Monday, April 26, 2010

Banks And Mortgages

I have been puzzling for some time over the true state of real estate and I have been able to form no conclusions locally. Florida is a no tax state and relies heavily on property and sales taxes for it's income. The state sales tax is riddled with loopholes and property taxes have been in decline for some years now as the Great depression takes hold. Yet we hear that there is a recovery in the offing. The Monroe County School District is enacting cuts and laying off personnel, but the Superintendent tells his followers that next year things will be better as the economy is improving. I wonder why he thinks that, perhaps he is just hoping for the best and waiting to see if he has to pile on the bad news next year...

In the Florida Keys real estate has been among the most pricey in Florida. Certainly there are pockets of extreme wealth in the state but Monroe County has distinguished itself by reporting across the board costly homes for a very long time. Now prices are dropping but it's hard to tell what is really going on. Realtors say the market is picking up but "For Sale" signs have been a way of life around here for years. An acquaintance who works in a realtor's office was told just last week that her pay is being cut by a third. That doesn't sound good as far as sales are concerned but of course it could just be an office of incompetent Realtors. In any event home sales do not appear to be as rosy as indicated by the people involved in the trade.

Nationally the situation seems rather more dire. Reading a report in Counterpunch I was disturbed to see that mortgage refinance is proposed as one more way banks are scamming the public coffers. It seems banks are struggling to deal with many more foreclosures than they can handle. Apparently it takes banks an average of two years to gain access to home after the occupant stops paying the mortgage and even then the house is most likely going to be kept off the market. The reason is that if the banks put all their foreclosed inventory up for sale at once prices will tumble even further so they parcel them out. This is leading to speculation that the inventory of actual homes for sale is going to be considerably greater than current estimates.

Add to that problem the problem of dealing with delinquent mortgages and banks are apparently on the ropes. The housing crisis has frozen credit because banks simply don't have the capital to cover their housing losses and have capital to lend at the same time. It seems too that mortgage modifications are increasing at quite a clip and the fear is that with the spiralling home values they will end up , again, in foreclosure. The only thing is that there is a wrinkle in this little problem. The permanent modifications are guaranteed by the FHA so that if the modified mortgage fails the costs will be picked up by the taxpayers, not the original lenders. So once again we see banks dumping their toxic material on taxpayers.

When you also notice that Bank of America is offering the unemployed payment forbearance you get some inkling of how desperate the situation is for banks. I am wondering myself why we aren't considering defaulting on our mortgage. It's just a matter of my wife and I being too bourgeois, I suppose.Paying pur mortgage is starting to seem like a mug's game to me. The shenanigans that are going on across the country fill me with foreboding about the housing market and the fact the mainstream media keeps pushing economic recovery just makes me wonder all the more. High unemployment, toxic mortgages, failing commercial real estate and we are about to begin a recovery?


Danette said...

I can't remember if it was Thomas Frank or another writer on current affairs but they discussed at some length the mindset among the people who manipulate us-- if they tell us the economy is bad then pocketbooks tighten. But if they can convince us that it's not that bad out there then we might start buying again- thus stimulating the economy. Speaking for myself- I buy stuff when I have the money. And if my old car is broken down (needed breaks last week) or my computer is caput (which it is right now) then I am not going to be able to buy the other stuff I may want. I'm too busy fixin the old stuff. I don't think my spending is that out of character to most Americans-- and lots of households are running on less. I just had my year review and the salary "increase" we get is like 1-2% meanwhile my part of health insurance went up. I'm not buying new stuff- I'm busy paying my bills. (Of course I am taking a nice vacation to Key West this summer:) Everybody should be so lucky!)

Anonymous said...

If you don't mind being underwater for the remainder of your natural lives then keep making payments. It's a lifestyle choice for a home not a house. Also, apply for a rewrite even though you probably won't qualify. At least you're trying.

Sad to say but one is probably better off saving 24 months of payments and then moving on prior to eviction. This presumes FL is a no recourse state.

A question is the state of ones conscience. I say F the banks and sleep well at night. They got your down payment and 98% of the payments you've made are interest only.

Conchscooter said...

Lack of confidence is the hall mark of this "recovery."
The biggest problem I have with moving out of our home is that rentals are still expensive in the keys and the quality of the rental is horrible mostly.