Wednesday, November 5, 2014
Banks harvesting the last possible pound of flesh from millions of homeowners before kicking these failing debtors out of their homes
San Diegan David Soffer is suing J.P. Morgan Chase Bank for its practice of luring debtors with promises of loan modification, and then refusing to refinance after debtors have fulfilled their side of the bargain.
"The nation’s largest banks are methodically harvesting the last possible pound of flesh from millions of homeowners. We should put a stop to it." --Willaim Greider
It's Time for Debt Forgiveness, American-Style
November 14, 2011
..."We are in the reverse New Deal," Christopher Whalen, a savvy banking expert at Institutional Risk Analytics, told me. He meant that events are dismantling the ingenious engine that helped generate America's broad middle class. Homeownership was the main driver in accomplishing that great social change. For three generations, people of modest means could buy a house knowing it would secure their place in the middle class and allow them to accumulate significant savings. If the family held the standard thirty-year, fixed-rate mortgage, they were painlessly saving for the future every time they made a payment, acquiring greater equity in the home as they did so. With moderate inflation, the house would steadily increase in value even as their monthly mortgage payments stayed the same. So the cost of housing actually declined for the family, as a percentage of its income.
Meanwhile, the accumulating equity became a nest egg for retirement or something to pass on to the kids.
That virtuous process, originated by New Deal reforms, is in peril and has already shut down for tens of millions, especially working-class families whose incomes are no longer rising. As described by the brokerage investment firm Amherst Securities, the housing picture is ugly.
Among the 55 million families with mortgages, one in five is underwater—they owe more on their mortgage than their house is worth—or already delinquent. That's 10.4 million families who are sliding toward failure and foreclosure. Virtually all of them will become renters, since no bank is likely to give them a new mortgage.
As a result, the housing market will remain depressed for years—too many houses for sale, too few buyers. Amherst estimates excess supply of 4–6 million in the next six years. Economic recovery may have to wait until that surplus is gone, because the housing sector has always led the way out of recession. The more housing supply exceeds demand, the more prices fall. The more prices fall, the more families get sucked into the deep muddy. The vicious cycle is known in the industry as the death spiral. So far, there's no end in sight...