The big four mortgage bankers appeared before Congress today and said they have no intention modifying any home loans and you can’t make us. They prefer to continue foreclosing on homes. The Census Bureau says there are 3.4 million homes currently standing empty. The best estimates are that there are upwards of four million mortgages already in the foreclosure pipeline on top of two million already processed.
There are probably another five million mortgage holders that could enter foreclosure in the next year or less. Once a community reaches a certain density of foreclosed homes it starts to feed on itself. Local tax revenue dries up as abandoned property brings in nothing but eats up increased services from the city for police, fire and so on. The increased burden shifted to remaining homeowners helps drive them under. Local businesses layoff help and eventually close. They default on their commercial loans and debts to other businesses spreading the disaster. Somebody has termed these mini-Katrinas, destroying neighborhood by neighborhood. Thousands of these little storms are brewing across the country. Mortgage holders that owe more than their house is worth are described as being under water. Millions of people who are current on their mortgages now will find they can‘t make their payments as the economy spirals down. Unable to sell or refinance, they will drown too.
The banks routinely get far less from foreclosure than the amount the current owner could pay under modification so why would why would bankers who measure margins in fractions of a percent want to foreclose? It’s simple, the bankers don’t give a steaming roll of nickels for the long term health of their own banks let alone America. Bush left behind tax and accounting rules that allow the bankers to lose money hand over fist and still look good on paper each quarter. The more foreclosures, the better the books look, after all there are billions in executive bonuses at stake.
If they run their banks into the ground in a couple of years, so what? That’s what trillion dollar bailouts are for. Even if the government seizes the big banks and liquidates them, it’s not like the bank executives have their own money invested in them. They aren’t stupid. When a hurricane comes you go to high ground. The bankers’ high ground is in gated communities behind armed guards. The rest of us are on our own. www.prairie2.com