BANKS DO NOT LIKE CHAOS

Cartoon from here.

Cartoon from here.

We hear a great deal about how the mortgage lending crisis is the fault of those greedy and unscrupulous Wall Street folks.  The truth is different.  Consider this article in the Washington Post.

Defaulting homeowners are taking advantage of banking chaos to live mortgage-free for six months or longer, dragging out the eviction process, according to lenders and real estate agents. Unscrupulous landlords are collecting rent but withholding mortgage payments, leaving a rude surprise for their tenants when repossession comes. And banks are so eager to avoid the hassle of eviction that they are paying occupants $5,000 or more simply to hand over the keys and move out without a fight.  (from here)

The Washington Post writes as though mortgage lenders are learning a new lesson (that is, the banks are just now learning this lesson.) about foreclosures for the first time.  Of course, such is foolishness.  It is the Washington Post’s reporter who is learning something new.  Even in good times, there are people who default on their loans, and when that happens, it is costly.  Consider this latter paragraph in the same article.

Each foreclosure costs a bank $40,000 to $50,000 in attorney’s fees and fees for property management and other services, according to John Mechem, a spokesman for the Mortgage Bankers Association. “Sometimes it takes two or three tries on a short sale to make it work,” he said. “Lenders are willing to go to great lengths to avoid foreclosure.”  (from here)

Such expenses eat up profits.  So no experienced lender in their right mind loans money to people who are likely to default.  Only the government, particularly when it is run by Democrats, does that.

Other Views

Tertium Quids wonders if the Bailout money might not be better spent on Christmas (see here).    😀

Vivian J. Page takes Congresswoman Thelma Drake to task for her vote on a bill that “would create a nationwide mortgage licensing system and registry” (see here).   Drake, it would seem, is engaged in an evil plot.   Traditionally and constitutionally, state law rules in this area.  Nonetheless, Page rails against Drake.  Moreover, Page fails to remind us how Fannie Mae and Freddie Mac, nationwide experiments in mortgage financing, created the current mess, and she also neglects to discuss whether the proposed bill is constitutional.

Raising Kaine repeats the same anti-Drake nonsense here.   Note that when Drake is not representing her district, she is in the realty business.  I can only suppose that Drake has discovered that nefarious business principle.  Profitability demands buying low and selling high.  The same principle works in the stock market.  BTW – In addition to real estate, now also might be a good time to buy stock.

Below the Beltway bemoans the fact we seem to be one more step on the road to serfdom (here).  Here Doug notes that Congresswoman Drake is not the only devious person who is buying houses.

Cartoon from here.

Cartoon from here.

2 thoughts on “BANKS DO NOT LIKE CHAOS

  1. vjp – Excuse me, but true it is.

    Your flippant response is emotional, not logical. Consider your accusation of Congresswoman Drake. Tagging her with greed just because you think the bill might be a good idea is sick. By buying foreclosed properties, what Drake is doing is helping to ensure these properties retain their value. She makes money by putting them back to use.

    Boom and bust cycles do occur, and to some extent they occur because a few people take idiot risks. However, it takes government to create a really big mess. Fannie Mae and Freddie Mac are huge government creations. These monsters certainly have had a lot more effect than anything Drake could do.

    Like

  2. Moreover, Page fails to remind us how Fannie Mae and Freddie Mac, nationwide experiments in mortgage financing, created the current mess

    Now why would I remind you of something that isn’t true?

    Like

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