Oh, Pity the Poor Banks

It's so sad.  Our megabanks are suffering.  I mean, we let them get away with all sorts of stuff--making bad loans, selling them to investors, shorting the investments as they sold them to investors, getting the government to bail them out, other stuff we all know about.  But now cometh the California Homeowner Bill of Rights, which makes said megabanks behave themselves--minimally.  It doesn't send the Board of Directors and major players off to prison.  It doesn't make them pay a fine.  All it does is require that they not conduct themselves like gangsters, that their dealings with distressed homeowners be clear and transparent, that they not do things to sneak through foreclosures on the unsuspecting.

Alas, we find that the Bank of America can't even do that.  A scant five months after the legislation came into effect, we have a case in which the agent for the bank double-tracked a homeowner--allegedly negotiating while filing a Notice of Default and attempting to proceed to foreclosure.  You'd think this was one of the simple rules: you will negotiate in good faith and not encourage people to sell their first-borns to keep their homes, all the while proceeding with the foreclosure.  Not only it it bad form and a specific violation of the law, but it's also easy for a distressed homeowner to show that she has asked for a modification.  There's paper evidence all over the homeowner's dining room table.

But it costs so much money!  The bank has to pay its own attorneys, the attorneys for the distressed homeowner etc. etc.  Awww.  Maybe BofA should have realized that a lot of lawsuits aren't worth the trouble.  That's what the rest of us do.  Too much hassle.  Not enough return.  Surely BofA has an economist somewhere on staff who could see that the recovery through foreclosure didn't justify defending this lawsuit.  Or they could have just obeyed the law in the first place.

Yves Smith has a really good piece on the same subject.

A Couple of Notes on Foreclosure

First, there have been a bunch of stories noting that foreclosures have increased since March.  That happens every year.  With a couple of notable exceptions during the depth of the crisis, foreclosures are always higher in the second and third quarters, lower in the first and fourth.  So you want to look at the year-over-year, and foreclosures are falling.  They should be, given the number of people who have already lost their homes. A lot of properties that homeowners might have struggled to keep on through the ARM rate adjustment in 2012 were, in fact, owned by landlords who bailed when prices collapsed.

Second, most of what I hear from tenants makes me angry.  But every so often I get a story that's more than just ordinarily appalling.  You know, stories where the bank just changes the locks on the tenants or turns off the water or whatever.  Nasty, piggy behavior.  Even as the crisis lessens, though, there are still some of those.  To wit: a California homeowner rented out rooms in his home.  One was rented in 2012, and two in 2013. The foreclosure sale was this week.  "Wait," you say, "the landlord must have known when he rented out at least two of the rooms that the building was about to be foreclosed."  Yes, indeed.  "But, surely," you say, "the owner told the tenants what was happening.  Or they saw mail lying around the house."  You've gotta be kidding.  The landlord is squeezing as much blood as possible on the way out the door.

In this case, it gets worse.  The landlord has been offered a "cash for keys" agreement if the property is vacated within 15 days, and the landlord wants the tenants to move so that he can collect the money. Yeah.  Unfortunately there's an exemption in California's foreclosure protections, just for tenants who live in the same unit as the owner.  It may be that the Legislature really believes that no owner would keep such information from people sleeping in the next room.  It may also be that tenants who rent rooms are low-income and not worthy of the protection afforded even other tenants.

Nook Grief

I love my Nook.  But it recently (yesterday) caused me grief equaled only by the grief involved in setting up the wireless connection when I first got it.  J finally solved the problem then, and he did it again.  But what is most irritating is that Barnes and Noble has known about the problem forever and didn't bother to fix it.

The problem was that the latest Nook update won't work with Adobe unless you have an ID and a password.  In the olden days--before yesterday--I got my library books through Adobe and then transferred them to my Nook.  Simple.  Easy.  Even I could do it.  But then I left my wireless on too long and the Nook updated.  (I don't use the wireless unless I'm buying from B&N, as the wireless uses a lot of battery power.)  Then it wouldn't let me get library books.  I had error messages.  There were no books.

I wept.  I screamed.  I tore my hair.  I called to J.  "Fix it," I said, "or I'll never be able to get another book from the library and I'll have to buy them."  J set to work.  He took my computer, he took my Nook, and then magic happened and I was restored to ebook borrowing.  Unlike many people, I did not have to restore my entire library, or re-set everything on the Nook.

But I'm still irritated that Nook didn't solve this problem months ago.

It's Not Supply and Demand

One of the fun things about writing on tenant issues is that you get to keep re-using stuff that you knew 20 or 30 years ago.  You never have to study up because nothing changes.  The landlord/real estate/economist interests make the same arguments year after year, no one ever challenges them, and so they never have to say they were wrong.  Ever.

This piece is stolen from an article by Ted Gullicksen, published in the Tenant Times in 1992--yeah, more than 20 years ago.  I found it in the process of throwing away old papers that I don't want to keep. 

But one of the things we should have learned about rental housing is that supply and demand doesn't determine its cost.  It just doesn't.  And that's simply because there ain't no free market in rental housing.  Let's look at the conditions for a free market (from Edgar Olsen, Professor of Economics at the University of Virginia):

1.  Buyers and sellers are numerous. Well, buyers (tenants) are numerous, but sellers not so much.  There are far more tenants than landlords. Simple counting.  And tenants need to rent housing more than landlords need to find tenants.  A tenant needs a place to live every month, while a landlord can leave an unit vacant for months.

2.  Neither buyers nor sellers collude.  Well, Adam Smith pointed out a long time ago that employers didn't need to directly collude to push down wages.  Sellers of rental housing don't need to collude--they just get on Craigslist and see what the going rates are.  If landlords see those rates going up, they can increase their asking rent pretty easily.

(In fact, I once had the experience of a prospective landlord announcing that he had discovered that he could get more rent for the place we were looking at and was therefore raising the asking rent.  That's an automatic "no" from us, but other people may not have a choice.)

3.  Entry/exit from the market by consumers is easy.  Weeks of time, thousands of dollars, need I say more?

4.  Producers and consumers possess thorough knowledge of comparative prices and qualities.  Luckily I have a husband who checks the place out thoroughly--using this meter thing to make sure the house is wired correctly, checking the cabinets for evidence of vermin, turning on the water and flushing the toilet to check the water pressure etc.  But there are a lot of things tenants won't know until they move in.  Is there sufficient power to run more than one appliance at a time?  Are there mold or water leaks that have been painted over?  In addition, tenants can't go to see every unit for rent at any given time to compare them.

(In addition, the law makes it very difficult to get out of a lease once the tenant has signed it, if the tenant finds that conditions were not as advertised.  A tenant who breaks a lease and moves faces serious legal risks.  Interestingly, a landlord who doesn't allow a tenant to move in after signing a lease faces some risk, but far greater hassle is borne by the tenant.)

5.  No artificial restrictions are placed on demand or supply.  Doesn't require comment.  And I'm not talking about the kind of zoning restrictions that prevent apartments from being constructed near fertilizer plants.  Many communities don't want rental housing, and have the clout to prevent it.  That, folks, is an artificial restriction.

6.  The service or product is homogeneous.  Every rental unit has a monopoly on its location.  No two units are identical, as anyone who has looked at two identical units in the same complex and chosen one over the other knows.  It's not like buying a TV or a new dress.

7.  The individual sale or transaction is small in relation to the overall number of transactions.  Gullicksen notes that the market does work in this respect!

So why, if this is so obvious, do people from Paul Krugman on right think that rent control is bad because it impinges on the free market?  Uh, political power, economic power, and laziness, not necessarily in that order.

You can look at the rental vacancy rate and median rent graphs here.

Happy Birthday to Me

Yes, I'm 58.  My husband thinks I am a "youngster".  And a belated Happy Birthday--her 21st--to L, daughter of friend A.

Oh, Please, Just Decide Already

Sacramentans are being treated to the continuing saga of the Kings. They've been treated to this for years, so much so that it's likely that my reaction is shared by the vast majority of my fellows.

But the NBA has a problem.  A big one.  In the great scheme of things, Seattle should be the obvious choice.  Ben Stein says so, and I'm inclined to agree with him.  Stein noted that Seattle was a much better choice, as that city is a "powerhouse," while Sacramento is simply a very nice town. (One might argue with that, but it's not important to my point.) So why is the NBA dragging this out?

It's simple.  Seattle's arena deal requires that the owners put in a lot more money, and that Seattle not only put in less, but make money off the deal. Seattle has been burned before, and the voters responded with I-91, which requires that any sports' complex deal guarantee a profit for the taxpayers.  Sacramento's deal gives away the store.  Not only won't the city make money, the city may be on the hook for the bonds if the income projections don't pan out.

So on the one hand, Seattle is a much more desirable choice.  But the Sacramento precedent is one that the NBA owners want to set--cities that want teams, or want to keep teams, should be willing to pay handsomely for the privilege.  And if they aren't, even a "powerhouse" city won't get a team.

Is It Walmart, or Is It Everywhere?

It's one of those moments when your not sure that it's for real, or if it's something mistakenly reprinted from The Onion.  But Walmart is thinking of experimenting with a system that would ask customers to deliver online orders to their neighbors for a slight discount on their purchases.  Yeah, the problems with this idea should be obvious--liability, theft, and so on.

But as part of the discussion of this stupidity, someone raised the point that WalMart generally doesn't pay suppliers for products until they're sold. If they aren't sold, the supplier takes the loss.  But it's not just Walmart that does that.  It is well-known that a national purveyor of plant material does the same thing.  That's why any plant that's been there for more than a couple of days is near death.  (J once described the place as Plant Auschwitz.)  My objection to this is that, while it may be very "efficient" for the corporate owners--they don't have to hire anyone who knows about plants, or have people take the time to dump water on them--it's environmental evil.  All of the resources devoted to planting and nurturing the tree, shrub, petunia, or whatever is wasted.  And then people wonder why little planet Earth is slowly dying...