I’ve been thinking about suing myself. Plenty of reasons to. What I do on a golf course could almost be called criminal. Most times that I’ve been on one I hurt my neck an ankle or a wrist. That’s reckless endangerment. I probably should sue myself for buying my car. It’s a GM model. A lot of GM dealers have been closed down by the federal government. When I need service I have to go miles out of my way. My patriotic buy is likely grounds for gross negligence.
It’s not impossible. One of the nation’s largest banks is, as the lawyers like to say, plowing new, fertile legal ground in Florida. Wells Fargo Bank is suing itself.
By no means am I an expert on Florida, or any other states’ real estate laws. But it seems that in 2006 Wells Fargo financed a couple to buy a condo with an 80/20 loan. That’s financial short hand for two loans to create 100% financing. That means: no money down. The couple defaulted on the loan in what they thought would be a friendly foreclosure. Well foreclosures are rarely friendly and in the process Wells Fargo has to recover its notes, hence the suit. The questions are: Why did the bank hire competing attorneys to sue itself? Why are they filing combative briefs? Couldn’t one lawyer combine the notes with less paper work thus less money spent?
Welcome to the stimulus age. The age where taxpayers’ money is squandered mercilessly. The 21st century history of the American real estate market is that of government interference and as that same government plunges more deeply into it there has been only one outcome. The housing values of hard working Americans who lived the dream of owning their own homes are plunging in a downward spiral that doesn’t seem to have a bottom.
In the early part of this century the government did all it could to hold interest rates below market levels. That created cheap capital that led to a robust sub-prime mortgage market. This defiance of the market led way to the disruption of a simple axiom of residential real estate: a mortgage with no down payment is a lease. Leases are easy to walk away from and people, in record numbers, are. During the first five months of 2009 Wells Fargo had defaults exceeding those of the entire year of 2008.
The government’s response? Defy the markets again.
In May the folks who ignited this mess, Fannie Mae and Freddie Mac, put new home appraisal rules in effect. Circumventing local appraissers who ussually have an in-depth knowledge of their markets and mortgage brokers, who often specialize in securing loans for the self employed, these semi-federal agencies imposed a system requiring cheap appraisals for mortgage lending. Saving money these days sounds good unless there’s been a foreclosure in your neighborhood. Under these regulations, if that’s happened, your home’s appraised value is likely to be tens of thousands dollars less than it was a year ago.
The Obama administration has plans to solve this problem. Recently Housing and Urban Development Secretary Shaun Donovan announced that the American taxpayers are prepared to guarantee housing values up to 125% of what they are worth. He announced it in Nevada where the agency says 67% of current mortgage holders have mortgages that are higher than the worth of their homes. Additionally the administration is pushing the creation of a new buracracy, the Consumer Financial Protection Agency, with broad sweeping power over the financial services industry including banks, check guaranty services, leasing agents, even gift cards.
The short history of 21st century markets in the United States is dominated by the artificialty of government intervention. This mess won’t end until the government gets out. Someday if that happens people with cash or good credit will go shopping and housing values will be restored. In the meantime if you’re among the vast majority of Americans who have worked hard for home ownership your equity will continue to shrink. To get it back you’ll have to sue yourself, after all, under our laws you really can’t sue the Republicans and Democrats that are equally to blame, they work for the government.
Albert Paschall is Senior Fellow at the Lincoln Institute of Public Opinion Research, a non-profit educational foundation based in Harrisburg, Pennsylvania. Somedays is syndicated to leading newspapers and radio stations through out Pennsylvania. He can be reached at [email protected]