Friday, October 9, 2009

What's Wrong with a Peoples Bailout (Besides a Missing Apostrophe) Part 1 of 2

Guest Editorial by the Hawthorne Hawkman. Photo from the Hawkman files.

On Tuesday, October 6, the Minnesota Coalition for a Peoples (sic) Bailout met at the Minneapolis Urban League. One flier stated that "Northside agencies and other resources will be on hand for those struggling presently with a foreclosure or in a housing crisis." Aside from one attorney with the Minnesota Tenants Union, there really didn't seem to be any northside agencies OR resources on hand.

Another flier said to "Come and hear from those who have come up with creative approaches to the crisis."

Yeah, I'LL say their approaches are creative...

The kind of creative ideas that come from putting on your tin foil hat, going outside in a lightning storm while holding a set of jumper cables in your hands, and hoping something good will strike you. THAT kind of creative.

Oh, where to start? My head was spinning from all the blatant misinformation flying around the room. If it seems like I'm rambling, well, there was a LOT to cover.

Let's start with the most obvious mistake: The tactics used with Rosemary Williams. Look, when the Johnny Northside blog and the Mpls Mirror BOTH agree that you were wrong, what does THAT tell you? This coalition and Rosemary used each other for publicity's sake. While they got swept up in themselves, the mortgage company made attempts (some good, others not) to strike a deal before finally foreclosing. They got what they wanted in terms of publicity, but they didn't save her house.

One woman spoke about her pending foreclosure and said that the redemption period will end in November but she will refuse to leave. I feel for her, I really do. But once the sheriff's sale happens there is almost no way to save a house. By adopting the same actions as Rosemary, she will probably wind up in the same spot: getting kicked out of her house while protesters rant, police stand by, and by this time it'll be old news so the only media to show up will be the guy from youtube.

(Man, it seems like he's EVERYWHERE!)

Where are the ideas grounded in reality, people? Not on their sign-up sheet for an action plan, which references a city resolution (that's resolution, not ordinance, so there's no legal teeth to it), a state moratorium on foreclosures, and protesting against banks so that people stay in their homes.

In a previous JNS post, the youtube guy filmed me expressing some doubts about a moratorium. Here are two more: In each of the past two legislative sessions, bills have been passed that would protect people from foreclosure. Pawlenty vetoed them both. This moratorium goes MUCH FARTHER than either of the previously vetoed bills. Pawlenty is effectively running for President by now, and he's acting even more conservative than ever. It is not realistic to think he would sign a moratorium into law. Getting a veto-proof super-majority is just as unrealistic.

The second reason hearkens back to some "the-sky-is-falling" rhetoric that mortgage companies use all the time. In this case, however, I would find it to be a legitimate concern. The logic goes like this: If we tinker with the rules too much, then mortgage companies will find lending in Minnesota to be too risky or simply unpalatable. Rates will rise or lenders will pull out entirely.

When this excuse was used to argue against curbs in predatory lending, my response was "GOOD! We don't WANT those kinds of lenders in the FIRST PLACE!" But if we pass a law that there will be NO FORECLOSURES for two years (yes, that's what some coalition members call for) I believe lenders WILL pull out or rates will increase drastically.

Based on the written and verbal rhetoric of this coalition, it seems as if they are looking for a blanket moratorium for everything and everyone. Even if it were to be targeted in scope, a two-year moratorium would cause sensible lenders to wonder what other ways mortgage contracts would be interfered with. And when the finance industry is working properly, higher risks equal higher rates, while too many variables lead to credit drying up entirely.

This editorial is in progress, and another post will be forthcoming. I TOLD you there was a lot wrong with the ideas these folks have.


Don "GOP" Allen said...

Dear Jeff - The ideas these folk had at the meeting/forum/whatever were not thought out well. None of our current lawmakers will touch it cause in all reality, they have no plan.

I would like to see the foreclosure "opportunity" go away, but until we address the wasteful, miss-directed spending of City Hall to address this issue, people will continue to loose their homes.

Good story.

Pond-dragon said...

You borrowed the dough and now you can't pay it back, as long as you are on the borrow side I guess its ok? Now what about granny's pension check that is backed by mortgage securities for the house that is going to be foreclosed? Those monthly payments are part of Granny's income!

Guess we call out that Obama death panel for consultations.
There are 2 sides to every story.