Saturday, October 8, 2011

How To "De-Fang" Your Bankster

Are US Banksters Creeping YOU Out?
Drilling Down to Specifics

It's easy, given the economic train wreck which has now engulfed all the actual human people (as opposed to "people" who are "corporations") in the world's developed countries, to simply bemoan the conditions of our existence under the heavy boot of the well established oligarch class. However, such a general malaise, we are discovering, is an obstacle far too easily handled by the ruling class.

The patient day laborers in the "public psychology management sections" behind those board rooms find it very convenient to simply describe us a "mildly restive."  Oh sure, we can grumble, but when we confront the now elaborate fortress of wealth which has been so "innocently" constructed to separate us from what would otherwise be a natural prosperity, we are confounded with the question of "Where to begin?"

Well, that "fortress of wealth" was not constructed from massive elements.  It is not the overnight product of revolution or a coup d'etat.  It was very quietly and gradually assembled from a thousand little insults steadily amassed in countless sunny afternoons in our Congress amid the cigar smoke and brandies.

Any citizen now wishing to undo what has been done must first realize that the process will require an equally long series of remedies, that is, an equally  long series of determined counter measures.  The fenders of the monster will have to be unbolted and dispatched one by one.

With an adversary so well armed and entrenched as this most modern class of democracy hating oligarchs, there is no other way to reach the chassis, and so long as that chassis remains in tact, the monster will inevitably return.

If You Take the Congress, What Do You Do With It?

Although our afternoon naps may be punctuated with fantasies of guillotines and adolescent French girls waving Tri-Color flags from barricades, we'll need far more specific plans if we expect to make much progress.

In fact, one early aim would be to permanently obliterate even this term "much progress," itself.  We're past the point where we might relax with "much progress."  This dragon must become entirely and unequivocally a corpse, not just a more manageable invalid.

Here, MeanMesa repeats a previous idea, not with the ambition of extracting just a few more blog visitors from the process, but because its "time may have come."  At least, perhaps, because the necessity of their reconsideration has grown more relevant.

Let's look at one item in a  "starter package" of new law which could begin to make a difference right away.

If only we could spay and neuter them. (image source)

Mortgages as Ownership

The shift of home ownership to those who are holding the securitized mortgage packages will continue pretty much regardless of political developments.  However, MeanMesa is quite willing to reiterate a suggestion made several times in the past on this little blog.

This has to do with collateral damage.  As the foreclosures rage on ahead, home values continue to cascade and ex-home owners rent cozy apartments, an unexpected victim arises from the rubble.  

Local property tax bases.

Schools, especially, but also roads and other local expenses, are left holding the bag.  As the big boys' mortgage gimmicks continue to unfold wreaking havoc like a medieval plague, property tax revenues plummet, leaving cities and towns without the means to make payroll for their teachers, principals and janitors.

In the air conditioned conference room in Riyadh where one of these "bundled mortgage delights" has finally landed, a sterile, chilly angst fills the atmosphere as the actual value of this little stinker gradually comes to light.  The 'owner' of one of the autonomous sovereign investment funds has just taken a $100 Mn hit, but some little town in Ohio has just had to increase the size of classes in its public schools to 35.

Bring my securities trader. (image source)

So, what can be done?

The slightest change to the way that mortgages are legally "organized" can make all the difference in the world.  Even better, this scheme accomplishes a nice collection of additional benefits once it becomes the law of the land.

The Scheme

The new law says that the ownership of mortgaged real estate runs with the mortgage instead of the title.

Of course, we know that, at least in the world of finance, this is already the case.  If you doubt it, let your house get foreclosed.  The real owner will emerge from that stack of paper you signed when you moved into your dream home.

For the comfortably ensconced home owner, making his mortgage payment month after month, the change is invisible.  Each month's payment covers the traditional accounts of principal and interest, but it would also include the cost of a pro-rated payment of the property taxes.

At any given moment in the life of the mortgage, a percentage of the ownership of the real estate is shared between the mortgage holder and the home owner.  When the monthly payment is made, the property tax would be paid collectively by each of the stake holders according to the percentage of ownership calculated for that month.

We know that mortgage bankers are not going to lose money on this arrangement because they will simply include the property tax in the monthly payment.  The home owner is going to have to pay the annual property tax, anyway, and under this change, his tax payments will simply be channelled through his mortgage payment instead of being made when he gets his annual tax bill.

However, the important difference becomes clear when the house is foreclosed.

At that point, the ownership of the house reverts entirely to the mortgage holder -- and so does the property tax liability.

If you are a banker and your mortgage holder defaults, you can still foreclose to your heart's content, but each of the properties which revert to your ownership will carry with them the continuing property tax exposure.  This alone will present an additional reason for just a little more reluctance on your part as the benefactor of the foreclosure.

If you wind up owning a bunch of residential real estate as a result of your foreclosure practices, you will also wind up with the corresponding property tax liabilities.  Let's take a look at what additional changes this might incorporate into the massive foreclosure process currently under way.

1. Municipalities will continue to receive property tax revenues, even when foreclosures increase.  This means that established municipal services such as schools will continue to be funded.

2. Bankers and mortgage holders will become much more interested in policies which will protect local property values.  Further, this new "interest" will extend to the holders of securitized mortgage packages regardless of where they are.

All the investors will have a new incentive to become and remain good citizens in the places where they hold mortgages.

3. Even with the prospect of foreclosure no more than a distant, future possibility, mortgage holders will become more involved in municipal services expenditures.  It may be attractive to demand frugality on expenses for municipal services, but being too stingy will result in creating adverse conditions which led to lower housing prices.

Bankers know about all sorts of useful things which could help a municipality make sense out of both its property tax policies and its expenditures for schools and maintenance.  If it became a matter of their business interests to "take an interest" in such things, their management expertise could contribute a lot.

4. The business of holding mortgages would adopt a much more local nature.  The presently unregulated journey of a mortgage investment might tend to remain closer to home at local banks instead of making its way to China or Japan.

5. The credit credentials required for a mortgage would begin to reflect the new arrangement.  The deregulation fever of the autocracy made it not only profitable, but unsettlingly acceptable for an eager beaver mortgage salesman to simply get almost any signature on the instrument, take his commission and pack the thing off into the world of investment funds, helter skelter.

The prospect of foreclosing the mortgage, once the additional burden of assuming the on-going property taxes is included, would make lenders quite a bit pickier about their mortgage partners.  Since the jobs picture in the local economy would become more important, the mortgage lenders would have a much larger, material stake in the prosperity of that local economy.

We may not be able to stop the foreclosure mania that is raging along right now, but this simple change could go a long way towards not repeating this monstrosity.

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