Issue link: https://newsleader.uberflip.com/i/146256
Sarasota News Leader July 26, 2013 OPINION to a lesser extent, the flippers — those who borrowed too much against the phantom equity of their homes and other houses they had bought). Page 73 empty. The result was that, instead of owning good properties (they were good while they were being maintained by the homeowners), the banks owned abandoned properties subject to mold, theft of copper pipes, unkempt What solutions were open to the banks to yards, etc.: a real downer for the community cure their underfunded portfolios? One was and nearby property owners. what they had been doing all along: increasing profits by selling shares in bundles of bad CONSEQUENCES mortgages to pension funds around the world. So, where do we stand? Another, as stated above, was to pay their lobbyists to get the federal government to bail From when the bubble burst until now, hardly them out with billions of dollars and low in- anyone had been buying homes. In fact, for terest rates (low, as in zero). A third approach most of the time after the start of the receswas to foreclose on the non-performing loans. sion, an inventory of multiple years worth of homes was available for sale and just sat with The problem with the first approach was no takers. Why? Houses were cheaper after that it should have been illegal. The problem all; this should have been a great time to buy. with the second was that the money given to the banks in the bailout was supposed to be A major problem is, and has been, that banks loaned to companies — so they could contin- have not been making mortgage loans; or, ue to operate or to expand —or to potential if they said they were, they were asking for homeowners in the form of mortgages. In- much higher down payments along with many stead, the banks kept the money to prop up other restrictions, which blocked sales. their reserves. Too bad Congress never put Many articles that have appeared since the into writing the stipulation that the banks start of the recession have been about banks were supposed to loan the money. When new not following through on the short sales of mortgages failed to materialize out of the bail- distressed homes. These were homes that the out funds, the low interest rates the Federal banks said they would allow to be sold for an Reserve charged the banks were supposed to amount below what the sellers owed on the do the trick. However, once again, that never mortgages. However, the banks repeatedly rewas put into any law. neged on such sales just before closings. This practice became so widespread that many The problem with the third solution — forepeople wanting homes just stopped looking closing on homeowners — was that a lot of for bargains. homeowners wound up on the street. Further, banks — not being property managers With banks not giving mortgages to buyers — failed to maintain the houses that became and not offering loans to developers or con-