The Embarassed Republican: Foreclose Me

It’s not a happy time for big banks, ever wonder if they care?  “Occupiers” were out in force yesterday, all over the country, expressing their displeasure with Bank of America.  It won't be the last bank to be “Occupied.”  My wife expressed her own displeasure with them when her credit card account was sold to BOA.  No one asked her, in fact she only found out when a new Bank of America Visa arrived in the mail and the account number seemed suspiciously familiar.

Of course the terms changed as well.  It’s just this kind of “The customer comes last” attitude that makes people so angry with big banks.  With each passing day more and more of us are moving our accounts to smaller local banks and Credit Unions because we feel so powerless with these gigantic institutions.  They do things that not only make us feel small, but also don’t seem to make any sense at all.

I was doing some research on foreclosures in Morris county last week, specifically the “Sheriff's sale” database on the county website.  There have been almost 1,800 announced foreclosure proceedings in Morris County since 2008.  A small number of these were settled with the homeowner still in their own house, but in most cases the Banks took the house for the price of $100.  I found that rather odd.  $100? It must be a “customary fee”  but why just $100?  I’m sure it costs a lot more than that just to have the proceeding, let alone maintain the Sheriff’s department database, and make the required visits, notices and whatever else is involved.  Why not $1,000 or $5,000?  The bank eliminates one of our neighbors and a taxpayer and leaves us with the bill?  Why make it so easy for them?

It’s pretty awful to lose your house, no matter how it happens.  The database doesn’t contain the reasons why the bank was foreclosing though.  Too bad, I think that’s probably the most interesting part.  Without making the required thousands of phone calls I’d still like to understand what was going on in those cases.  Were these people who just walked away when the investment in a home was no longer profitable or were they like Tom Hanks in “Larry Crowne,” out of work during the recession and no longer able to make huge payments?  We might be able to tell part of the story by knowing how long a family had lived in the house before they were foreclosed upon, or at least make a guess.

What I can say is that the amount of foreclosures was rising rapidly until the end of 2010 when the New Jersey courts effectively put an end to “Robo-Signing” and the banks backed off.  However, the numbers are starting to rise again.  I can also reliably state that most of the homes foreclosed were in the $150,000 to $500,000 price range which is hardly the playground of speculators who are likely to bolt when an investment becomes unprofitable.  I suspect from the value of the properties that in most cases these were families who lost their homes due to job loss or other effects of the recession.  That is sad, our own friends, neighbors and fellow taxpayers given the boot.  Which begs a couple more questions, why would the banks not move immediately to re-negotiate?  Isn’t some income better than an empty house that needs to be maintained?  The lack of dealing on the part of the banks has really slammed the rest of our home values and must have hurt the bank’s assets as well.  Of course they can just take a “write down”, too bad we can’t.

It was almost serendipity to hear while I was studying the data that two State Senators had proposed a solution to the thousands upon thousands of foreclosed properties throughout the state (over 48,000 since 3rd quarter of 2009).  Called the “New Jersey Residential Foreclosure Transformation Act”  this bill would create a central state authority to oversee and encourage the purchase of foreclosed homes to be used for the purpose of fulfilling each county’s lower income housing quota.

Under this bill the Towns and Counties would have first crack at any foreclosed homes within their boundaries and each one turned into a lower cost house or “supportive shared living housing” (as in a group home for the disabled) would count double or more against that municipality’s low income housing quota.

That idea scares some people, but personally I think it’s got every chance of being an innovative solution. What it does is avoid building yet another low cost housing project which is, if history is any guide, likely to start almost immediately to sink into a high crime/no growth area. Instead, it turns houses that are empty and driving property values down into homes again. Additionally, it gives municipalities a chance to have some local control over the process.

As several people commenting on the Patch have said “ the devil is in the details”  in this case that will be very true.  Of course it’s easy to assume the worst for this plan, after all the term “low income” can have some pretty negative connotations. I think we need to note that the bill designates these properties be used for moderate and low income housing.  It also defines “Moderate income” as 50 to 80% of the local area's median and “Low income” as 50% or less.  The median income in Morris county is $96,787 (up from $77,340 in 1999). That would make these homes available to people like teachers, firefighters, police and municipal workers and that doesn’t sound like a bad thing at all.  

If the bill passes, it will be interesting to see if the towns and townships grab this bull by the horns and turn it to their advantage.  This is a chance to turn an awful situation into something good.  After all the banks may very well be amenable to dealing now that they have so many empty houses on their hands, and towns are far harder to push around than individual homeowners. This does provide an alternative to selling the homes off to speculators and provides the opportunity for municipalities to get the value from the property and some choice about how they are used.  Change is what you make of it.