Sunday, October 11, 2009

What's Wrong with a Peoples (Sic) Bailout Part 2 of 2

Guest post and photo by the Hawthorne Hawkman
(Editorial note: The above photo is an illegally-placed sign that is a SCAM, and the Hawkman took down this sign. DO NOT call the number, but seek counseling if you are at risk of foreclosure)

As promised, here is the follow-up to the first part of the Peoples (sic) Bailout plan. Their strategies are too poorly contrived to fit in just one post. Readers be warned, it's time to flex those mortgage muscles because we're about to get technical...

Proponents of the Peoples (sic) Bailout kept on bringing up a statistic that only 16% of foreclosures received any kind of help from foreclosure prevention counseling. This figure is misleading because it doesn't take into account the massive fraud in the mortgage industry in Minnesota (such as straw buyers, flipping, identity theft, etc.). And although the Peoples (sic) Bailout plan for a moratorium calls for it to only apply to owner-occupied properties (well, first they said ALL foreclosures and then after I chewed them another one they said only owner-occupied, so who really knows?) the 16% is calculated using all foreclosures.

So that's a meaningless number for the sake of this argument. They are only using it because it's such a low number that it would make most people say "Yeah! We can do better than 16%!" A better measuring stick is that according to Twin Cities Habitat for Humanity, 58% of their clients received loan modifications. Individual banks such as Wells Fargo, are pitiful in their loan mod statistics, and we certainly want to do better than 58%. As Bob Dylan would put it, "When all of your advisers heap their plastic, at your feet to convince you of their pain, trying to prove that your conclusions should be more drastic, won't you come see me Queen Jane?"

These folks also like to rail against the TARP (Troubled Asset Relief Program) without having any real idea of what the money was used for. Let's get one thing straight: There was a LOT wrong with how that program was set up, how some financially sound banks were forced to take money, how poorly the use of money was monitored, and whether it had any real effect. But the Peoples (sic) Bailout people say this money "was meant to bail out homeowners." WRONG. The TARP money was intended to shore up funds in struggling or potentially struggling banks so they could go out and make more loans to consumers and grease the wheels of a credit-driven economy.

Which brings me to another fundamental flaw in their simplistic outlook. "Just give the money to the people in foreclosure," seems to be the best summary of their strategies. There still has to be some way of determining if the money is well-spent. The toughest stories I hear at forums or while doorknocking to get people into counseling are the ones of good, hard-working folks who just want a job. Admittedly, there isn't much to be done for them unless we fulfill the mantra that the best social service program is a job.

Minnesota has a fairly long foreclosure process, and thanks go out to Rep. Joe Mullery. For the past few years has authored extraordinarily technical bills that have real effects on people's everyday lives. When I ran into him at the Harvest Festival on Saturday, he asked, "Do you like my bill?" I had to respond, "Which one?" He is truly a legislator that a mortgage geek can get behind.

The bill in question, though, allows for the sheriff's sale to be postponed until very close to the end of the redemption period in order to give the borrower more time before foreclosure and the loss of a home are unpreventable. However, you HAVE TO SEE A COUNSELOR to make this happen. Eat that, you sixteen-percenters.

Back to the folks without a job, though. This bill can hopefully buy more time in such scenarios. This is hard to say without sounding callous, but somebody has to say it. The foreclosure process in Minnesota can take close to a year to go through. If you don't have a job in that length of time, then what is a mortgage company supposed to do? Mortgages are set up so that if you do not or can not make your payments, then at some point the mortgage company has the right to collect the collateral instead. True, we need more jobs and we need banks to do a better job modifying loans. But there comes a time when a lender must legitimately move forward with a foreclosure.

I will end this two-part rant with a story of my first encounter with the Peoples (sic) Bailout people. I was asked to speak as a panelist at a forum in south Minneapolis that they'd put on, and I hadn't heard of them before. I said some rather populist statements (which I still adhere to) about holding predatory lenders accountable. I was asked afterward if I would join them in a protest against US Bank, since the company received some TARP money.

I responded that I know folks at the bank, and I could arrange for a sit-down meeting with some fairly high-ranking individuals there who would have the authority to implement real changes on behalf of our community. But the trick was that we'd have to have actual, realistic, attainable demands first. So did they want to have a rational discussion? No. They used my words (which was fair game since they were said in a public forum) in local media to express support for their protest, and went ahead without any attempt at dialogue.

The Poor People's Economic Human Rights Coalition, the Coalition for a Peoples (sic) Bailout, and many of their partners are too willing to grab a sign and chant until they're blue in the face. But real, rational discussions elude them.


Pond-dragon said...

JNS we are agreed, you can also take this to almost any topic:

The real issue with most folks is they don't want an honest knock down drag out discussion, its far easier to sit on a high horse and throw conjecture, and blame everyone including the plumber for their or some unfortunates, misfortune. Rationale thinking does not arise. There is a great chasm between bad luck, and a track record of poor decision making.

A Different Mortgage Geek said...

Great post and comments from Pond Dragon. I totally agree.

This behavior also serves to chase away folks who have the ability to help, and the desire to bring practical solutions to the table. There are plenty of dubious characters out there in politics and financial service companies, but there are also plenty of people that could help in REALISTIC situations.

But, this shotgun style witch hunt only force them to hunker down and shake their heads, or risk getting caught up in the emotion driven mess.