Those who are older than I am will attest to the fact that many things in this world are interconnected. Far more than we admit at first. This is easily seen on issues of Faith. If you are a Christian, then most of the time you’ll be convinced that evolution is false, which leads to a completely different interpretation of the data gathered concerning biology, sociology, psychology and other disciplines of science. Similarly, over time we can more easily identify how interconnected things such as government oversight/control (meddling) has on businesses, job creation, family life, and overall prosperity. Further examination shows that government actions also have a trickle-down effect and thus influence things such as the number of FL foreclosures coming down the pipe, small business effects of the recession, and other more acute aspects of life in general.
I’m pretty sure that most lawmakers are older than I am, so it can safely be assumed that they can share in this view of the world and the effects such government influence have had in the past. I guess we could call it “Political Chaos Theory”. Some of you may know from your studies in college (or from reading Michael Crighton’s Jurassic Park) that there is this idea out there that events in our world (both large and small) have far reaching effects. The example often given is known as the “Butterfly Effect”. A Butterfly flaps it’s wings in Australia and the small amount of air moved by that action plays out over a series of millions of small chain reactions to cause a thunderstorm in Nebraska. That’s the general idea.
Political Chaos Theory thus says that actions by the government (both small and large) can have a ripple effect that spreads through all aspects of life in a very short period of time. I think we’re seeing a bit of that right now.
One example would be that Fannie Mae has now fired up a new policy that says No Investor Sales For 15 Days. You heard it right, the largest mortgage lender in the world wants to refuse to allow investor buyers to have the opportunity to purchase a FL foreclosure property for 15 days after it is listed. During this initial window, the home will only be availalbe to private owner-occupant home buyers who intend to live in the property after it is purchased.
Admittedly, there are some merits to taking this position. Real estate agents who work for the banks and list homes in large numbers are often faced with the fact that their commissions are unacceptably low. Period. The listings are routed through to them via a third-party administrative company who works for the banks and takes a large cut of the total commission payout as soon as the house sells. They also sometimes specify that the commission amount be less than what the rest of the market would normally bear.
The idea behind these [now] commonplace business processes by the banks and third party administrators is that the Realtors listing the homes don’t need to spend money on marketing getting new clients. They are spoon fed listings of FL foreclosures by the dozen and thus should be able to give a discount for dealing in volume and still turn a handsome profit. Unfortunately, the real estate agent doesn’t see it this way. He sees himself has listing a horde of houses that often are overpriced. He or she is also frustrated that the amount of time required in getting the homes listed and ready for sale is equally burdensome for houses that will net them nearly zero profit as those that will bring in a descent payday. This situation has caused many real estate agents specializing in selling FL foreclosures for banks to look to build a “pocket list” of investors to whom they can sell the homes without involving another agent. This arrangement ensures that they can get both sides of the commission and greatly increases their willingness to work in a tough market segment where the customer (the bank) is trying to strip out all profit for the agent that is still left in the deal.
This sequence of events can, and often does, lead to abuse. Agents will mark properties “pending” when they are not. They’ll hold offers until the one from their client is accepted. Thus, in an effort to put a lock-down on such bad behavior, many banks have already come up with policies like those being instituted by Fannie Mae. It’s not anything new. In fact, HUD Homes have been sold on such a basis for years. The crux of the issue is that it’s never been done on such a large scale.
Fannie Mae either backs or owns outright a massive piece of America’s “mortgage pie” and placing this restriction on such a large number of foreclosures is sure to cause additional backups in a system already bogged down with delays. This will certainly translate into more vacant FL foreclosures on the market for a longer period of time. That does not bode well for a recovery in home prices and is another indication of small changes which would otherwise go unnoticed causing a profound impact on the overall situation in the housing sector.
A recent report came out that as much as half of the mortgage losses are going unreported and are thus weighing down the balance sheets of the world’s largest banks. I’ve been saying this for a while now, and the push to turn the loan modification into the silent savior of the world housing markets is simply not working. I’m sure you can judge for yourself if clogging up the arteries of the Florida foreclosure property liquidation process makes sense or not.
Further intrusion into the workings of various financial markets is being advocated by many around the world. One such movement is calling for taxing of speculative investments across multiple markets. The reasoning behind this is that while it is commonly known that our foreclosure problems, job losses, and economic woes are more closely tied to the fallout in the mortgage industry than anything else, other imperfections in areas of financial investment exist in the foreign exchange and commodities markets…and must be stopped at all costs. The proposed solution is to institute a new “tax” on placing the transactions themselves! The idea is that if we could limit investment and trading in Forex and Futures, there would be some type of protective benefit. The article cited does not make good on explaining HOW that benefit would come about. Seems like a another excuse to prop up sagging government revenue streams if you ask me.
On a positive note, banks have recently been entertaining the idea of handling the issue of the looming foreclosures waiting in the wings by actually renting out the properties to tenants themselves. This is an amazing turn of events, unprecedented in the most anyone’s memory.
Banks are NOT in the landlording business, banks are in the business of lending money. At least that’s what the gurus who look for you to buy their latest and greatest course on getting rich flipping FL foreclosures would have you believe. The idea that banks would never entertain the idea of renting properties out is a core theme in these real estate investing courses, ebooks, seminars, and CD sets. But desperation is the mother of innovation and it would appear that the banks are starting to have a change of heart concerning mixing it up as a landlord in order to keep their newly acquired properties from sitting vacant while they process them through the their traditional asset liquidation systems in greater and greater numbers.