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Fri Aug 24, 2012, 07:03 AM

 

Our Coming Rentcropper Society: Private equity firms buying up blocks of foreclosures nationwide

We are in the midst of a sea change in terms of the relationship of ordinary Americans to the housing market. Policymakers are not only in denial as to its magnitude, but are actively enabling courses of action that are likely to prove destructive...

Given this sea change in the stability of middle class income, it seems obvious that home ownership will not be attainable for many workers. Moreover, some may recognize that even if they can afford to buy, that the risk/return tradeoff may still make rental more attractive for them.

In some respects, this transition is already underway. Homeownership is now at its lowest level in 15 years. And some societies have much higher levels of renting than the US, most notably Germany.

But there is a second major shift underway, which is a planned transfer of large number of homes into the hands of private equity landlords. Fannie and Freddie are now piloting programs for bulk sales of foreclosed home. Historically, they’ve sold them individually or in geographically dispersed packages, but since February, Fannie has been experimenting with selling homes in large volumes in Phoenix, Atlanta, Chicago, Florida, Los Angeles and Las Vegas. There are also reports of investors making significant buys in Florida. Bank of America is also experimenting with bulk sales. It’s likely that once the Fannie and Freddie programs are up and running, the servicers will copy their template with private label loans.

And the expectation is that fortunes will be made....There are several grounds for concern. One is that there is no model for large-scale, absentee landlords of single family homes. In the past, institutional investment in residential rental has been in multifamily properties, often apartment buildings. And these almost without exception had property management in place at the time of acquisition or was in dense urban areas where it was easy to find experienced management firms... PE firms have too often proven to be bad landlords by design...

What can we expect from our new suburban absentee landlords? First is they don’t seem to appreciate how operationally intensive property management is. Second is that they plan to make tenants responsible for maintaining properties. Yes, you read this correctly; we’ve heard this from various sources.... The subtext is that the PE crowd intends to take as narrow a view of what constitutes required repairs as possible; the reports of PE landlords from hell and underinvestment in Stuy Town would tend to confirm that...

So as we indicated, there is good reason to expect that the new PE landlords will undermaintain the properties they buy. That in turn has implications for the neighboring properties...

The one plus ordinary Americans have in the coming rental conversion is that this is a battle that can be fought on a local level, where major financial players seldom bother buying political favors and can easily misjudge who the key players are. Stronger rental rights, which would discourage absentee rentiers from bidding up properties, would also work to the advantage of local landlords who have been the traditional owners of residential rental properties. This is a battle that can be won, provided homeowners get word soon enough that a quiet battle for their communities is about to be joined.

Read more at http://www.nakedcapitalism.com/2012/08/our-coming-rentcropper-society.html#Td4eh6HzCh0JProP.99


I think this ties into an article I posted yesterday: suburbs becoming the new slums. If the PE landlords don't plan on doing maintenance, they're planning to create ghettos. That's how it works -- the same process that took place, e.g., in the south bronx. They use them as cash cows and tax dodges, in order to shift residential patterns -- by income, race & ethnicity.

Given the lack of public transportation in many suburbs, though, if things play out like this & services, shopping etc leave the areas it would be pretty grave for the residents.

http://www.democraticunderground.com/10021184351

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Reply Our Coming Rentcropper Society: Private equity firms buying up blocks of foreclosures nationwide (Original post)
HiPointDem Aug 2012 OP
xchrom Aug 2012 #1
2pooped2pop Aug 2012 #2
HiPointDem Aug 2012 #4
Nuclear Unicorn Aug 2012 #13
summerschild Aug 2012 #33
woo me with science Aug 2012 #3
goodword Aug 2012 #8
aquart Aug 2012 #5
Duchess St.Rollins Aug 2012 #7
Snarkoleptic Aug 2012 #18
Raster Aug 2012 #19
Thor_MN Aug 2012 #17
Raster Aug 2012 #20
FlaGranny Aug 2012 #6
HiPointDem Aug 2012 #10
Trillo Aug 2012 #31
FlaGranny Aug 2012 #40
Zalatix Aug 2012 #9
Mustellus Aug 2012 #11
fasttense Aug 2012 #12
CabCurious Aug 2012 #14
2pooped2pop Aug 2012 #15
CabCurious Aug 2012 #24
2pooped2pop Aug 2012 #29
CabCurious Aug 2012 #35
HiPointDem Aug 2012 #21
yardwork Aug 2012 #22
CabCurious Aug 2012 #25
Snarkoleptic Aug 2012 #16
CabCurious Aug 2012 #26
CabCurious Aug 2012 #27
coalition_unwilling Aug 2012 #28
Snarkoleptic Aug 2012 #37
coalition_unwilling Aug 2012 #38
OnyxCollie Aug 2012 #23
coalition_unwilling Aug 2012 #30
Dustlawyer Aug 2012 #32
girl gone mad Aug 2012 #34
HiPointDem Aug 2012 #36
Egalitarian Thug Aug 2012 #39

Response to HiPointDem (Original post)

Fri Aug 24, 2012, 07:05 AM

1. du rec. Nt

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Response to HiPointDem (Original post)

Fri Aug 24, 2012, 07:13 AM

2. It was a takeover from the start

 

It was and is a takeover and redistribution of the lower and middle class finances, back up to the rich. They won't quit until they have it all.

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Response to 2pooped2pop (Reply #2)

Fri Aug 24, 2012, 07:18 AM

4. i think you're right.

 

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Response to 2pooped2pop (Reply #2)

Fri Aug 24, 2012, 09:04 AM

13. Being facilitated by Fannie and Freddie?

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Response to 2pooped2pop (Reply #2)

Fri Aug 24, 2012, 12:07 PM

33. I've been expecting this.


The same f**ckrs that caused the mess saw all the opportunities in the foreclosures and they haven't missed a trick in exploiting them. That's the reason programs to aid in refinancing failed dismally. Cooperating with those plans would have reduced the profit from this kind of initiative. From the start, the original guilty parties have used every trick to line their pockets - the outlandish fees, the robo-signings, etc.

I expected the foreclosed properties would be gobbled up, and the original players in this are wealthy enough to do it very efficiently and profitably.

As long as the opportunity to profit from the carnage exists, the vultures intend to clean to the bone.

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Response to HiPointDem (Original post)

Fri Aug 24, 2012, 07:17 AM

3. DU Rec. We have been bought and sold,

and the worst is yet to come.

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Response to woo me with science (Reply #3)

Fri Aug 24, 2012, 08:28 AM

8. I agree. We've been duped...

but does that mean we have to accept it?

I don't think so. I think we need to galvanize. We need to come together in a more meaningful way, a stronger and more defined way. As someone whose political and social ideals lean more in a democratic position, I'm tired of the hatefulness and greed of the right. I'm tired of their power and the belief that just because they have the money they deserve to rule over everyone else.

We are living through historic times right now. But if we dont make a stand, those of us who are affected by all the huge inequalites that have taken root over the last few decades are going to finally be silenced. It's already happening a little at a time. The power of Republicans will eventually consume our nation; and that's exactly what they want.

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Response to HiPointDem (Original post)

Fri Aug 24, 2012, 07:48 AM

5. Anyone know a guillotine startup looking for investors?

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Response to aquart (Reply #5)

Fri Aug 24, 2012, 08:20 AM

7. If you find one, let me know...

I'll invest my life's savings in that shit.

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Response to Duchess St.Rollins (Reply #7)

Fri Aug 24, 2012, 09:25 AM

18. Welcome to DU.

Luv the trollcraft you and Duke do on FB.

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Response to Duchess St.Rollins (Reply #7)

Fri Aug 24, 2012, 09:52 AM

19. Welcome to DU! You and the Duke are among friends.

And yes, at this point, Guillotine Futures looks mighty tasty.

Seriously, no one saw this coming? This is akin to the "tote the note" car "dealerships" that offer to self-finance your new vehicle at rates that guarantee you will default. Be late by ONE DAY and your car is picked up, and either (1) back to you along with new fees and penalties; or (2) fluffed up to be re-sold to a new sucker.

So now they're going to do the same with homes. Except they no intention of reselling, only confiscating, under maintaining and over renting.

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Response to aquart (Reply #5)

Fri Aug 24, 2012, 09:24 AM

17. During the French Revolution, they had to rely on gravity powered devices

 

With modern, powered devices, a single, conveyor fed, pneumatic gulliotine could serve an entire state. So not much profit on device sales - would have to be a service industry, charging on a per use basis. But who do you invoice?

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Response to Thor_MN (Reply #17)

Fri Aug 24, 2012, 09:53 AM

20. No invoice. The entertainment value alone negates a profit motive.

And just think of all the good for society by dealing with the vermin.

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Response to HiPointDem (Original post)

Fri Aug 24, 2012, 07:58 AM

6. On a smaller scale

The homeowner's association where I live and work may be in for big trouble. Over and over again, properties here go up for foreclosure and are bought by smaller, local equity firms. These properties go up for foreclosure because years of unpaid fees. When you dig deeper, there are years of unpaid property taxes also. Anyway, these firms buy up the properties and hold them, with no payment of HOA fees OR property taxes. Then the same properties go up for foreclosure again. In the meantime, our other homeowners have to take on more and more of the expenses to run our community. I don't see things getting better for a while. Things don't make much sense in the housing market.

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Response to FlaGranny (Reply #6)

Fri Aug 24, 2012, 08:36 AM

10. how can they hold the properties and not pay the fees or taxes? can they be sued?

 

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Response to HiPointDem (Reply #10)

Fri Aug 24, 2012, 10:08 AM

31. Similar thing happened, but government was the owner.

Government didn't pay a water bill accrued during the time they owned it, apparently due to a yard water pipe that broke and which took some time for the property management to cap. It was up to the new owners to pay all the past due amounts, and the water company receptionist was a real work of hatred, even asserted on the phone we owed the water company the amount due before we even bid on the house!

Hey, if government can do it, why can't corporations. Little people will pay all the bills.

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Response to HiPointDem (Reply #10)

Sat Aug 25, 2012, 09:14 AM

40. They just do, and they ARE sued.

After they've missed paying maintenance for about 6 or more months, the property goes back to the attorney for another foreclosure, and then purchased again by another speculator. We have properties in foreclosure where we've discovered they owe many years of property taxes. Have one right now that has about 8 or 9 tax certificates (years) that have been purchased by different speculators. It's crazy. It costs the rest of the owners 40 to 50 thousand a year extra. It gets to the point where so much money is owed in taxes and maintenance that no one wants the property. The funny part is that this is an HOA mobile home community and there is hardly a cheaper place to live in the state.

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Response to HiPointDem (Original post)

Fri Aug 24, 2012, 08:32 AM

9. This will be interesting to see in California, which I believe has strong renters' rights.

 

California could become a very expensive investment area for these absentee landlords.

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Response to HiPointDem (Original post)

Fri Aug 24, 2012, 08:36 AM

11. They will have to also buy

... the local zoning boards.

Its an obvious point of resistance.

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Response to HiPointDem (Original post)

Fri Aug 24, 2012, 09:00 AM

12. I owe my soul to the company store.

 

In this case, we owe our souls to the huge corporations that provide no jobs.

Under TARP the bushes and Obama could have started a real program, like FDR, to stop foreclosures and bring loans down to their actual value. Money was set aside and programs were outlined for saving the American homeowners in TARP but neither administration would enact the waiting programs. The bushes excuse was that a new administration was coming on and they wouldn't implement anything because it would just get changed. Obama's excuse is that Timmy Geithner didn't want to do it.

So instead, millions of families needlessly lost their homes all because Timmy did NOT want to do it.

America For Sale brought to you by Goldman Sachs and Geithner.

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Response to HiPointDem (Original post)

Fri Aug 24, 2012, 09:09 AM

14. At least it's not China buying those blocks...

to be honest.

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Response to CabCurious (Reply #14)

Fri Aug 24, 2012, 09:14 AM

15. so it's ok then right?

 

bull

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Response to 2pooped2pop (Reply #15)

Fri Aug 24, 2012, 10:01 AM

24. because that's what i said, right?

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Response to CabCurious (Reply #24)

Fri Aug 24, 2012, 10:06 AM

29. kind of sounds like it to me

 

at least it's not China. wtf

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Response to 2pooped2pop (Reply #29)

Fri Aug 24, 2012, 02:49 PM

35. it was a joke... and I'd be happiest if working class families could all remain in their homes

But the wider point is that China is literally buying America due to our debt spending and our hubris.

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Response to CabCurious (Reply #14)

Fri Aug 24, 2012, 09:54 AM

21. you think not? i'm sure chinese investors are buying some of them. as well as americans,

 

europeans, africans even.

with our pension funds as the backstop.

all kinds of rich fucks in those PE firms.

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Response to CabCurious (Reply #14)

Fri Aug 24, 2012, 09:55 AM

22. How do you know it's not China? Do you know who owns these private equity firms?

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Response to yardwork (Reply #22)

Fri Aug 24, 2012, 10:02 AM

25. great point!!!!

These days, the finance sector seems to basically be a global, multinational culture with its own interests that have no real concern with national growth and sustainability.

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Response to HiPointDem (Original post)

Fri Aug 24, 2012, 09:21 AM

16. Thomas Jefferson saw this coming.

""If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered...I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

The Federal Reserve is neither federal, nor has it any reserves.
It's time to sweep into the US Treasury.
IMHO

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Response to Snarkoleptic (Reply #16)

Fri Aug 24, 2012, 10:03 AM

26. wow. That is officially the most important quote in our country's history

Incredible.

Do you have the exact source?

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Response to Snarkoleptic (Reply #16)

Fri Aug 24, 2012, 10:05 AM

27. hate to break it... but this may be a fake quote

I was suspicious when i saw the words deflation and inflation. It turns out that nobody has a real source on this quote.

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Response to Snarkoleptic (Reply #16)

Fri Aug 24, 2012, 10:05 AM

28. Um, no disrespect to Thomas Jefferson or to you, but private banks DO NOT

 

"control the issue of . . . currency". The issue of currency is handled by the U.S. Treasury's Bureau of Engraving.

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Response to coalition_unwilling (Reply #28)

Fri Aug 24, 2012, 08:44 PM

37. Printed by Bureau of Engraving, yes...

but...
Federal Reserve Notes are authorized by Section 411 of Title 12 of the United States Code and are issued to the Federal Reserve Banks at the discretion of the Board of Governors of the Federal Reserve System.[2] The notes are then put into circulation by the Federal Reserve Banks,[3] at which point they become liabilities of the Federal Reserve Banks[4] and obligations of the United States.[2]

Meaning we're on the hook for whatever they choose to issue. Like the reported $13trillion they issued to bailout foreign banks at the peak of the banking crisis and while pugs were whining about a measly $700billion for US stimulus.


https://en.wikipedia.org/wiki/Federal_Reserve_Note

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Response to Snarkoleptic (Reply #37)

Sat Aug 25, 2012, 02:53 AM

38. Do you understand the difference between 'money' and 'currency'? There is a

 

major difference and before we continue this discussion, I think we need to be sure we agree on our terms.

As a hint, $13 trillion in currency was not printed by the Bureau of Engraving.

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Response to HiPointDem (Original post)

Fri Aug 24, 2012, 09:58 AM

23. It's a great time to be a slumlord. nt

 

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Response to HiPointDem (Original post)

Fri Aug 24, 2012, 10:07 AM

30. K&R for exposure and education. - n/t

 

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Response to HiPointDem (Original post)

Fri Aug 24, 2012, 10:13 AM

32. All part of consolidating and owning everything among a very few!

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Response to HiPointDem (Original post)

Fri Aug 24, 2012, 02:48 PM

34. k & r

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Response to HiPointDem (Original post)

Fri Aug 24, 2012, 05:11 PM

36. Dean baker says prices on low-market real estate in phoenix have increased dramatically in the last

 

three months.

http://www.cepr.net/index.php/blogs/beat-the-press/housing-recovery-its-better-than-the-nyt-thinks

wonder if there's a connection?

phoenix was hit hard by the mortgage crisis.

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Response to HiPointDem (Original post)

Sat Aug 25, 2012, 03:06 AM

39. Absentee ownership is the surest way I know to destroy a neighborhood.

 

You can see it happen like clockwork. The main thing they are counting on is the suckers (us) to observe and maintain the basic legal structure of property ownership, and frankly, it's a good bet. We're really not very bright.

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