A Lot More

Observations on housing's wreckage and recovery

Foreclosure graveyards

In the new issue of The American Prospect, I write about the latest phase of mortgage crisis fallout: the mass dumping of vacant, foreclosed real estate onto already devastated city streets. My article is set in Atlanta but it could as easily be about St. Louis, Jacksonville, Akron, and many older midsize cities whose modest older houses are caught in literal shell games played by mortgage servicers and real estate speculators. It’s all a tragic waste. HUD is spending billions on programs to help neighborhoods recover from mass foreclosures, but it’s no match for mortgage servicers’ maneuvers to cut their losses.

One twist that didn’t make it into the story: When servicers get rid of their real estate for pennies on the dollar, the biggest losers are mortgage securities investors with the riskiest, most toxic stakes, and some, such as hedge fund manager Bruce Rose, have been fighting back in court and in their own business practices. As Ruth Simon reported recently in the Wall Street Journal [subscriber only - sorry], Rose’s Carrington Mortgage Services, which now manages the defunct subprime lender New Century’s portfolio, has been keeping real estate out of the foreclosure graveyard through aggressive loan modifications and by renting homes out directly to tenants. (It’s not clear whether some of those tenants are the homes’ former owners, but that certainly seems likely.) Rose believes, correctly, that the real estate will eventually sell for more than it does right now, and that it’s in his best interest to hold on to the property in the meantime.

What we’ve got here is an unlikely alignment of interests between do-gooder community development groups and high-flying financiers seeking to protect their losing investments. The two forces would do well to team up to help stop the insanity.

If you want to see my article in its printed form, with pix, or read more of The American Prospect – you should – it’s now available in free PDF download to registered users.

Thank you to the Nation Institute Investigative Fund for sponsoring the research for this article, and for my earlier “Predatory Lending With a Smiley Face” in Salon, about the loan modification industry.

August 18th, 2009 | Tags: , ,
Posted in A Lot More | 2 Comments »

2 Responses to “Foreclosure graveyards”

  1. Steve Sailer says:
    August 31, 2009 at 6:02 pm

    By the way, I’ve published a 2400 word review of “Our Lot.” Here’s an excerpt:

    “Our Lot: How Real Estate Came to Own Us” by Alyssa Katz, a liberal journalist and NYU journalism professor who writes for Mother Jones, is the best book yet on how the sacred cause of “diversity” merged with pedal-to-the-metal capitalism to bring us the Great Mortgage Meltdown.

    The book hasn’t garnered the attention it deserves—probably because it makes clear the bipartisan responsibility of both her opponents on the Right and her friends on the Left.

    Our Lot focuses equally on the misdeeds of both capitalists and leftists. But I won’t give the boiler room boys as much attention in this review because they’re a more familiar tale, while Katz’s reporting on the role of her side is compelling “testimony against interest”.

    Katz is remarkably frank about how government programs and political pressure to boost minority homeownership helped blow up the economy. She’s particularly good at explicating how leftist housing activists, such as ACORN and Gale Cincotta, the godmother of the Community Reinvestment Act, worked with Democratic politicians such as Bill Clinton, HUD Secretary Henry Cisneros, and Jim Johnson, CEO of Fannie Mae, to lay the groundwork for the Bubble and Bust.

    Katz doesn’t devote quite as much depth to the Bush Administration’s culpability (which, to my mind, is even greater). Perhaps she lacked Republican contacts to give her the kind of inside story she got on her own party’s mistakes.

    Still, Our Lot makes clear that on housing policy, the Clinton-Bush years form a single continuum with one overarching plan: boost the minority homeownership rate by lowering credit standards. I call it the Era of Multi-Culti Capitalism.

    And there’s little reason to think that its lessons have been learned yet.

    More at http://vdare.com/sailer/090830_homeownership.htm

  2. Womack says:
    December 19, 2009 at 3:10 pm

    Love your article. I never heard anyone speak of foreclosure graveyards.

    Is that what happen in the movie Potergiest?

    I learned something new today. Great info. 2 Thumbs Up. ;-)

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