Everything is Coming Up Roses, Or Are They Tea Bags?

Rick Santelli was reporting from the pit at the Chicago stock exchange the other day and got everyone stirred up with his suggestion of a Chicago Tea Party . I thought it was marvelous and right on.

Here we are now with a $787 billion stimulus package that includes anemic elements like an $8000.00 tax credit for taxpayers buying a primary residence between Jan. 1 and Dec. 1, 2009. Single taxpayers making less than $75,000 are eligible. That tax credit doubles for married couples. Think about it, an 8k credit is just a drop in the bucket for a buyer in areas like Martha’s Vineyard, and no not everyone who lives here is rich. It’s just not enough. And what about the $75 billion mortgage relief plan the President announced. It’s not right. The Wall Street Journal says, "By investing in failure, the Administration will also prolong the housing downturn and make financing a home purchase more difficult for future borrowers." The New York Times says it is "a good start, but given the dire state of the economy, we fear it still may not be enough."

But what is enough and actually too much is the idea that people who did nothing wrong, the 92 percentile, are being asked to help the 8% that either had no business getting a loan in the first place or defrauded the banks intentionally out of sheer avarice. It’s the hard working people who are continuing to pay their bills even though they are suffering like everyone else today; they are really going to suffer.

Here’s a quick story I heard yesterday from a broker in Florida about one of those people you will be suffering for. This ‘investor’ accumulated no less than 20 properties through no-money down financing during the high time of the market. They did not and have not paid one cent toward an equity share on those properties; they had every intention of not owning the properties long term. The lenders began the foreclosure process about three years ago, but it takes time. In the meantime, this person is consistently making about $20,000 a month in rental income. There are hundreds of scenarios like this one. Why should we suffer for this kind of behavior? They should lose everything and go to jail. But if they go to jail, shouldn’t the enablers go with them? Yes, and that is why nothing will happen to them.

If you are wondering why the foreclosure machine is moving so slowly, let me give you a brief idea by way of another true story. This person is a first time home buyer who will most likely lose their home when their Alt-A loan resets. Mind you this is also in one of the areas where values have dropped by 50%. This person went through foreclosure prevention counseling and as instructed began the bureaucratic procedure with the lender for a loan modification. They spoke to a loss mitigation representative and complied with the instructions they were given. They supplied all the necessary documentation, both on line and via certified mail. They had the person’s name and extension number, but when they called to get a progress report after about two weeks, that person did not exist and both their cyber and paper trail no longer existed. They tried again filling out all the same information, etc. Again after a couple of weeks they contacted the LM department and that person did not exist. However, somehow they were finally able to track down the person that helped them. The representative told them, “You can jump up and down, get nasty and impatient but it will not do you any good. I have over 100 case files on my desk and you are just one of them in the pile. You’ll hear from us when we get to your case.” End of discussion. That’s just one person who has to deal with this enormous mess the government wants everyone to be responsible for.

Bringing it back home to the Cape and Martha’s Vineyard, here in Massachusetts the Warren Group reported the number of homes on Cape Cod that were actually foreclosed on last month was down 8.9 percent. This number is compared to January 2008. In exact numbers, there were 41 foreclosure deeds filed in January 2009 compared to 45 last year. In Dukes County, which is Martha’s Vineyard, the number of foreclosure deeds filed fell to 9 last month compared to 13 in January 2008. That is a difference of 30.8 percent. The experts are not sure what is causing this reduction in foreclosures, but it is a good sign as are the more realistic price reductions posted by the Martha’s Vineyard Information Network database. There are 467 single family homes currently on the market with a total inventory of 680 properties in all classifications. There are 72 single family homes that have been removed from the market since the first of the year. I can assure you everything is for sale, so if you want one of those properties just ask.