The financial and property systems continue to break, to the extent that many banks aren't even going through with foreclosure:
SOUTH BEND, Ind. — Mercy James thought she had lost her rental property here to foreclosure. A date for a sheriff’s sale had been set, and notices about the foreclosure process were piling up in her mailbox.
Ms. James had the tenants move out, and soon her white house at the corner of Thomas and Maple Streets fell into the hands of looters and vandals, and then, into disrepair. Dejected and broke, Ms. James said she salvaged but a lesson from her loss.
So imagine her surprise when the City of South Bend contacted her recently, demanding that she resume maintenance on the property. The sheriff’s sale had been canceled at the last minute, leaving the property title — and a world of trouble — in her name.
“I thought, ‘What kind of game is this?’ ” Ms. James, 41, said while picking at trash at the house, now so worthless the city plans to demolish it — another bill for which she will be liable.
City officials and housing advocates here and in cities as varied as Buffalo, Kansas City, Mo., and Jacksonville, Fla., say they are seeing an unsettling development: Banks are quietly declining to take possession of properties at the end of the foreclosure process, most often because the cost of the ordeal — from legal fees to maintenance — exceeds the diminishing value of the real estate.
The so-called bank walkaways rarely mean relief for the property owners, caught unaware months after the fact, and often mean additional financial burdens and bureaucratic headaches. Technically, they still owe on the mortgage, but as a practicality, rarely would a mortgage holder receive any more payments on the loan. The way mortgages are bundled and resold, it can be enormously time-consuming just trying to determine what company holds the loan on a property thought to be in foreclosure.
In Ms. James’s case, the company that was most recently servicing her loan is now defunct. Its parent company filed for bankruptcy and dissolved. And the original bank that sold her the loan said it could not find a record of it.
Meanwhile, many county sheriffs are simply refusing to evict homeowners. These aren't just small town sheriffs either, they include, for example, Cook County (that's Chicago) Sheriff Thomas Dart.
The question becomes: if Sheriffs won't evict people and, even if they do, if banks won't foreclose on property, what happens?
You have a dead law and a collapse in a very fundamental part of society (at least as we know it).
Laws after all, are simply declared memes/taboos with a measure of majority agreement and physical force backing them up. That's it. Every society on earth has them, in some form or fashion. However, we usually take them for granted, so much so that it's easy to forget how quickly they can die when anyone stops giving a damn about them.
A little while ago, I speculated that given cities with swelling tent slums and large amounts of abandoned housing, the U.S. could easily see a powerful squatter movement emerge.
This, however, takes it a step further: squatters don't even need to fight landlords, property owners and the authorities if a) the authorities aren't going to evict and b) the banks aren't going to re-sell the property. I'm still analyzing this, because if this process continues, it's like they held the final, all-out class war -- and nobody showed up.
Two realizations from this pandemonium:
The financial and real estate systems outwitted themselves to fucking death (that's right, not just ordinary death, fucking death). I'm willing to bet that if one bank had simply owned the mortgage and still been functioning, they would have gone through with the foreclosure as any ordinary asset: you stop paying, they take it. Their overall financial welfare depends on doing this. A lot.
But there isn't one bank to deal with, because they long ago ditched the mortgage, selling it packaged with hundreds of others. On top of that, the schmuck they sold it to has now re-sold that package, probably re-bundled with even more mortgages. Everyone lost track of said package by the time it crossed the equator and hit Taipei, because all the companies were bankrupt and the bureaucracy necessary to record all these transactions functions about as well as most things in this era of limitless bloat.
The end result is that Jin, an ambitious Chinese woman of peasant stock, probably owns half of South Bend, Indiana. Naturally, she is completely unaware of this fact.
The lesson, of course, is that parts of a society are interdependent. Bundling mortgages might have been "innovative" but it turned out to be a really freaking bad idea both because it opened financial markets to an even greater degree of corruption and created a level of complexity that the structure can't possibly deal with. The result is a very broken stack of figures, and little else.
The Loyalty Problem. For years we've been hearing how multi-national corporations and organizations are destined to replace outdated nation-states. These machine-animals of finance (we were told) are flexible and possessed of magical powers, capable of shifting labor and capital around the world at the blink of an eye, past the borders that constrained those plodding relics of a different time. No doubt national loyalties would fade and a corporatized world (dystopian or utopian) would emerge.
A very small part of this is correct. Traditional nation-states are outdated and their bonds to their people are strained. What the economic and housing crises have shown, however, is that multi-national corporations -- at least in their current form -- are just as outdated. They aren't the cutting edge, they're the damned old aristocracy, locked in Versailles, sure they can make money off the brave new world without keeping their vaunted role.
The problem they have is one of loyalty. People will be loyal to small things. They will be loyal to their friends, family, neighbors, their subculture. They are loyal to small things because of familiarity, because of direct support in tough times and because we're social animals.
People are also, even in this fractured time, loyal to large things. They will be loyal to ideologies, religions, nations (or ideas of nations) or grand visions of the future. They are loyal to Justice, however they define it. They are loyal to large things because it helps to give a human life a greater sense of meaning, because it imbues action within a powerful story -- and stories are what make up our universe.
Even the staunchest advocate of going to a localized world views their cause in terms of a larger tearing down of outdated structures.
I'm not saying any of the above loyalties are right or wrong. Both have been responsible for plenty of glory and horror in their time. But they are what human beings will fight, die and accomplish utterly insane feats for.
This then, is the corporation's problem. By becoming a fiction of numbers, by jettisoning any of the larger social ideas that may have clung to their ponderous bulk from the Industrial era, by treating their workers as cattle and by re-branding themselves into nothing, they have become the worst of both worlds. They are far too large to command any sort of personal loyalty, but far too hollow to draw upon the power of big ideas.
No one wants to die for a bottom line.
Which brings us back to the Sheriff, who after all is a human being and has to live in a community (with other humans), isn't in any rush to throw someone out of their house over a piece of paper that company #99599 doesn't even know they own. This is also why the bank's employees (humans too, don't forget) couldn't give two shits about taking the home, or care that they lost the scrap of paper in the first place.
They get paid either way, and better work will come one day.
I wonder how many ghost cities we'll have by then?
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