Stay with me now while I think something out….
Fannie Mae and Freddie Mac (aka: The Government) own $400 Billion in bad loans. Some folks are putting that number as high as $1 Trillion.
They have already foreclosed on over a quarter of a million homes. These homes are either not on the market yet or will be put for sale on the market at a loss.
Because of this inarguable loss, what is stopping the government from becoming a landlord and either renting out or giving these houses away to “low income” individuals and families?
Nothing, right?
That is what I was afraid of.
The idea for this short thought process was found at Vox Popoli .
Some interesting comments at Vox Populi, but all of them seem to overlook the legal mechanics of foreclosures. Overlooking them by pencil-whipping the stacks of paper required by mortgage foreclosures just got those banks into huge trouble, and not even the Feds have the clout to snap their fingers and change the names on the Deeds of Trust.
The courts are owned by the lawyers (NOT the “vox populi”), and the lawyers see this foreclosure crisis as a huge, unending source of litigations and settlements (income to them).
Here’s what will happen:
The Feds will charter one or more large national “Mortgage Solutions” companies, each employing hundreds of lawyers (or having hundreds on retainer). The dot.gov will streamline the process for changing the legal trustees of these properties, and they will be churned though that new system in their thousands, until next year sometime, when the backlog is done. No, this new outfit can’t change the laws of supply and demand, so their will be a short spike in prices of existing homes, but as the properly-processed foreclosed houses hit the market (and the dot.gov might control THAT flow), the prices will start to fall again.
There will be a huge fight next Congress over how this all shakes out, because trillions of dollars worth of properties is at stake. The GOP will likely split over it, with true conservatives refusing to meddle in the market, and moderates voting with (D)onks on some intermediate solutions.
The bottom-line result is that, brother, I sure hope you don’t have to sell a house any time in the next decade: you won’t get anything for it.