De-Incentivizing Home Foreclosures

MeanMesa has posted on this idea before (see: A MeanMesa "Quickie" - Still In Love With the Bankers? - April 6, 2010).  However, the foreclosure attack has, since that posting, simply raged forward unchecked.  It now appears that the mortgage schemers intend to own every house in the country, even if it means taking a hit from their own reckless practices.

The idea in that old posting is that local property taxes should be "joined at the hip" with the ownership of local property.  Home owners are going to pay these taxes in any event so long as they are able to own and occupy their residences.  However, once the property descends through the foreclosure "meat grinder," the burden of paying property tax on it ceases.

Property taxes are for the little people -- not us bankers.

Back to the "burden of paying property taxes ceases" idea, the central concept is that property taxes pay for the commons of the community.  The list of commons may include items such as public schools and civic projects -- museums, treatment centers, court houses, you name it.

The community assets paid for by the property taxes support the value of living in the community, and, in a serious way, support the desirability -- and hence, the value -- of the property being taxed.  Further, the flow of property tax revenues is collective.  Property taxes from home owners without children are still funnelled into the school budget.  Property taxes from home owners who aren't interested in art or antiquities are still funnelled into museums.

"Boiled down to the bones," the idea is that anyone who holds property will pay the property taxes.  There is, however, one glaring exception to this rule.  That exception is the banker or security fund which holds the mortgages.  Although "holding a mortgage" amounts to "making an investment" in the community, the bankers have never felt obliged to "participate" in paying for community enhancement projects.

This should change.  In fact, it should have changed long ago.  It has never been much of an issue until recently when foreclosures mushroomed after the Republican Great Recession hit full swing.

Of course, bus loads of professional screamers -- all hired by the bankers and mortgage schemers --would immediately arrive at City Council meetings and State Legislatures to decry the prospect.  But, on the brighter side, the damage to these "Captains of Industry" wouldn't have to be so great.

Property tax liabilities could be seamlessly injected into the responsibilities of the mortgage holder.  Most of the time, that is, in the majority of cases where mortgage holders simply pay their mortgages and their property taxes, the new proposal would be revenue neutral to both the bankers and the home owners.  However, just when these same "Capitalist eager beavers" rushed to foreclose a home, they would have to include in their cost estimate for that foreclosure the prospect of paying the property taxes until it was resold.

Aside from the benefit of "slowing down" the bankers' foreclosure frenzy, the true benefactors would be local governments.  When property taxes were included in the monthly mortgage payments -- always based on the share of the property held by each partner each month whether in foreclosure of not -- city governments would be more confident about their income stream.  The onus of rectifying unpaid property taxes would become joined with the onus of collecting the mortgage payments.

However, after a foreclosure, the city would continue to receive its property tax revenue from the "new owner" of the property -- the bank or mortgage company which had foreclosed it.  With the number of foreclosures being executed in today's market, this would be a great way to keep municipalities "in the pink" for the duration of the economic disaster.

MeanMesa also thinks that when bankers have more "blood in the dirt," both municipal policies and national politics -- not to mention house prices -- would benefit.

Well, some State Congressmen from Rhode Island are having similar ideas.  Take a look at the following form October, 2009.

The Hive - The Modesto Bee

TheHive@modbee.com 

(source http://thehive.modbee.com/node/14928 )

3/10/2009

Bill makes banks liable for property tax on foreclosed homes STATE HOUSE – Central Falls had the highest property foreclosure rate in southern New England in 2008 (57 foreclosures for every 1,000 residential properties), with Providence not far behind in third place (45.8 per 1,000).  In total numbers, Providence led the region with 1,447 foreclosures, ahead of Boston and Worcester. During that year, Pawtucket had 384 foreclosures, Cranston had 293, Warwick had 184 and Central Falls had 125. “There is enormous pain and suffering in our state as a result of all of these foreclosures,” said Rep. John M. Carnevale (D-Dist. 13, Providence, Johnston), “but the suffering is not restricted to the individuals whose properties have been foreclosed upon, or tenants evicted from these homes. Cities and towns are losing vast sums of property tax revenue despite the fact that the property still exists and some entity – a bank or other mortgage lender – holds the property.” To help ease the strain on city and town budgets, Representative Carnevale has introduced legislation to require “a bank or other mortgagee commencing a foreclosure process to pay the city or town the outstanding property taxes on or before publishing the first foreclosure notice.” “Despite a foreclosure, there is still real property with a real value located in the community,” said Representative Carnevale. “The bank or other mortgage company foreclosing on the property controls this asset and should be liable for the property tax encumbrance on it.” “I know the banks will argue they should not have to pay,” he said, “but let’s be blunt. When the bank moves that property – at a foreclosure sale or some other transaction – the bank can easily recoup any amount they have paid to the municipality in property taxes on it.” “There is no loss here for the bank. It is cities and towns that are the big losers because of the decreases in property tax revenues, which plays havoc with municipal budgets and ends up hurting every citizen of that community,” said Representative Carnevale. The bill, (2009-H5295), has been referred to the House Committee on Judiciary, but has not yet been scheduled for a hearing. Co-sponsors include Rep. Samuel A. Azzinaro (D-Dist. 37, Westerly), Rep. John G. Edwards (D-Dist. 70, Portsmouth, Tiverton), Rep. Roberto DaSilva (D-Dist. 63, East Providence, Pawtucket) and Rep. Peter F. Martin (D-Dist. 75, Newport). Representative Carnevale has introduced a second piece of legislation dealing with mortgage foreclosures and sales. That bill, (2009-H5123), would require a mortgagee to notify municipal tax collectors of any pending mortgage foreclosure sales and dates within the community and to maintain a public list of the property scheduled to be foreclosed upon. “Banks have their businesses to run and municipalities have their duties to do,” said Representative Carnevale. “But the current foreclosure crisis has a wide impact, and there needs to be better sharing of information and cooperation between the private and public sectors to help us all – our cities and our state – get through this.” The bill has been referred to the House Committee on Municipal Government, which has held it for further study. Co-sponsors include Rep. Karen L. MacBeth (D-Dist. 52, Cumberland), Rep. Michael A. Rice (D-Dist. 35, South Kingstown) and Representatives Edwards and DaSilva.

Creating the Royal Dynasty in the Neo-Con Paradise

Will this be the last decade of the economic miracle which was America?

Miracle?

Yes, the United States gained a reputation eagerly offered by the down trodden of the world when its promise was first unfurled.  Here was a land where even the most modest of men could work hard, be clever, solicit only a smattering of good fortune from the gods in play and, although previously unthinkable in the old world, prosper.

Now, the Eighteenth Century was hardly the first appearance of the remarkable middle class in the long history of the world's economies.  The ancient Greeks admired the vivacity of a trading class of freed men in old Athens.  Even before them, we must assume that Babylon was also fairly endowed with the ancient Sumerian equivalent of used car salesmen, tort lawyers and other brave opportunists who managed to court comfort, security and wealth in roughly the usual, albeit somewhat alien, success stories of the day.

However, these previous successes had been exceptional.  For every well heeled middle class exception there had been hordes of slaves doomed to toil to their early deaths and even rarer pockets of unimaginable, dynastic wealth for the noble families who were friends of the Pharaoh, Emperor, Sheik or recently victorious invader.

Not so in the United States.  Here, the exceptions flourished like flies at a messy picnic.  Further, however unlike the previous models, a fortress nobility, ensconced in unassailable inheritances of birth to death money was crowded out of the economies of the masses.  Instead, innovation, invention and efficiency were the constant origins of such a wide spread "new wealth."

There is an educational note to be attached to those old Crassus and Hapsburgs, unfathomably rich elitists who were not always so rich.  For example, the Crown of the Austrian Hungarian Empire began as a family of highway robbers, slowly amassing wealth at first by outright crimes, then later as "toll collectors" on the main arteries of Medieval commerce.

However, only decades later, the Hapsburg wealth had grown so great as to legitimize these old Dark Ages crooks into a royal family, all aglitter and equipped with a formidable army.  Once the crucial pivot point -- a sort of critical mass of wealth -- had been crossed, all became valid, royal, pure, and convincingly derived from the Divine Rights of Kings.

Ooops. It seems there are those among us who dream of this plutocratic obscenity repeating itself once again even in this distant, future century.

What is their socially recidivist plan to accomplish this retreat to medieval economic brutality?

It turns out to be discouragingly similar to the mechanism employed so successfully by the Hapsburgs.  These economic reactionaries believe that they can follow the pattern of their brutally checkered forebears with a scheme to accomplish the same goals.

The outline is simple enough.  Do business for a time, not with the goal of necessarily being competitive and successful, but rather with the sole intention of accumulating enough money to finally obscure the free market discipline by artfully purchasing sufficient influence in the government to establish an unassailable monopoly.

Exagerrating again?

Hardly.  The examples are compelling and undeniable.  We have seen the story unfold in some highly visible encounters already, and there are undoubtedly many more still in the carefully crafted and sustained shadows.

Example One - The Health Care Nobility

We have observed the health insurance monoliths and their wholly owned Senators gut what might have otherwise been a fairly rational health care reform proposal.  This would not have been possible if the Pharma and HMO benefactors had not previously fortified themselves with vast discretionary monies to lubricate the process.

Now, having established the initial base of the new health care economic autocracy where there will be no unpleasant alternatives, they quickly employed the fraudulent media pundits, their special Senators and their immense corporate image handlers to deflect the attention of the hill billies and bigots with incessantly repeated, supercilious psuedo-ideology.

The health insurance giants are already well established plutocrats.  Now they are "waiting in the wings" for an inauguration to the corporate equivalent of the Divine Right. MeanMesa has already posted a number of essays concerning health care, links to a few of them appear below.  There are more in our archives...

Who Killed Single Payer?

Free Market Health Care?

Health Care - Legislative Firepower

Ooooh! Health Care and the Senate

Example Two - The Royal Petroleum Families

Now, considering that America is packed full of almost more cars than people, one might think that producing petroleum products would be essentially a "no brainer" when it comes to generating a robust profit -- something akin to "selling whores in a lumber camp."  Even the most modest effort at corporate practices should, theoretically, find a vast market filled with willing buyers.

Teddy Roosevelt "downsized" a few petroleum fascists along with an equally rancid collection of steel makers and rail road tycoons, but this species seems to have "1,000 lives," always re-emerging as a hybrid Phoenix a few decades later.  Worse, these new little birds are born hungry, squealing and squawking for a nice meal of Federal subsidies ($16 Billion a year to Exxon), rapacious speculation ($4 per gallon gasoline) and, of course, ever deepening, constant de-regulation (the current Gulf disaster).

When the Texas dynasties of "good old boys" finally accumulated enough dough to start shopping for Senators the government was finally "renovated" to a state where the public interest was no more than a cynical, road weary campaign slogan to be trotted out at election time.

Example Three - Gangsters and Banksters, All Too Big To Fail

As the autocrat and his corporatist minions in the Senate patiently dismantled the regulations imposed at the end of the Republican Great Depression in the 1930's, the brokerage houses opened their bottomless "McDuck Money Bins" to unleash their own latest wave of "pseudo-ideological piracy."  No matter how fervently the population of American voters wanted regulation, their "wholly owned" GOP Senators began -- at once -- to feverishly pull the teeth from the new born legislation which might prevent future bubbles and future calamities.

The "free market" disciplines were left in the dust bin in favor of new investments in election campaigns, all designed to protect their burgeoning royal, Wall Street dynasties.  By the way, disabuse yourselves of any lingering hope that this plan didn't work.  These pimply little monkeys can now claim ownership of 60% of the total value of the nation, not to mention the $60 Trillion dollars worth of casino derivatives and other financial "doo-dads" they've embedded into a staggering world economy.

The monetary "fortress" of the financial nobility is defended by a continuing threat to wreck the entire economy should any demands of their fatwahs and fiats be resisted.

The Final Insult

We Will Destroy Any Politician Who Won't Play Along

... resistance is futile ...

Perhaps the most egregious outrage of the autocracy was the insertion of a majority gang of rabid neo-con ideologues to our Supreme Court.  The sketchily publicized decision of a few weeks ago empowers absolutely any of these well funded, reactionary plutocrats to contribute without limit to political campaigns which will destroy any candidate who might oppose their scheme.

For more reading, sample the following archived MeanMesa posts on the subject.

Finally - Quotes From the Decision

Raising the Corporate Toddler

Monday Morning With The Chief Justice

The Supreme Court Addresses THE WRONG PROBLEM!

The message is simple enough.  If you, MeanMesa visitor intend to live here,

RESIST!

Photo courtesy of http://britishreactionstotherevolution.files.wordpress.com/2009/02/tale_of_two_cities-16.jpg

A MeanMesa "Quickie" - Still in Love with the Bankers?

Have you ever worked on the electrical system in an aging car engine for hours, looking for a small, intermittent short somewhere?  As long as the thing remains the way it is, your car seems as if it can't get out of its own way.

That pedestrian analogy can be applied to the banksters who have, for far too long, been literally looting our economy.  When MeanMesa was but a foolishly optimistic youth, a common humor was that "one will pay all his money either to the government in taxes or to the bankers in interest."

Toss that joke in with the current appetite to reform banking regulations and nothing very promising seems to emerge.  After all, the Republicans have already clearly demonstrated their prowess at looting every bill passing through the Congress.  Reforms to banking regulation hardly present much hope of being an exception to that "vampire-like" equivalent of a mysterious short circuit.

However, MeanMesa would like to propose an interesting plan to break this destructive economic cycle.  It has to do with just exactly who should be paying property taxes.

When a real estate property is purchased with a mortgage, the ownership -- that would be derived from the classical "rights and duties" approach -- is shared.  The purchaser owns a part of the property, and the mortgage lender owns part of the property.  All through the life of the mortgage, a ratio can be calculated.  That ratio shows the relative equity which both the property owner and the mortgage lender have in the property on any given day.  The total of both parts should, hopefully, equal the current appraisal of the value of the real estate.

Now, back to the "rights and duties" approach used to analyze a contract, in this case, the mortgage contract.  The property "owner" enjoys the "right" to use the property -- in the case of residential real estate, for example, to live in the house.  He also accepts the "duties" of, among other things, paying the property taxes on the appraised value of the property.

All of them.

Just as if he owned the property "free and clear."

The bankster, on the other hand, even though he clearly owns part of the property as a mortgage lender partner to the traditional "owner," has no "duty" whatsoever to pay property taxes on his portion.

Ooops.  Why not?

The conditions of the streets, schools, police and fire protection etc. around the property certainly support its value whether to a property owner or to a mortgage holder.  The United States Constitution refers to all this stuff as the "commons."  Are you wondering how such an arrangement could have ever begun in the first place?

Heh, heh.  Just remember who owns the Senate.  In fact, just remember who has always owned the Senate.  If you were a robber baron, a railroad magnate, a corporate oil gangster or a fast talking Wall Street broker, your name was  probably already on the bill when it left the printers.

Sometime in the distant, foggy past just such  a bunch of "wholly owned" Senators (probably, but not necessarily, Republicans) shoe horned this rancid little outrage into some legislation controlling how mortgages would work.  At the time, most Americans were "blown away" with even the remote opportunity of owning their own home, so they neither complained or even noticed.

Again, that was then.  This is now.

The neo-con looting of everything in the country which wasn't bolted down under the cover of the autocracy pretty much drained all the money into a few, certain, allegedly "Patriotic" and sincerely "free market" pockets, and the mouths associated with those pockets were, well, Loud Mouths of the First Water.

They convinced the entire country that they were, uh, our very best friends.

As such, MeanMesa thinks those bankers should have an opportunity to pay property taxes on the parts of all those mortgages they still own.  Even the worthless ones they suckered someone into buying with their stinky securitized mortgage consolidation schemes and their phony rating companies.

Saint Ronnie Rayguns said that "If you want less of something, tax it."

MeanMesa assumes this includes wild, reckless, unchecked, avaricial neo-con  greed.