The authorities of 50 US states have begun an investigation into how legitimate the banking practice of taking housing from debtors. Some banks, without waiting for the results, have already suspended the seizure. What forced them to take such a step and how the situation will turn out for the American economy, explains Aleksey Bayer
For more than two years since the beginning of the financial crisis, banks took about 3 million homes from homeowners. Moreover, this year, despite the growth of the economy and the seemingly favorable financial situation, the crisis in the housing market has only worsened. In the first nine months of 2010, banks seized 816,000 homes and, according to economists’ forecasts, for the last quarter were to bring this figure to 1.2 million. However, this was prevented by the initiated investigation: all 50 states were interested in how competent and legal the actions of banks were.
It turns out not so much. The documentation was lame, the legal process was not respected. In some cases, banks sent a sheriff with a summons for eviction to houses for which the mortgage did not belong to them. By the time of the investigation, some of these houses had already been sold by auction. Now it turns out that they sold illegally, so that the new owners do not actually own them.
Some banks have already suspended the seizure of houses and began to independently study the gaps in their internal regulations. Perhaps their further actions will be imposed official moratorium. If, as a result of the investigation, negligence and irresponsibility on the part of the banks are proved, confusion will start, because the affected homeowners will start legal proceedings. In addition, several states have announced that they intend to demand financial compensation from banks for the damage caused to them by illegal actions against homeowners.
Rising against the banks and a wave of popular anger. The 2008 crisis was associated with risky mortgage loans that banks provided to the poorest families unable to pay monthly installments. The scheme offered to customers was simple: the first six monthly installments would be preferential, with an extremely low interest rate (the so-called lure method, teaser rate). However, it was worth the poor swallow the hook, the value of the monthly installment jumped. While real estate prices were growing at a fantastic rate, buyers could re-pledge their new home and pay the old one out of this new loan. Of course, it was a pyramid, and banks frankly cheated, but in that situation it was possible to blame the debtors: they say, there is no money – do not poke at home to buy. Today, the situation has changed: among the defaulters there were many who recently was a representative of the great American middle class – workers, employees, and even lawyers with bankers. Those who were among the unemployed when the labor market lost 8 million jobs. And that’s another thing.
Economists warn that a moratorium on the seizure of houses will only exacerbate the problem. Until banks get rid of bad loans on their balance sheet accounts, they will not give new ones, and the real estate market will not be able to rise. Even in prosperous New York all the time you hear from realtors one and the same song: “We found a buyer. Like a creditable, working family. But the bank did not give a loan at the last moment. ”
The seller suffers, the real estate agent suffers, the economy suffers. Suffers, by and large, the entire American way of life. The crisis in the real estate market knocked down the famous American mobility. The Americans, after all, always moved from place to place, very few people spent their lives in the city where they were born. If you lost your job in Cleveland, it was worth nothing to move to Houston, where unemployment was low. However, today is not so easy to move. The real estate market has stalled, the house can not be sold, and if you sell, all the money will go to the bank in the mortgage account. Where are you going?
Moreover, if the “non-performing” loans will hang like a dead weight on the accounts of banks, a new round of banking crisis is quite possible.
Banks also think so. The sooner they get rid of mortgage loans, the better. So get rid of. In a hurry, somehow. Errors and punctures come from this, and as a result, the whole story seems to be more expensive. Much more expensive.