With Friends Like

Shaun Donovan, Secretary of Housing and Urban Development, homeowners in distress don't need any enemies.  One does have to credit the ingenuity of the TBTF banks, however.  It's as though they hired a bunch of former radicals, who spent their younger years thwarting various government agencies and private businesses, to figure out how to go after the people they once worked to help.

But this one isn't all that new.  It's one of the strategies the banks have used for awhile in California to part people from their houses.  And the bank negotiators did a good job--they simply didn't note that they often held second mortgages that they could write off, then claiming that they had modified a mortgage.  I'd feel sorry for the government negotiators, but for the fact that I think they knew exactly what they were doing.

BTW, Neil Barofsky's book, Bailout, has a short and well-written analysis of HAMP, showing how it was designed to help the banks and screw homeowners in distress.  HUD was involved in designing that one too.

Not Damn Likely

Housing Wire has a piece this morning on the declining number of foreclosures in California, claiming that the lenders are going to switch from non-judicial foreclosure to judicial foreclosure because of the passage of the Homeowner's Bill of Rights.  Uh, huh.  In California.  Not damn likely.  No lender is going to want to spend five years in court to foreclose on a property worth $200K.  What's more likely is that lenders will do more short sales, even if they have to take a big haircut on the price, as judicial foreclosure only makes sense when the property owner has sufficient resources to be worth suing.  And judicial foreclosure would require that lenders have their paperwork in better order than the Homeowner Bill of Rights does.  Most defaulting homeowners don't have enough in resources to be worth the trouble, and would just go bankrupt to get out from under the judgment.  The lender then would pay a lot of money to get very little.

It's likely that (a) foreclosures are falling anyway, just because so many people have already lost their homes, and fewer homeowners are in danger of default, and (b) the lenders have to do a bit more work to foreclose, and have to do a different calculation to determine whether a short sale is a better option.

E-Filing

I'm not going to e-file my taxes.  Our taxes are simple.  We don't need to pay someone, or a service, and using the fillable forms takes longer than just writing the stuff down.  You have to pay to get someone to do the math for you, and I have a calculator.  If they want people to e-file, they should have a free form that does the math for you.  Until they do, they get a paper form from me.

Something I Missed

I'm so embarrassed to have missed this article.  What it points up that is important is that the disproportionate effect of the foreclosure crisis in non-white communities wasn't the result of investments by minority owners, but by white real estate speculators decimating non-white communities.  The authors looked at foreclosures in white and African American neighborhoods in Louisville, Kentucky.  What they found was that, controlling for income and so on, foreclosures affecting homeowners were pretty evenly distributed.  But when they looked at African American communities, they found that the higher foreclosure rate was the result of white investors buying up rentals and then, of course, giving them up when the housing bubble popped.  After all, as I noted in my other blog, the investor wasn't giving up his home, but someone else's.

So this video isn't exactly right.  The video should show the "respectable" (read: white?) family buying an investment property in someone else's neighborhood, and then defaulting on the property when its price collapses.  Had this been clearer, economists and politicians might have looked at what could be done to protect those neighborhoods from the "life after people" landscape that some of them have suffered.  Local governments could have bought the properties, kept the tenants in place, and limited the damage.  Instead they left the communities to weather the storm alone, and chose not to understand who was really responsible.

Leaving California

One of the examples of the complete lack of numeracy on the part of the population is the assertion that high-income people will leave California to escape our tax code.  They'll move to Nevada or Texas or Florida.  There's no evidence of this, and quite a lot against it, but people argue this all the time.  And people believe it--because they can't count.  I mean, we're looking at people who have adjusted gross incomes of $1 million or more.  The tax increase passed by voters in November would raise their taxes one percent.

Now let's do the arithmetic.  What is one percent of a million dollars?  Let's do this the easy way.  Ten percent of a million dollars is $100,000, which you get by simply dropping one of the zeroes.  You're getting the idea, right?  One percent of that is (hint: drop off another zero), yup, $10,000.  That's a lot of money if you make the median income here, about $50,000.  In fact, that's twenty percent of your income.  But if you make $1 million, it's chump change.  You certainly aren't going to starve to death.  Or not be able to buy another yacht.

So if you want to move to Nevada or Texas or Florida over $10,000, well, have a good life.