Hey, there! Log in / Register
Support Universal Hub
Help keep Universal Hub going. If you like what we're up to and want to help out, please consider a (completely non-deductible) contribution.
Help keep Universal Hub going. If you like what we're up to and want to help out, please consider a (completely non-deductible) contribution.
Comments
You completely misunderstood
You completely misunderstood the article. The irresponsible parties are those who try to keep tenants in foreclosed buildings that banks and other financial institutions are trying to sell. The cleaning up after more or less proletarian landlords who've bellied up - and who often lacked the means to properly care for the units to begin with - will go a lot smoother if banks are allowed to quickly empty the buildings and put them back on the market.
The sub-prime debacle that people like progressive Governor Deval Patrick cashed in big on caused a lot of problems, one of which was putting properties in the hands of woefully under-capitalized landlords.
Why should banks empty the buildings?
Let them sell the buildings with tenants still in them (which are a source of income to the prospective buyer).
Since taxpayers now own significant shares in the banks, they need to behave in a socially responsible manner.
That's very difficult (but still the right answer)
Having done this: It's incredibly difficult in this market to sell any property with tenants. You need to give them at least 24 hours notice of a showing, and buyer-brokers don't usually bother calling in advance. They want to stop by on a whim, RIGHT NOW, which you can't let them do.
That said, it's still better than forcing the tenants out. The price and expense of a move can be prohibitive for people with actual jobs and budgets. And the bank *should* have included the difficulty of reselling the property when they originally bought the loan - though we know they didn't.
In theory, banks could
In theory, banks could increase the value of a property by judiciously keeping or kicking out tenants, but that would likely result in racial disparity in retention/eviction rates and a whole new headache to deal with. It's easier from a bank's perspective to indiscriminately toss'em all out.
Since taxpayers now own
Socially responsible is putting the properties in hands of capable landlords.
Lending money to the types of people who've disproportionately bellied up over the last three years was in the name of social responsibility.
yeah, except for that whole thing about binding leases
will go a lot smoother if banks are allowed to quickly empty the buildings and put them back on the market.
Yeah, great, let's just throw contracts out the window. Guess what? The apartment belongs to the lessee during the terms of the lease. If they want to empty the building, they can ASK the tenants and offer them compensation. Some have, but the compensation has amounted to less than half of one month's rent for most people ($500-ish.)
My favorite part in all this is that the mortgage companies say they're not "set up to handle" being landlords, as if that's some excuse to skirt their responsibilities.
I should rob a bank and try that excuse out with the police. "Yer under arrest, robber scum!" "I'm sorry, officer. I'm not set up to handle being in jail."
Where is the governor in all of this? Working on a book deal?
You know what really scares me? The thought of banks owning these properties long-term.
If they want to empty the
The paltry amount is because the leverage is different than you think. When the original owner is foreclosed on (well, his/ property) the lease does go out the window. The compensation is to avoid the court appearance that tenants are entitled to as part of the eviction process.
Sitting in his mansion and counting his Ameriquest money, I guess.
Look, there goes the lease
That's kinda shocking, especially in a tenant-friendly state like MA. But a little Googling reveals that this is commonplace nationwide. All tenants become tenants-at-will upon foreclosure. Eviction's harder, but you don't want an eviction on your record.
What's the reason for the laws to be tilted against renters in that situation? From a layman's perspective, I'd think that as a tenant, I have a contract with the landlord, and I am receiving consideration: not having to move for 12 months. If the landlord can't perform, why am I not compensated for his breach of contract? It's not as if he's bankrupt and I'm a creditor. He is still liquid; he just no longer has the ability to perform.
Are there good public policy reasons for things to be this way, or is it just the Grand Banking Conspiracy?
The bank is involved only
The bank is involved only because the owner used the building as collateral for a loan. If the owner can't make payments the bank can reclaim at least a portion of its money by selling the building. If parts of the building is tied up by leases the value of it is likely to be lower. The bank would have to protect itself by being more selective in its lending process, which obviously carries a cost to the economy.
It isn't useful to have landlords who aren't able to maintain their rental properties and it's not practical to have banks be landlords anymore than it is to have them run grocery stores or ad agencies. The best way to keep the rental market healthy for renters is to swiftly move properties from failed owners to new ones.
It is not unreasonable to place regulatory burdens on landlords but each burden jacks up the cost for renters, so trade offs have to be made. Just as owners assume a certain set of risks, renters must, too.
Thanks
Good explanation.
I don't understand your statement "tied up by leases"
this income offsets the cost of the property and provides a DESIRABLE stream of cash to pay off the cost of the property.. that's the basic premise of owning property as an investment... why do you call this a burden or an undesirable feature? Would a buyer not prefer to purchase a building with a stable cashflow and tenants already in place? I have a friend who has been buying foreclosed or distressed properties for some time. In some cases he has done good by everyone and simplified his life by simply renting it to the people who used to own it.
I don't understand your
The leases could be too low or could leave the building divided in a way the new owner doesn't like or could keep the new owner from rehabing it.
a DESIRABLE stream of cash to pay off the cost of the property
The jumping off point for this thread is that a lot of banks don't find the cashflow as desirable as recouping the principal. You think they're wrong but they're the ones sitting on the properties.
Why would it be a burden for an owner to be forced to take on leases he didn't sign and doesn't want?
Keep in mind that the context of this discussion is an article about poorly maintained properties in foreclosure transitioning from one owner to another.
Consequently, banks should..?
Consequently
income is better than no income
the statement "leases he doesn't want" makes no sense in a stalled economy
the banks that rejected tenants and thereby turned some neighborhoods into ghost towns... screwed up in the most grand fashion. they did not act rationally given the circumstances, but were following a script written for some entirely other purpose. as a result their own failures are even deeper than they would have been, and our economic problems in the aggregate are much worse.
no free lunch
There are responsibilities and liabilities that come along with being a landlord that make that statement disputable. That's actually the gist of the Globe article that kicked off this thread.
That's not your call to make since you're not the one sitting on foreclosed properties that need new owners.
This crisis has not been worsened by banks reclaiming principal by trying to quickly sell foreclosed properties. If anything, forcing banks to in effect carry non-performing loans would likely prolong the crisis we're in.
I think we have established our respective points: I think banks should be allowed to sell foreclosed rental properties w/o keeping previous tenants and you think they shouldn't.
Other owners aren't allowed to sell properties they own
By extension, neither should banks.
Our laws go very far out of the way to carve out all kinds of exceptions and safety net-style rules for residential properties BECAUSE a housing contract is very unlike any other kind of contract. Society has recognized that housing is different and special and important to keeping people healthy and safe.
Massachusetts is behind the game in this regard. The MGL are dense with lists of things landlords must do, and things they cannot do, for and to tenants. There is one hole in the law, and it needs to be fixed.
If a bank lends money on a property and then becomes the owner because it should not have loaned that money, well, now it's a landlord. That needs to be the bank's problem, not the tenant's.
?
Please elaborate.
How cavalierly we wash our hands of the consequences of decades of legal, legislative, regulatory and activist assaults on prudent lending practices.
Clarification
my bad
I intended to write that other owners aren't allowed to kick out tenants when they sell a property. The tenants, along with the appliances, the carpet, and the siding, are all part of the transaction.
Interesting that you'd say that, since the small, non-mega-growth-oriented community banks seem to be weathering this storm just fine, both in hindsight and looking ahead. These small banks never had delusions of grandeur, and apparently were loaning, investing, and writing all manner of paper within their means all along. A few little guys have cooked the books, trying to impersonate the big boys, but it's nothing on the scale of the City, BofA or Countrywide mega-scandals.
The country never needed super-sized banks and doesn't need them now. This mess was caused by greed, nothing else. Banking was, will be, and should be, a conservative business that nets around 1-4% per year and serves as a market-LEVELING force by virtue of its inherent interest in self-preservation... when it's working right.
The regulators didn't invent derivative securities. They did permit them. But lots of things not explicitly outlawed, such as leaping off tall bridges or heading out into the desert for a week with only a box of candy bars, are not explicitly outlawed, and also are bad ideas.