Boston comes up with a..uh..foreclosure..solution? Might cause facepalm.

[Manedwolf]

Hub bill would ban foreclosure evictions

Warning that America is experiencing a housing emergency, six Boston city councilors want to force lenders who foreclose on Hub properties to rent seized houses and apartments back to occupants.

The United States is facing a national housing emergency (and) the City of Boston is facing a serious public emergency in regards to foreclosures, Councilors Michael Flaherty, Steve Murphy, Michael Ross, Chuck Turner, Charles Yancey and Sam Yoon write in a new home-rule petition.

The proposal would order lenders to lease foreclosed properties back to ex-owners or tenants at market rates until either third parties buy the homes or the measure expires in 2014. Violators would face fines of at least $10,000.

Lenders have an obligation to fix whats going on, said Ross, whose Government Operations Committee held a hearing on the proposal yesterday. Theyve crippled the American economy.

Ross said the measure aims to primarily help tenants whove paid rent on time but face eviction anyway because their landlords fell into foreclosure.

However, the measure would also cover individual homeowners who fell behind on their own mortgages.

Ross said lawmakers decided to include such residents because many faced foreclosure due to high-cost mortgages created to entrap homeowners. Owners whove lost their homes and their life savings shouldnt be thrown out on the street.

The councilors proposal needs just one more lawmakers support to pass the 13-member City Council. However, the bill also requires an OK from Mayor Thomas M. Menino, the state Legislature and Gov. Deval Patrick to become law.

The banking and real estate industries oppose the plan.

Kevin Cuff of the Massachusetts Mortgage Bankers Association said the measure would mean that every single-family homeowner who goes into foreclosure would become a tenant - with all of a tenants legal rights. We think thats a little far-reaching.

I can see lenders pulling the eject handle on the entire city of Boston now. And the "happy renters" deliberately making the places look like hell so nobody will buy it.

Yay entitlement! The comments after the article are pretty good.

http://www.bostonherald.com/business/general/view.bg?articleid=1089243&srvc=home&position=7

[Fly320s]

But, it feels good, so it must be the right thing to do.

[lupinus]

If they couldn't pay the mortgage (generally speaking lower then rent) how in the hell are they supposed to pay rent?

You can't pay, you loose the house.  This is a sound time proven well known concept.  Sucks, but life sucks don't buy what you can't afford.

[BridgeRunner]

If they couldn't pay the mortgage (generally speaking lower then rent) how in the hell are they supposed to pay rent?

Not in these cases.  They either bought when the properties were worth a lot more and/or they chose crappy mortgages and their payments doubled. 

Iirc, Boston's main stake in this is the huge increase in abandoned properties and the enormous costs to the city of maintaining them.  Failing to maintain them leads to even lower values and increases in crime and vagrancy.  This is a good solution for local government.  Sure it would be nice to stick it to the defaulters, but you can't get blood from a rock, and the city can afford neither the maintenance nor the costs of demolishing.  When the problem becomes one of abandonment, the lenders cease to be faultless.

[Manedwolf]

If they couldn't pay the mortgage (generally speaking lower then rent) how in the hell are they supposed to pay rent?

Not in these cases.  They either bought when the properties were worth a lot more and/or they chose crappy mortgages and their payments doubled. 

Iirc, Boston's main stake in this is the huge increase in abandoned properties and the enormous costs to the city of maintaining them.  Failing to maintain them leads to even lower values and increases in crime and vagrancy.  This is a good solution for local government.  Sure it would be nice to stick it to the defaulters, but you can't get blood from a rock, and the city can afford neither the maintenance nor the costs of demolishing.  When the problem becomes one of abandonment, the lenders cease to be faultless.

Lenders do not want to become landlords. They do not want to have to be responsible for fixing the roof, fixing the appliances, fire code changes, tenant rights and tenant disputes and all the rest of that. Also, it's REALLY hard to evict people in Boston. One claim of discrimination, and they're tied up for a long time. And what incentive do the renters have to keep the property nice? It's not their stake anymore.

This is going to cause the lenders to flee, or cause them to deny even more loans out of fear that Big Government is going to whack them when the risky borrower can't pay (or decides not to pay!) and becomes another forced renter on their bill. And it will cause the Boston housing market to further implode.

If this worked, the lenders would have done it themselves. This is another case of government breaking someone's leg, then handing them a crutch and thinking they've done a good job.

[PTK]

How were these people able to get the houses in the first place??

[lupinus]

Not in these cases.  They either bought when the properties were worth a lot more and/or they chose crappy mortgages and their payments doubled.

Then they should have waited until they could afford and get a decent loan with decent terms.

If you are dumb enough to take an adjustable rate mortgage with bad terms when you have *expletive deleted*it credit for the full (or damn near it) value of the house, when interest is super low and don't have the wiggle room to afford it when those low interest rates go to normal levels, thats your own damn fault.

If you can't afford a decent chunk of money upfront so you have equity, credit to get a decent mortgage, and sense to buy a house that is within your means that's your own fault when you can't pay when banks raise interest rates accordingly.

People buying houses that are more then they need just because it's what they have always wanted is stupid.  As is the "standard of living" many try to have, when that standard is well beyond their means.

[BridgeRunner]

Guys, I wasn't saying that it's a brilliant plan.  I was saying two things:

First, in these cases rent is likely lower than the mortgage payment

Second, this plan addresses the city's interests.

That's all.

[lupinus]

True, but its the same basic words I'vce heard from so many who do hold that position BW.

[mtnbkr]

One thing that bothers me is how a renter can lose their home because the owner of the property defaults.  This happened to the lady living next door to us.  She didn't do anything wrong, but apparently her rent wasn't enough to cover the mortgage payment, so the owner defaulted or sold, not sure which and she was left with 30days to find a new home.

Chris

[Azrael256]

I can see lenders pulling the eject handle on the entire city of Boston now.

Yup.  It's now on my list of places never to do business of any kind.  Not that it wasn't already covered by the blanket prohibition on the entire state, but you get the idea.

[Manedwolf]

One thing that bothers me is how a renter can lose their home because the owner of the property defaults.  This happened to the lady living next door to us.  She didn't do anything wrong, but apparently her rent wasn't enough to cover the mortgage payment, so the owner defaulted or sold, not sure which and she was left with 30days to find a new home.

Chris

Sure, protection for someone who IS renting if their landlord defaults is one thing. I think that's already part of law, though. That makes sense, it's not their fault that their landlord is an idiot who was apparently spending their rent money on something other than mortgage payment. But this new law idea:

However, the measure would also cover individual homeowners who fell behind on their own mortgages.

That part is downright asinine.

Kevin Cuff of the Massachusetts Mortgage Bankers Association said the measure would mean that every single-family homeowner who goes into foreclosure would become a tenant - with all of a tenants legal rights. We think thats a little far-reaching.

He's right. And lenders would be right to say "No more loans here, sorry", if this passes. They don't want to be forced to be landlords for a bunch of houses bought by deadbeats who bought beyond their means, and I can't blame them.

[Brad Johnson]

If you are dumb enough to take an adjustable rate mortgage with bad terms when you have *expletive deleted*it credit for the full (or damn near it) value of the house, when interest is super low and don't have the wiggle room to afford it when those low interest rates go to normal levels, thats your own damn fault.

Amen, brother.

Second, this plan addresses the city's interests.

Not really.  Once these people become tenants they will get into the "it's someone elses problem" tenant mentality.  The properties will, in all likelihood, quickly become your typical rental property - messy, marginally kept, and occupied by persons who have little or no interest in maintaining the property, either aesthetically or mechanically. 

If the city was really interested in keeping up the neighborhood, they'd be working with the lenders trying to get owner-occupants into the homes.  As it is, they are forcing the lenders into an untenable position in order to say they "did something".  They think just because someone is living in the home that it will be okey-dokey when, in reality, they are making the problem worse.

Brad

[Sergeant Bob]

Looks like the chickens are coming home to roost.....

[Headless Thompson Gunner]

Guys, I wasn't saying that it's a brilliant plan.  I was saying two things:

First, in these cases rent is likely lower than the mortgage payment

Second, this plan addresses the city's interests.

That's all.

I don't think this plan would address the city's interests at all.  The city wants to see vacant properties be sold and occupied.  That's not going to happen now, because this plan would make it suicidal for any lender to lend on a property within the city.

I would guess that rent is higher than mortgage payments for any given property.  I don't know the market capitalization rate for rental homes in Boston, but I'm guessing it's in the neighborhood of 8% to 10%.  Add in the landlord's expenses and you've almost certainly exceeded the cost of a high-rate subprime mortgage payment.

[lupinus]

First, in these cases rent is likely lower than the mortgage payment

Actually, since the owner sets the rent, they could set it at the value of the mortgage payment or higher (as is typical for rent in many cases, rent is seldom cheaper per month then a mortgage payment if you have anywhere near decent credit, even just ok credit is usually better then rent)

So all they would have to do is jack the mortgage payment up 200 bucks a month, say their tenant isn't paying rent, boot them out, and sell the house to someone who isn't as great a risk and has the money to make their mortgage payment.

Problem solved.

[El Tejon]

When did Atlast Shrugged come to life?

This is right out of the twisted tales of socialism of Ayn Rand.

[Manedwolf]

First, in these cases rent is likely lower than the mortgage payment

Actually, since the owner sets the rent, they could set it at the value of the mortgage payment or higher (as is typical for rent in many cases, rent is seldom cheaper per month then a mortgage payment if you have anywhere near decent credit, even just ok credit is usually better then rent)

So all they would have to do is jack the mortgage payment up 200 bucks a month, say their tenant isn't paying rent, boot them out, and sell the house to someone who isn't as great a risk and has the money to make their mortgage payment.

Problem solved.

Not that easy. Boston, remember? All the tenant has to do is cry "OMG discrimination!" and it's tied up in the courts for years, while they stay in the house.

[Azrael256]

boot them out

Maybe Boston is different, but in Texas, it takes about six months to evict a tenant who's smart enough to know how to fight.  For a lender, this just locks up their liquidity further.  Even if eviction takes 30 days in Boston, it will still kill the lenders.

[Manedwolf]

boot them out

Maybe Boston is different, but in Texas, it takes about six months to evict a tenant who's smart enough to know how to fight.  For a lender, this just locks up their liquidity further.  Even if eviction takes 30 days in Boston, it will still kill the lenders.

Six months? If they don't fight. Longer if they do.

[lupinus]

Maned-

As I noted rent is generally more expensive then a mortgage payment, including ones with a bit higher interest.

If they are charging a fair rent based on the area, no discrimination.

Also even if they don't raise the price the lender couldn't make the mortgage payment anyway so they shouldn't be able to make rent either if it's the same price.

[ilbob]

One thing that bothers me is how a renter can lose their home because the owner of the property defaults.  This happened to the lady living next door to us.  She didn't do anything wrong, but apparently her rent wasn't enough to cover the mortgage payment, so the owner defaulted or sold, not sure which and she was left with 30days to find a new home.

Chris

If she had a month to month lease, like many renters do, it works both ways. The renter can get out of the contract just as the owner can. A lease is only good for the period it covers. It is not an indefinite contract unless it is so specified.

[wideym]

These houses are not abandoned, they are in foreclosure.  The city of Boston does not "keep up" these homes, the lenders do.  Banks or morgage companies hire people to check on these properties (cut the grass, pick up trash, make minor repairs, ect.), they do not abandon them.  Most cities I know of fine or bill property owners if they clean up the property.  Unpaid fines or bills lead to seizure of the property by the city after a few years or less. 

[taurusowner]

What is it with Leftists and their compulsion to force companies through asinine legislation to take their business elsewhere?  Do they not reason that the easiest way to stop someone from succeeding is to penalize success?  The best way to stop lending is to make it riskier.  The best way to force a business to leave is to make it more expensive to stay.  And the best way to lose jobs is to make keeping them too hard and expensive to be worth it.

Of course the logic in all of this has no bearing on the emotional feel good-ness of the Left and their terrible ideas, no matter how often they fail.  Time and again the Left's answer is to heap taxes, regulations, and penalties upon the very people(businesses) who provide the jobs, capital, and infrastructure for the rest of the nation to even have a house, a job, or food on the table.  And then they have the gall to complain when said companies react as they should by cutting jobs, stopping lending, ceasing production, and moving out of state or overseas.

Business, especially "big business" is the main source of every job, house, product, and opportunity this nation has.  Outside of .gov of course.  Maybe that's the reason.  Businesses show that they can do anything government can do better, faster, and cheaper.  And they give the consumers a choice wether or not to purchase their products or services.  The big .gov Leftists though would prefer to have all the say in every product, service or opportunity you the citizen can come into contact with.  And they don't want you to be able to decline.


Let us not forget who forced the lenders to lend to clients that could not pay: Congress and their misguided regulations.  Equal Opportunuty Lending my ass.