Is it the homes- or the people we’re worried about? Foreclosure crisis

The redistribution of wealth continues. Foreclosing on people who at one time were making payments, but stopped because of job loss due to the economy, is going to come back and bite us all in the backside.

These homes are taking huge drops in value- and while the “capitalists” among us say that’s a market adjustment, I call Bull Hockey. Instead of modifying loans, we’re seeing drops in comps, and a game of roulette- where new home buyers may be in the same position in a few short years if the markets aren’t stabilized.

Reading the article in today’s Dayton Daily News- it seems government is worried more about the homes than the displaced people problems. People pay taxes- not the homes. The banks no longer have a stake in the community, with both their jumbo size- and their bailouts by the US Government.

The need is there. Montgomery County alone is estimated to have 36,000 vacant housing units, which puts the residential vacancy rate at more than 14 percent.

A real estate market with a 5 percent vacancy rate is considered to be in balance, said Doug Harnish, president of Gem Public Sector Services. To make matters worse, a recent study Harnish conducted for local governments predicts that the number of vacant and abandoned homes will swell to 48,000 by 2013.

“In eight years, we’ve gone from 19,000 to 36,000 (vacancies) and in another five we’ll go from 36,000 to 48,000 unless we do something to stem that tide,” Harnish said.

via Abandoned properties could be saved by government funds.

The priority shouldn’t be on saving the  “abandoned properties”- we need to save the people first. It’s time to start charging impact fees to banks that foreclose without attempting loan modifications, and making them responsible to the community as well as to their shareholders, for the difference between the “loan value” and the foreclosed value. Only then will we stem the erosion of our property values and our community values at the same time.

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16 Responses

  1. jenet August 17, 2009 / 9:54 am
    Good article! Do you think anyone is listening?
  2. Gary Leitzell August 17, 2009 / 10:14 am
    Seven years ago I shared an idea with the Mayor that would have provided a small incentive for people to buy houses and fix them up. It was simple. If I pay permit fees for $25,000 or more for fixing up a house, when done, have the inspectors sign off on a form that I can submit with my local tax return and give me a $1000 credit on my taxes. This is basically a refund of my permit fees.
    This cost the city nothing but the future earnings that they were not going to get unless the incentive was in place. We would have had several hundred nicer looking houses if something similar to this was implemented all those years ago.
    What happened? Look around you.
  3. David Lauri August 17, 2009 / 11:34 am
    As Jim McCarthy points out in his op-ed piece that ran in yesterday’s DDN, Montgomery County judges have the authority to require mediation in foreclosure cases but have not been doing so:
    http://www.daytondailynews.com/blogs/content/shared-gen/blogs/dayton/opinion/entries/2009/08/16/jim_mccarthy_judges_should_ens.html
     
    One wonders whom the judges serve, the out-of-state companies who’ve purchased mortgages and benefit by foreclosing even if they don’t get the full value of the mortgages OR the residents of Montgomery County?
  4. Marianne Stanley August 17, 2009 / 2:15 pm
    Again, you make excellent points and excellent suggestions, David. YOU should be running government since you are one of the few who consistently share your concern about human beings who are hurt or lost in our many corporate sponsored processes or laws. I applaud your courage, your intelligence and your genuine compassion!
  5. Jeff August 17, 2009 / 5:55 pm
    I agree with Marianne,  David, you are one fierce, righteous dude.
    (David Lauri made a good point, too, about how the judicial system sides with the banks).
     
     
  6. Robert Vigh August 17, 2009 / 11:56 pm
    Dear David,

    Ok, 5/5 think this is great, so Ill be the devil’s advocate: This is a terrible.
    You want to force fees on a bank? You want to further remove property rights and individual liberty in an attempt to protect people that cannot make house payments? Every single removal of individual liberty and property rights is another step towards socialism, which has failed many times over. Social programs fighting against the market are the major cause of most of our problems today, yet you think a furtherance of that agenda will help?

    I am a conservative investor. I have managed to work through this recession and set aside a good savings account. The recession adjusting home values is my opportunity to buy property at a good price. The more social impedence on the market you create, the less likely I am to be able to buy a home. So, I save and save and my savings and attitude is helping to save America by not overspending. However, when the market begins to adjust to a level that I would like to buy, you take money from me in the form of taxes and give it to people that over purchased. This heightens demand on the housing market and keeps prices artificially high. Or, in lieu of this, we force fees on banks for the same effect. Which has the extra impact of negating individual liberty and proprty rights.

    The conservative well thought out individual gets punished with these types of ideas in a multitude of ways that most people do not understand. Anyone that thinks this is a good idea, really needs to come on over and let me give them some lessons in econ. You cannot force fees on one group for the benefit of another without affecting another innocent bystander. This does not save the people, it punishes them and creates further evidence of our nanny state.

  7. Teri Lussier August 18, 2009 / 10:37 am
    >The priority shouldn’t be on saving the  “abandoned properties”- we need to save the people first.
     
    I do agree with that.
    However, there are banks that do have stake in the community. Many home buyers shopped loans in places that have no stake in the community. Online lenders allowed people to look outside the local bank for a loan, and people went there, got mortgages that were destined to blow up in their faces.

    Were these people taken advantage of? They had enough knowledge to shop a loan, so we could say that they were taking advantage of expanded opportunities. All this is what it is, but we can’t paint any one industry- banks for example- as evil. There are plenty of local lenders who would have loved to have had the chance to provide a mortgage, would have taken the time to educate the clients, and would have been able to work with clients who were in trouble. The same clients they go to little league games with, worship along side, and shake hands with every day.  The difference between the options is that one is going to give you a loan, one is going to make you qualify for a loan.  Community values goes in many directions.
     
    >if the markets aren’t stabilized.
    Markets will stabilize if allowed to do so organically. Outside interference will only put pressure elsewhere- typically towards individuals, private citizens- with continued damaging outcome, resulting in cries for more interference, etc. You are creating a vicious cycle, instead of  allowing  for a natural cycle, which would be much less painful. And no, the past eight years have not been a truly free market either, so don’t use that as an example.

  8. Robert Vigh August 18, 2009 / 10:53 am
    ^^^^ What Teri Said^^^^
  9. Gene August 18, 2009 / 12:21 pm
    Another hand holding crusade led by Esrati. The bronze medal suits you well.
  10. Ice Bandit August 18, 2009 / 4:57 pm
    Well Dave, it’s neither the homes nor the people that we should be worried about, but the economy. If the economy is running on all eight cylinders, folks with money will solve the housing puzzle.
    Quite frankly, Dave, the Old Bandito is not a little amazed by your inability to see who the real villain in this saga is, and it ain’t the banks. Government Gremlins like Barney Frank compelled mortgage lenders to deal with the clearly unqualified. When the money spigot was turned wide open, speculators jumped on the easy-money bandwagon. Add to that government programs that allowed folks to turn their homes into ATMs, and it’s the perfect storm of economic stormclouds. And when the feces hit the rotating and oscillating cooling device, who was surprised when the unqualified and the “house-flipping” quick-money boys turned their backs and walked away leaving the bankds to hold the bag? That this house of cards collapsed is not surprising, it was predictable. And what is Dave’s prescription? Why, more government and taxes on banks, of course. Trust me, Dave, if we get government out of the housing entitlement business, and start requiring folks to lay down 20 percent on that starter home like it was custom when the Ice Bandit was a young man, the problem will solve itself. The road to hell, David, is indeed paved with good intentions. And all our solons did was erect an eight lane superhighway to hades……….
  11. David Lauri August 18, 2009 / 5:08 pm
    Government Gremlins like Barney Frank compelled mortgage lenders to deal with the clearly unqualified.
    LOL.  Right.  The whole predatory lending fiasco is the fault of liberal democrats forcing companies to issue mortgages to people who were unqualified.  Actually “predatory lending” is a misnomer because no companies were acting predatorily; they were acting as the government compelled them to act.
    Only problem is that Republican Congressman Mike Turner believes otherwise.  Look at http://www.urbanohio.com/forum2/index.php?topic=3936.0%3Bimode#msg48755 for a quote from the congressman on predatory lending.  Seems if he thought predatory lending were all Barney Frank’s fault, he’d have been glad to say so.
  12. Gene August 18, 2009 / 5:16 pm
    It boiling down to the fact that borrowers and lenders were too worried about the keeping up with the Jones family, the one that lives in the bigger, better place.

    Greed was on both side of the coin, and we wonder why our country is in the toilet. Simply put, it be boff dare faults.

    Require 20% down, 35% for second home, demolish unwanted homes, and housing values will go up, securing current home owners and providing security to future borrowers who will have equity in their first home on the day they close.

    Not everyone was meant to live the American dream – just the people that work and make wise decisions.

  13. James R Herman July 2, 2010 / 11:12 am
    Here’s the problem with all the foreclosures. True housing choice does not exist. We don’t have a level playing field. The American Dream is to live in a home of one‘s own choosing. No local, county, state, federal or any governmental entity should establish a covenant or restriction that runs contrary to this dream. Specifically exclusionary zoning of any kind should be prohibited. This American dream is superior to any other covenant or restriction and overrides any other.
    This principal is embedded into our constitution which proclaims that all men are created equal and that we are all endowed by our creator with certain inalienable rights. That among these rights is the right to life, liberty and the pursuit of happiness. In order to have life one must have the necessities of life: food, shelter, and clothing. That shelter should be of one’s own choosing. The cancer of exclusionary zoning has spread across much of America. Exclusionary zoning has twisted the American dream into the American nightmare of buying something so expensive that it takes you 25 to 30 years to pay for it and thus puts one into financial slavery.

    Local governments are interfering with the housing market with exclusionary zoning
    Let’s put this into perspective. That’s about $8,656.00 per acre per month. George Bush has a ranch of many acres in Crawford, Texas. Would he pay $8,656.00 per acre per month in rent each and every month just to live there? If I could’ve just bought a lot back in August of 1991, put a singlewide mobile home on it and paid property taxes like everyone else then I’m estimating I’d be about $45,000.00 better off now. And what about all the rent I paid for renting apartments in my life? So this is true for renting in general. The point here is why rent if you can buy?
     
    It’s OK for a rich man to put his big house on a big lot but he and others like him have passed laws so a poor man can’t put his small home on any size lot. And if they had their way in Farmington Hills, Michigan, then even mobile home parks would be zoned out. You can’t put a new mobile home park in Farmington Hills Michigan and I am not advocating that. Although it’s too late for me, I’d like to see exclusionary zoning eliminated for others.
    The guy across the street paid $170,000.00 for his house and he paid one-third less in property taxes than I did in lot rent. Keep in mind his home and property was worth more than four times what my home, including the lot that it sat on, was worth. So I paid six times the rate that he was paying. I don’t mind the rich man driving his $50,000.00 Hummer on the road because I can drive my $13,000.00 Honda Civic on the same road. We both have transportation and we’re both riding. But we both also need food, shelter, clothing and the pursuit of happiness. Our cost of living is higher than it needs to be which leads to homelessness, foreclosures and the gross inequities we see throughout America.
    Wouldn’t it be great if we could structure our society to maximize the probability that people could take care of themselves? Instead of giving a man a fish we should teach him how to fish. And oh yeah, let’s take down the “No Fishing” sign while we’re at it. Instead of treating the symptoms of poverty lets get right at the causes of poverty. Freedom is the key. Milton Friedman, Nobel prize winner in economics, has correctly said that freedom leads to prosperity. That’s why democracies have much more prosperity than dictatorships. But democracies are still flawed in that a majority can disadvantage a minority. That is any majority against any minority regardless of the rightness of the issue. Remember, a majority hollered “Crucify Him!“ when Pilot asked the crowd what should he do with Jesus.
    AND HERE’S A BONUS. NO ONE HAS TO DONATE THEIR TIME OR THEIR MONEY. WE JUST HAVE TO BE TOLERANT.
    Some worry about housing values going down. The Farmington Hills housing code talks specifically about protecting property values. Aren’t people more important than property values? And why would we value property less if a singlewide mobile home was located nearby? What does exclusionary zoning say about our moral values. Buildings don’t make a community it’s the people in the community that make a community. People should only be excluded if their behavior is bad. That’s what jails are for. Let’s not exclude someone simply because he/she works for less money.
    I do not want exclusionary zoners telling me how I should spend my money or my time. That is anti-freedom, anti-American and just plain wrong. People should be able to live where they want in a home that they can afford. People would then live where the schools are good and the crime is low. People would live close to where they work to minimize the commute. Pretty soon all the schools would be good and crime would be low everywhere. Our country would only be strengthened by people having more financial security and self determination. I don’t believe government’s role is to take care of people from cradle to grave. But I do believe in a level playing field and structuring our society to maximize the probability that people can take care of themselves.
    You won’t hear exclusionary zoning talked about on the Sunday morning talk shows or see a question about exclusionary zoning come up at a town meeting. Yet we live with the housing crisis. Who ever thought it was a good idea to buy something so expensive that it takes you 25 to 30 years to pay for it? And it’s absurd to expect housing values to double every ten years as the national association of realtors touts in a radio commercial as one of the benefits of home ownership.
    One nice thing about singlewide mobile homes is that you can move them. So in California, instead of just leaving your home and hoping it doesn’t burn down, you can move it. In New Orleans instead of just leaving your home and hoping it doesn’t get destroyed by a hurricane, you can move it. Single wide mobile homes make nice starter homes, guest homes, vacation homes. If we could eliminate exclusionary zoning I believe we’d see the quality go up and the formaldehyde go out.
    John McCain says he’s concerned about veterans. So does Barack Obama. Yet 1 out of every 5 homeless persons is a Veteran. Do you think we’d have more homelessness or less homelessness if we had housing choice? I think we’d have less. Poor people would rather go to the grocery store and buy their own food. At Christmas they’d rather go to the store and buy Christmas presents for a child instead of hoping for a donation by the Salvation Army.
    Are you interested in social and economic justice for all of our citizens? Well here’s an opportunity for you to get on board the right side of an issue that addresses that justice. This is an issue everyone in America can understand. Not everyone understands the Iraq war or the Viet Nam war for that matter. Does John McCain think the Viet Nam War was a good idea? What did we accomplish or even hope to accomplish? The people there voted fairly for communism. John was dropping bombs on them. Did he think they would welcome that with open arms. The best ideas are the ideas that eventually win out. Freedom is the best idea. Capitalism and democracy are winning over dictatorships and communism simply because freedom has a better chance with capitalism and democracy than it does with communism and dictatorships. Exclusionary zoning is not fair housing. Housing choice is the key to a just society. Everyone must be included. Let freedom ring.
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    . This prevents us from having welcoming, affordable and competitive places to live and do business. The key is to reduce our cost of just plain living. In the southern half of the state of Michigan I could only locate my single wide mobile home in a mobile home park. That gave the mobile home park owner a monopoly so the lot rent could be raised anytime with the sky as the limit. From August of 1991 to May 2009 my lot rent was raised 91%. From August of 1991 to May 2009 I paid over $55,000.00 in lot rent for a 26 foot by 60 foot lot that’s worth about $7,500.00. So I paid for this lot more than 7 times. The mobile home park was getting about a 50% return on their investment per year. So I paid for the lot every two years.

  14. James R Herman July 4, 2010 / 1:02 pm
    Hoping for a second bite of the apple to clarify my original post. The first part of the second paragraph should have read as follows:
    Local governments are interfering with the housing market with exclusionary zoning. This prevents us from having welcoming, affordable and competitive places to live and do business. The key is to reduce our cost of just plain living. In the southern half of the state of Michigan I could only locate my single wide mobile home in a mobile home park. That gave the mobile home park owner a monopoly so the lot rent could be raised anytime with the sky as the limit. From August of 1991 to May 2009 my lot rent was raised 91%. From August of 1991 to May 2009 I paid over $55,000.00 in lot rent for a 26 foot by 60 foot lot that’s worth about $7,500.00. So I paid for this lot more than 7 times. The mobile home park was getting about a 50% return on their investment per year. So I paid for the lot every two years.
    If you put in “exclusionary zoning” into Bing and then check out Wikipedia, the free encyclopedia, listing you’ll see what I’m talking about. Exclusionary zoning has been spreading like cancer across America. In Michigan I would’ve had to go 167 miles further north into mid Michigan to the village of Wiedman near Central Michigan University to find a lot where I would’ve been allowed to place my singlewide mobile home and pay property taxes like everyone else. The reasons for exclusionary zoning are primarily to exclude “undesirables” and secondarily to protect property values. Anyplace you don’t see singlewide mobile homes you can bet there is exclusionary zoning keeping them out. Take the town of Grass Lake, Michigan, not too far from Ann Arbor. I noticed there was a 1985 mobile home for sale and I presume that’s about the time exclusionary zoning was enacted there. So only the singlewide mobile homes that were already placed on land were allowed to remain. No new singlewide mobile homes could be placed there. I checked with a realtor in Grass Lake before I decided to move to Rocky Fork Lake about 55 miles east of Cincinnati. Rather than go 167 miles farther north into Michigan I decided to go about 300 miles south and save a little on heating.
    Exclusionary zoning is kind of America’s dirty little secret. Even Dave Esrati confessed in an email to me that “This was the first time I was made aware of the issues of mobile homes- and I get it.“ People in general are not aware of it or actually vote for it. It’s the local government leaders who pass these ordinances on their own. They don’t come right out and say you can’t put a singlewide mobile home on a lot there. In Farmington Hills they say your home has to be at least 24 feet wide. And the roof pitch has to have a certain steep pitch and the eves have to extend out at least a foot. In order to be able to transport a singlewide mobile home on the highway it can only be so wide and so tall. My singlewide is 15 feet wide from side eve tip to side eve tip so it only extends a few inches past the vertical sidewall. And although it has a peaked roof, the roof pitch is not very steep because you don’t want the structure so tall that you can’t get under bridges as you transport it down the highway.
    Here’s another classical exclusionary zoning tactic. “No building of less than 1,200 square feet in floor area, excluding open porches and garages, shall be erected or placed upon premises.” Believe it or not this is number 12 on a list of “covenants and restrictions to become part of (sic) plat of Rocky Fork Point Subdivision”. This is the place I just moved to in June 2009. One of the residents took the Enchanted Hills Community Association to court over fees being charged and won. Another resident formed a committee to dissolve the association and is filing a class action suit to recover fees. I’ve tried to persuade them that the best way to preserve the American Dream of owning a home of one’s own choosing is to preserve the association but include the following Preamble:
    The American Dream is to live in a home of one’s own choosing. Enchanted Hills Community Association shall establish no covenant or restriction that runs contrary to this dream. For example, no exclusionary zoning or square foot restriction shall be imposed. This preamble is superior to any other covenant or restriction and overrides any other. That being said, 60% of the Enchanted Hills votes, as defined below, have established the following covenants and restrictions to apply to Enchanted Hills Lots:
    Each lot gets one vote. So if you own three lots then you get 3 votes. The lots are about a quarter acre each. And then you have some of the usual zoning restrictions like only single family dwellings are allowed. That no burning is allowed. You have to hook up to the municipal water and sewer lines.
    The courts have viewed zoning an exercise of police power – to protect the public health, safety and welfare. Generally zoning restrictions are upheld “unless palpably without reasonable foundation.” So weather a regulation has gone “too for” is decided on a case by case basis and it depends on what state and what city etc that you’re in. The Wikipedia Case History is somewhat encouraging. For example 1965 National Land and Investment Co v. Kohn 419 Pa. 504: 4 acre lot size struck down. Also 1979 Home Builders v. Berlin 81 N.J. 127: Minimum floor space struck down. Also 1981 Robinson v. Knoll 410 Mich. 293: Prohibiting Mobile homes deemed an invalid exercise of police power.
    So I just want to reiterate my original point that the housing market is not a level playing field. True housing choice does not exit. That the American Dream has been twisted into the American nightmare of buying something so expensive that it takes you 25 to 30 years to pay for it. I paid off my singlewide in less than 2 years but then got screwed out of $45,000 over the next 18 years paying lot rent. But that was the best that I could do in that market. I believe eliminating exclusionary zoning will only make America stronger by restoring the true American Dream of owning a home of your own choosing and not someone else’s choosing. Thanks.
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  15. David Esrati July 5, 2010 / 9:51 am

    @Mr. Herman- I appreciate your input and your position.

    I’ll get around to writing about this- as well as the issues of zoning- which I’ve battled myself.

    We seem to incentivize the building of new- over the preservation and reuse of old.

    We then pay the price of having to continue to add infrastructure that supports it.

    Thank you for your input- and making us all aware of exclusionary zoning.

  16. James R Herman July 5, 2010 / 2:14 pm
    Thanks Dave, I’ll look forward to your post and you can bet I’ll be voting for you on July 13th.  And keep running regardless. If everyone followed the golden rule we could have world peace. Just consider my point  that exclusionary zoning is another case of the golden rule not being followed. For example instead of saying “No building of less than 1,200 square feet in floor area etc” we said “No building greater than 1,200 square feet in floor area etc.”. I’m sure that would upset those people who would like a larger home. My point is that one should be allowed to make that choice for oneself. I bought my freedom from financial slavery and was able to retire when I lost my job because I didn’t put a lot of money into a house.  I bought single premium immediate life annuities and have income for life. If a tornado ever destroyed my singlewide then I’d like to be able to just build a 400 square foot home that doesn’t have formaldehyde in it. T K Constructors would charge about $50 a square foot. So right now it would cost me about $20,000 to build that small home. Well inflation has averaged 3.5% for the last 100 years. So if I wanted to build that same 400 square foot home in 30 years then it would cost almost 3 times as much or about $60,000. If I had to build a 1,200 square foot home then it would cost $180,000. Not doable by me. If the law said you could put up a home of your own choosing then I could just get a travel trailer as a replacement. I lived for 12 years in an apartment in Ypsilanti (Eastern MI U, my alma meter)  which only had 300 square feet and that suited me just fine. So exclusionary zoning is the difference between living a life of dignity or being poverty stricken for a lot of people, including me. I don’t think having people destitute makes America stronger. Quite the opposite. Thanks.

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