Prologue.
I had a serious idea the other day, and I ran to my computer and jotted it down before I could have a senior moment. So what follows is not intended to be funny, and does not intend to point fingers at bad guys. All I want to do is to try to offer a possible solution to a devestating problem. As the title indicates, it still is not a complete solution, but potentially goes a long way to mitigate most of the problem. If you think the idea outlined below has merit, let your congressman or governor or somebody like that know about it. It might even be improved upon.
The ongoing housing crisis persists because of four issues which were not a concern before 2007:
1- There are a very high number of foreclosed properties in all price ranges, which are simply sitting unoccupied,
2- There are not enough buyers for these foreclosed properties, at the price the mortgage companies are currently willing to sell
3- It has become difficult for real estate investors to have the capital on hand or the necessary borrowing ability to purchase the properties. (Yes, some do, but nearly enough). Furthermore, it has become difficult for these investors to make a profit on these properties either by selling them to a third party, or renting them out.
4- Property owners in the vicinity of these foreclosed properties are concerned that, whether these foreclosures are sold or not, the value of their own properties will decrease, robbing them of the equity they had prior to 2007. This is especially true in the homeowner market. Mortgage companies also may be reluctant to put all of their foreclosed properties on the market because of the negative impact it would have on neighboring property owners.
In order to resolve this problem, the rules of buying and selling properties need to be altered to reflect this new reality. To that end, I offer the following strategy to mitigate the housing crisis.
a- Have the mortgage companies sell the foreclosed properties at an 80% (instead of 30-50%) discount. This will encourage investors to take a larger number of the properties off the mortgage holder's books. It will also make the properties more profitable to investors.
b- Only compare foreclosed properties with other similar foreclosed properties when estimating comparable value (or "comps") for purposes of resale or refinance or equity loans. Essentially, this puts the foreclosed properties in a "Comp Coocoon".
c- For property tax purposes, allow these properties to reflect "open market" as its tax basis. For income tax purposes, allow these properties to depreciate from it's "open market" value. This will help protect owners of non-foreclosed properties from losing property value.
d- Improvements made to a "Comp Coocoon" property increase the value of the property the same as for any other property, and are thus exempt from the Coocoon. This will encourage an investor to improve the property.
e- A foreclosed property, once sold to an investor, remains in the "Comp Coocoon" for a period of 10 years. After that, it is treated the same as any non-foreclosed property. This should encourage an investor to hold onto a property longer (and thus help stablize a neighborhood) in order to maximize his profit by selling at "open market" prices, rather than the "Coocoon" price.
The window for such a strategy should be limited, assuming the foreclosure problem as it is today is of limited duration. A 5-year window should be enough to move the vast majority of properties off the books of the mortgage companies.
Epilogue:
The solution outlined above does not directly address those property owners who have been making the mortgage, but are in danger of slipping into foreclosure. Sorry.
Tuesday, September 13, 2011
Sunday, September 4, 2011
Approaching a World Trade Center Moment
As we are at 10 years since "9-11," I have new reason to discuss the real-world "no-win" scenario presented that day. Normally, the line of discussion goes something like this:
"Say you're on the 107th floor of the World Trade Center on 9-11... the planes have hit, the flames below you block the stairway, there is no elevator, and the flames are working their way up to your floor. You can even feel the increasing heat coming through your shoes. What do you do? Do you jump out the window to certain -- but quick -- death, or do you stay in the burning building and hope for a miricle that isn't coming anyway?"
We know now that there was no right or wrong answer. Whether you burned up, or were crushed when the tower collapsed, or jumped out the window, the end result was the same.
Which brings us to our national political situation. I've not written anything about the the actions of either the President Lawn Chair, or the Cadaverous Congress, or the subset of the GOP accurately described as the Tonto Party. And as if I'd spent the past 9 months eating nothing but cheese and white bread, and then suddenly switching to a diet of carrots, oat bran, and and Ex-Lax, I suddenly feel compelled to get this now painful, smelly load out of my system.
The sadest thing that President Obama has earned a reputation of folding like a lawn chair under opposing pressure "If you stand up to him, he WILL back down." I supported him actively in 2008, so I don't say any of this with glee. He was (still is?) intelligent, articulate, and wise. But since the 2010 election, even a few months before that, his expressed long-term vision and short-term goals, are simply not consistent with his actions and results.
Whether it's the environment, or energy policy, or the debt limit, or even when to address the nation about his #1 priority, jobs, it's been "Cave-ins, cave-ins, and more cave-ins. The 1st Black President (sorry Bill Clinton) has ironicly failed to make use of the ultimate Black Power, the power of the Presidency. He has allowed not only the minority party (the GOP) to run him around, but freshmen members of the House of Representatives, mostly Tonto Party members to dictate terms to the single most powerful man on the planet. The resulting pattern of stated position and retreat from said position, can only be described as weakness, impotence, a total lack of resolve. Caving-in is not the new compromise. The "Audacity of Hope" has become "the Audacity of Nope".... "Yes we can" has morphed into "I wish we could, but no we can't."
Not only has President Obama lost the faith of his Democratic base, he has lost the faith of middle America. A weak President is not a good leader, and even his stated direction can't be trusted. In contrast, Ronald Reagan (who Obama often refered to in his first presidential campaign) and who I have never liked as a President) at least was consistent between his words and his actions; so was Bill Clinton. So should we re-elect a demonstratively weak President? It's not such a simple choice. It's the 107th floor of the WTC all over again.
Not sure what to do in 2012... the Republicans seem to be in a race to see who is the most ignorant and stupid. I don't really want to spend the energy recounting all the crazy, insensitive, ignorant, "don't confuse me with the facts" set of candidates out there. And I say this in kindness. There is no other way to describe a group of candidates who don't believe in evolution, don't believe in global warming, are against raising the debt ceiling, are against the very wealthy paying taxes, against regulations in general, against human beings having affordable health care, and believe with all their heart that if Obama is not President, it will be "morning in America" again. They all seem to be out to corner the Tonto Party vote. This group is so mentally bankrupt, they give Obama a punchers chance of getting re-elected.
Could you imagine one of them as President? I can't. Do you really think any of them would do better? If anything, they are likely to accelerate the fall of this nation.
So there we are, in September, 2011. Our own 9-11 dilemma. Re-elect a weak ineffective President, or elect a Republican who would purposely steer the Titanic into an iceberg?
Here's a riddle Mr. President: what do baseball, tennis, golf, and national politics have in common? You got to have some balls to play... if you really want a place in history.
"Say you're on the 107th floor of the World Trade Center on 9-11... the planes have hit, the flames below you block the stairway, there is no elevator, and the flames are working their way up to your floor. You can even feel the increasing heat coming through your shoes. What do you do? Do you jump out the window to certain -- but quick -- death, or do you stay in the burning building and hope for a miricle that isn't coming anyway?"
We know now that there was no right or wrong answer. Whether you burned up, or were crushed when the tower collapsed, or jumped out the window, the end result was the same.
Which brings us to our national political situation. I've not written anything about the the actions of either the President Lawn Chair, or the Cadaverous Congress, or the subset of the GOP accurately described as the Tonto Party. And as if I'd spent the past 9 months eating nothing but cheese and white bread, and then suddenly switching to a diet of carrots, oat bran, and and Ex-Lax, I suddenly feel compelled to get this now painful, smelly load out of my system.
The sadest thing that President Obama has earned a reputation of folding like a lawn chair under opposing pressure "If you stand up to him, he WILL back down." I supported him actively in 2008, so I don't say any of this with glee. He was (still is?) intelligent, articulate, and wise. But since the 2010 election, even a few months before that, his expressed long-term vision and short-term goals, are simply not consistent with his actions and results.
Whether it's the environment, or energy policy, or the debt limit, or even when to address the nation about his #1 priority, jobs, it's been "Cave-ins, cave-ins, and more cave-ins. The 1st Black President (sorry Bill Clinton) has ironicly failed to make use of the ultimate Black Power, the power of the Presidency. He has allowed not only the minority party (the GOP) to run him around, but freshmen members of the House of Representatives, mostly Tonto Party members to dictate terms to the single most powerful man on the planet. The resulting pattern of stated position and retreat from said position, can only be described as weakness, impotence, a total lack of resolve. Caving-in is not the new compromise. The "Audacity of Hope" has become "the Audacity of Nope".... "Yes we can" has morphed into "I wish we could, but no we can't."
Not only has President Obama lost the faith of his Democratic base, he has lost the faith of middle America. A weak President is not a good leader, and even his stated direction can't be trusted. In contrast, Ronald Reagan (who Obama often refered to in his first presidential campaign) and who I have never liked as a President) at least was consistent between his words and his actions; so was Bill Clinton. So should we re-elect a demonstratively weak President? It's not such a simple choice. It's the 107th floor of the WTC all over again.
Not sure what to do in 2012... the Republicans seem to be in a race to see who is the most ignorant and stupid. I don't really want to spend the energy recounting all the crazy, insensitive, ignorant, "don't confuse me with the facts" set of candidates out there. And I say this in kindness. There is no other way to describe a group of candidates who don't believe in evolution, don't believe in global warming, are against raising the debt ceiling, are against the very wealthy paying taxes, against regulations in general, against human beings having affordable health care, and believe with all their heart that if Obama is not President, it will be "morning in America" again. They all seem to be out to corner the Tonto Party vote. This group is so mentally bankrupt, they give Obama a punchers chance of getting re-elected.
Could you imagine one of them as President? I can't. Do you really think any of them would do better? If anything, they are likely to accelerate the fall of this nation.
So there we are, in September, 2011. Our own 9-11 dilemma. Re-elect a weak ineffective President, or elect a Republican who would purposely steer the Titanic into an iceberg?
Here's a riddle Mr. President: what do baseball, tennis, golf, and national politics have in common? You got to have some balls to play... if you really want a place in history.
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