri Oct 15, 2010 at 08:52:41 AM EST
    Argh (none / 0) (#4)
    by Ga6thDem on Wed Oct 13, 2010 at 06:12:16 PM EST
    Geither is an idiot. I have houses that have sat for 2 years in my neighborhood. This is typical supply side gobble-de-gook. There apparently is more houses than there is a demand for. And in theory what he is saying is true but theory is not reality.

    I have seen this before (none / 0) (#7)
    by Rojas on Wed Oct 13, 2010 at 06:26:25 PM EST
    Got the T-shirt.
    When these houses go to auction someone will buy them. Might go for a nickle on the dollar or they may get 90 cents... Someone will pony up.

    This house (none / 0) (#17)
    by Ga6thDem on Wed Oct 13, 2010 at 08:26:40 PM EST
    went up for auction and no takers. Some have been bought at auction and others not.

    and the ones that have sold (none / 0) (#18)
    by Ga6thDem on Wed Oct 13, 2010 at 08:28:19 PM EST
    the seller has a minimum so it's not like people are really getting a deal at this point. yes, they are selling for less than they did in the bubble but it's not like they are getting them for 5 cents on the dollar. The banks would rather sit on them than sell them.

    Back in the day of the S&L meltdown (none / 0) (#19)
    by Rojas on Wed Oct 13, 2010 at 09:08:19 PM EST
    I know of many that went for 20 to 30 cents on the dollar in the DFW market. These were 1 to 4 year old homes in good shape. Lots of others that needed some work in the 5 to 20 cent range.

    Well (none / 0) (#23)
    by Ga6thDem on Thu Oct 14, 2010 at 05:10:10 AM EST
    all I can say is that isn't happening here. My brother bought a foreclosure in another state and he had to jump through hoops to get the bank to sell it. and after all that they would only cut the price to a certain point.

    Right... (none / 0) (#24)
    by ScottW714 on Thu Oct 14, 2010 at 11:50:01 AM EST
    The $.05 on a 1.00 is a myth you have seen on a 'how to get rich quick' infomercial.

    Send me one example.

    If there were $1,000,000 homes going for $50,000 I'll take a couple, maybe more at these interest rates.

    Foreclosed are discounted and usually the minimum price is what the holder of the lien is owed, maybe a slight discount if the home is trashed, but it's not the norm.


    Not the norm is the point (none / 0) (#28)
    by Rojas on Thu Oct 14, 2010 at 04:15:05 PM EST
    Were you in Texas in the eighties? And if you were would you have been even close to the age of consent?

    It was certainly not the norm but the conditions in Texas at that point in time are very similar to what many real estate markets are in today.

    I saw houses that had sold for 115k at the peak of the boom go for 28k a couple years later at auction.

    I had one client purchase a "house" for 350k that had never sold. It was a builder's personal residence they forclosed on. He put about 600k into it and sold it four or five years later for 2.6 million.

    Just about everyone who had bought in the five years preceeding the crash were under water. It was just a fact of life.


    Contrary to geithner (none / 0) (#5)
    by pluege2 on Wed Oct 13, 2010 at 06:16:01 PM EST
    Keeping houses off the market would be more helpful to the economy. If people have the where with all to purchase a house, better (for the economy) that demand stimulate construction, then purchase a foreclosed existing home.

    Bankster need to just write the crap off. But of course their protector geithner would never let them take a hit for their malfeasance.  

    Right, these people (none / 0) (#14)
    by me only on Wed Oct 13, 2010 at 07:50:05 PM EST
    aren't paying their mortgages, but surely they are paying their property taxes...

    Or maybe not.


    Oh, my gawd (none / 0) (#22)
    by gyrfalcon on Wed Oct 13, 2010 at 11:21:36 PM EST
    The mind reels.  Is this the homebuilder industry talking point now?

    Yes. The construction industry is reeling (none / 0) (#29)
    by Cream City on Thu Oct 14, 2010 at 04:38:04 PM EST
    as well I know from my two unemployed stepsons.  

    And yes, the new-home starts are a key indicator to which many businesses look for signs of hope.  So the horrible slide in new-home starts is a major reason right now for many business types to hold little hope and to be holding back on doing what we need to do to make this economy grow.

    So there is something to be said for this mindset, much as it makes minds reel.  It's all part of the monstrously complicated mess of this economy, and more reason why I really don't see Obama and Co. capable of fixing it, as they attempt to appease all of these different business constituencies.  Each move is so incremental and only upsets another sector.

    There is need for a grand plan.  They have none.


    Oh, I do know the industry (5.00 / 1) (#30)
    by gyrfalcon on Thu Oct 14, 2010 at 11:44:41 PM EST
    is in very bad shape, but the idea that tieing up foreclosures will make people turn to new homes is just ridiculous for all sorts of reasons.  Any old port in a storm, I guess, but still.

    If I wanted to buy a house that was vacant but not (none / 0) (#6)
    by steviez314 on Wed Oct 13, 2010 at 06:23:03 PM EST
    foreclosed on, who would I buy it from?  And how would I even know it was available?

    If it's for sale (none / 0) (#8)
    by Cream City on Wed Oct 13, 2010 at 06:35:23 PM EST
    it's in listings of, um, houses for sale.

    If it's not for sale, it's just vacant.  Like mine is if I'm away for a month.

    So I think that I am not getting your question.  Maybe someone else will. . . .


    I was talking about those houses where the (none / 0) (#9)
    by steviez314 on Wed Oct 13, 2010 at 06:42:57 PM EST
    owners have just walked away, left the keys in the mailbox for the bank.

    They're not putting up the for sale sign.  And I assume the bank can't do it until they officially foreclose legally.


    Most of those owners walk away because (none / 0) (#10)
    by ruffian on Wed Oct 13, 2010 at 07:05:02 PM EST
    they are underwater on their mortgage - owe a lot more than the house can sell for in his market- and the banks are just as slow on approving short sales as they are on foreclosures. so the people don't bother to try to sell- they just let it go to foreclosure. In those cases you can try to make a short sale happen, but without the cooperation of the mortgagee, it might be impossible. Probably have to wait for the foreclosure.

    That's why I wouldn't include these in any blanket (none / 0) (#11)
    by steviez314 on Wed Oct 13, 2010 at 07:21:53 PM EST
    moratorium...they'd become zombie houses.

    then who forecloses on it? (none / 0) (#12)
    by nycstray on Wed Oct 13, 2010 at 07:40:06 PM EST
    wouldn't they still need to be in the moratorium to sort out the paper before they could be sold?

    You were talking about buying (none / 0) (#15)
    by Cream City on Wed Oct 13, 2010 at 07:55:34 PM EST
    unquote, a house.  So it would have to be for sale, hmmmmm?  But now you're talking about houses not for sale.  Whatever.