Ohio 9th District Congresswoman Marcy Kaptur advises residents who face eviction to stay put. She support a tactic called “produce the note,” in which residents say they won’t move out unless the owner can produce evidence of ownership for a specific property.
The reason? In the midst of the real estate boom, as banks bought and bundled/sliced/diced/flipped properties, they cut corners. As a result, in many cases, banks may not be able to prove that they own the debt on a given property, giving occupants/owners valuable time to find alternate shelter.
Kaptur suggests, simply to “squat”. Make the suing banks produce the note. This, from Raw Story.com:
“During the lending boom, most mortgages were flipped and sold to another lender or servicer or sliced up and sold to investors as securitized packages on Wall Street,” explains the Consumer Warning Network. “In the rush to turn these over as fast as possible to make the most money, many of the new lenders did not get the proper paperwork to show they own the note and mortgage. This is the key to the produce the note strategy.”
In a related story, earlier I mentioned the “second wave” of Adjustable Rate Mortgages (ARMs) to reset in the next 4 years, which will make the sub-prime crisis seem liks a picnic.
An article in today’s Columbus Dispatch reinforces this fact. While `08 was bad, `09 promises to be even worse for homeowners:
“Credit Suisse suggests that the negative effects of sub prime loans peaked last year; however, it says that problems from adjustable-rate mortgages and alternative-documentation loans, or Alt-A loans, are on the rise and predicts they will peak between 2010 and 2012.”
“The root of the problem is bad loans,” said Kathleen Day, spokeswoman for the North Carolina-based nonprofit group. “And if we don’t stop all these foreclosures, we won’t stop the decline in home values that’s now in free fall and hurting everyone.”
Banks shouldn’t be so quick to foreclose. While predatory lending practices may have started this snowball rolling, legitimate institutions now hold the paper for these bad loans. I noticed that last week the fed indefinitely extended the .25% discount rate, (the rate banks charge one another for short-term loans). A year ago, it was 3.5%.
Hopefully, creative local solutions coupled with government programs can stop the hemorrhaging mortgage market. For now, though, it looks like the worst is yet to come.