Last week we read about Mike Chambless, Hollister code
enforcement officer, and his attempts to maintain the dozens of
houses that have been abandoned when lenders foreclosed on the
owners.
Last week we read about Mike Chambless, Hollister code enforcement officer, and his attempts to maintain the dozens of houses that have been abandoned when lenders foreclosed on the owners.
The story really brought home the problems of the subprime mortgage crisis. You have probably read about it: Families bought homes by borrowing money at absurdly low, temporary (“adjustable”) rates. Sometimes these mortgages were interest-only, and there are probably other packages with even more complex features.
Then, when the interest rate adjusted (way up, in most cases), monthly payments increased far beyond what the owners could pay.
In the meantime, most mortgage loans have been sold to another financial institution than the one with whom the homeowner originally signed papers. It becomes part of a portfolio of loans whose interest is paid to hundreds of investors.
I can understand the thinking of the homeowners who bought homes with this kind of mortgage. Since there is little rental housing available in Hollister, a low- to mid-income family would be attracted to the prospect of stretching their budget to buy a home, have a nice place to raise their kids and possibly avoid a long commute for one or both breadwinners.
The complete terms may not have been clearly explained to them, or if they were, they may have thought the risk of future higher payments was worth taking – maybe one partner would get a raise, or a better job. They may have understood the principle of the interest rate adjusting up, but have failed to do the math.
I can even understand how mortgage brokers could convince people to take out this kind of loan. After all, the family is excited about their new home, and the broker (not the real estate agent, but the person who finds the financing) is helping them make it a reality.
They are probably also motivated by a fair amount of pressure from whomever they work for to produce as many loans as possible. The pressure make come in the form of a yummy carrot, such as commissions and bonuses, as well as the form of a hefty stick, such as the threat of being fired plus being harangued to do more, more, more.
The broker’s peers and bosses also probably help to assuage any nagging concerns about whether this was all a good idea.
What I do not understand is how the big financial institutions, who were providing the actual money for these loans, could inspire this and go along with it. Not because I expect them to be any more moral than the individual brokers, but because they must have known that when the payments expanded, foreclosures would explode.
And when that happened, when thousands of families defaulted on their loans, and the interest and principal payments stopped coming in, their mortgage documents would become next to worthless.
Even when the original lenders planned to sell the mortgages to another financial institution, I can’t imagine that some analyst somewhere didn’t look at her spreadsheets and see big trouble ahead.
But apparently not, so here we are with the financial institutions, who knows which ones and where, now “owning” hundreds of houses in Hollister and thousands elsewhere throughout the state and the country.
But these owners aren’t mowing the lawn. They aren’t leaving the light on when nobody’s home. They aren’t bringing in the junk mail and newspapers that accumulate in the front yards.
Why don’t the provisions of the foreclosure laws require the “new owners” to act like owners? If they are going to take back the property for nonpayment, they need to treat it like property and prevent further decline by maintaining it, so its own value is maintained as well as that of the surrounding neighborhood.
The way things are right now, when foreclosure happens the mortgage holder gets to throw a family out of its home and then force the family’s neighbors (we, the taxpayers, as well as the family’s actual neighbors) to bear the burden of maintaining it.
