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A Man Who Has Nothing In Particular To Recommend Him Discusses All Sorts of Subjects at Random as Though He Knew Everything

Captain Tammany H. Plutocrat Real Estate And Bill Collection, Inc.

(Author’s Note: There is no editor. Maybe I’ll hire one if you buy a goddamn book

That rapscallion Bird Dog over to Maggie’s Farm linked to one of those titanic bits of news that apparently only warrants a mention on the last page of the Internet, while a few dozen well-to-do hipster doofuses have a hissy fit on the first fifty pages of all the newspapers.

— The largest transfer of wealth from the public to private sector is
about to begin. The federal government will be bulk-selling the massive
portfolio of foreclosed homes now owned by HUD, Fannie Mae and Freddie
Mac to private investors — vulture funds.

These homes, which are now the property of the U.S. government,
the U.S. taxpayer, U.S. citizens collectively, are going to be sold to
private investor conglomerates at extraordinarily large discounts to
real value.

You and I will not be allowed to participate. These investors will come from the private-equity and hedge-fund community, Goldman Sachs and its derivatives, as well as foreign sovereign wealth funds that can bring a billion dollars or more to each transaction.

In the process, these investors will instantaneously become the
largest improved real estate owners and landlords in the world. The U.S. taxpayer will get pennies on the dollar for these homes and then be allowed to rent them back at market rates.

Hmmm. The government is giving away all those practically free foreclosed houses you’ve been waiting and saving to purchase, to rapacious investors. Who’da thunkit? I mean, besides me, a year ago:

A “foreclosed house” is not a house. The jots and tittles have to be
filled in by the lawyers and clerks –who owes and owns what, what’s
required to call the house complete and safe for habitation — just like
you do before you dig the cellar hole. It is only a potential house.
Think of them as housing starts for future years, because the vast
majority of them won’t be ready to be sold for years. And since
practically no one is building any new houses, and household creation
plugs along, unspectacular but inexorable, those foreclosed houses are
not going to be sold for peanuts in the future, because they’re going to
represent the only game in town. Buy them or rent them, they’re going
to cost you real money.

Banks, especially big, national banks, are not realtors. They’re not
property managers. They have nothing in place to handle owning and
selling the property they have on their hands. They will never use a
retail approach to unloading them. They will sell them in huge blocks to
investors, unload them on the government –who will unload them on
favored investors —
or demolish them. These investors will be risking a
great deal by buying real estate, and they’re going to demand an
enormous return on that investment. They are going to make the most
rapacious developers that built the houses in the first place look like
The people who are currently living in the foreclosed houses
“rent-free” while the bank’s lawyer scratches his head in front of a
judge saying: “I know that deed is around here somewhere” are actually
doing the bank a favor. They are of no use to the bank as paying
customers anymore, and the bank has already written them off, but they
will serve as a kind of disreputable housesitter for a year, maybe two,
saving the bank from paying someone to mow the lawn or otherwise look
after the place. By then the banks will have their foreclosure ducks in a row, and out in the street they’ll go, and into the now nascent, but soon to be gigantic foreclosure machine the house will go.

I’ll tell you something else. All those people who thought they were going to walk away from those houses and give them back to the banks? The banks are going to figure out the difference between the mortgage and what the house is sold for, which will be huge, sell those debts to lawyers –who’ll make the mafia or a first wife look reasonable — and they’ll use the court system as their own private strong-arm collectors, and hound those people to kingdom come. 

Barring a sea change in governance, five years from now there will be nothing left to do but piss in the hole where the American housing industry once stood. It’ll still be smouldering from a subsidized public/private arson fire initiative, so even that might seem like a blessing when they’re done with it.

4 Responses

  1. Yep – that's already happening, too. I forget where I saw it yesterday, but there was an article about a guy who walked away from his mortgage, and got slapped with a bill for what the bank lost as a result, roughly $190k. And he can't walk away from that one.

  2. Was that Lon Chaney driving that boat?

    And that affable man w/ fedora wasn't me. Only time I was in your neck/shoulder/upper arm of the woods, I wasn't w/ fedora.

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