Seeing Through Data

Over the past few days Obama announced a plan to Stick It To The Man, except the former community organizer has apparently become confused about who “The Man” is.  El Presidente plans to hand defaulted landlords a potentially massive government subsidy at the expense of already stressed-out renters.

Before I go on, a disclaimer.  I’ve been on one of those marathon programming session, the kind you see in movies.  I’m working with one of my most ambitious data projects ever.  Good data comes from large record-sets and large record-sets come from tedious aggregation algorithms.  Working on housing and foreclosure data sounds fun and glamorous, especially when it’s featured in the news, but like anything glamorous behind-the-scenes the work is often mind numbing.  I suppose that’s a good thing though, or more people would focus on collecting the data rather than speculating what data collected by others might mean.

While I’ve been on the compilers, President Obama has been on the airwaves, and he appears to have lost his  his mind given some of the announcements I’ve seen rolling through my email inbox over the past couple days.

Personal confession: I’m a Democrat.  I was an early and active Obama supporter, buying into the whole Hope & Change shtick right up until Rahm Emanuel labeled Democrats that disagreed with the President “retarded.” Later he apologized .. for using the word “retarded,” because it’s politically incorrect. Looking at Geithner’s sneer, Emanuel’s words, and Obama’s actions I came to the epiphany that I’d been had.

At the back of my mind, or sometimes the tip of my lips, comes Reagan’s line, “I didn’t leave the Democratic Party,” sayeth the Gipper. “The party left me.” My girlfriend put the slogan on a t-shirt telling me “take the hint, Olenick.” I still haven’t had the heart to wear the shirt.

OK – enough of that and on to those announcements from our Bank Panderer In Chief.

The first, and worst, is Obama’s plan to enable back-yard landlords to refi to lower rates, Boom-Era Property Speculators to Get Foreclosure Aid: Mortgages.  Obama has worked out a plan to refinance landlords.  There’s Corporate Welfare, then there’s corporate welfare, then there’s .. this.  Except for ramping up Fannie and Freddie, then telling investors their bonds were a surrogate for the 30-year Treasury, it’s hard to think of a more poorly devised public policy move related to housing.

I don’t need data to rate the chance of defaulted landlords passing on their windfall by reducing rent or improving the properties they “own” .. zero.  These are landlords that collect rent while the property sits in foreclosure, leaving the tenant unsure what will happen to them once the bank takes the property.

I’ll ignore that there are laws to protect tenants after foreclosures, because the banks routinely ignore those same laws.  Tenants face the same problems as a person losing their home to foreclosure, except they oftentimes made every payment and just had the misfortune to rent from a crook. If you think getting a damage deposit back from your college-era landlord was difficult try a foreclosed landlord pocketing the rent.

I can make a strong moral argument that the value of the notes, the mortgage loans, would have plummeted but-for bailouts and argue the free market is not operating for owner-occupiers.  But people renting are entirely different because the price of housing, including rents, would have dropped had those notes been liquidated in bulk.  Therefore, there is a very real economic and moral issue demanding rent from somebody while not paying anything to the bank, externalizing the stress of what will happen when a foreclosure is complete to a third-party that is paying every month.

I met a couple not long ago who were renting a FL house that went into foreclosure.  They wanted to purchase it but their landlord, who made it clear he’d ruin their credit by moving to evict them if they stopped paying rent, would not cooperate on a short-sale offer.  At the same time he also made it clear they were on their own for maintenance.

Their lease expired and they purchased a home around the corner.  They know that there’s still enormous market volatility but didn’t care; they love the neighborhood, can afford their house, and have no plans to move.  Their former neighbors watched as their former house, sitting empty, deteriorated and was eventually sold as an REO for a fraction of what they paid for a similar house less than a block away.

Subsidizing their landlord, at the expense of these people who never missed a payment is, quoting Obama’s former Chief of Staff, retarded.  It’s morally and economically unjustifiable.

Tenants who are current should be given an option to make a short-sale offer to the mortgage holder anytime a property goes into foreclosure, with or without the cooperation of their landlord.  If accepted, and the landlord doesn’t cooperate to close the deal, the house would be fast-tracked through the foreclosure system — put at the front of the line — and REO’d to the people living there. State government could even allow the renter to divert their rent to pay the legal fees for the expedited process, and ban credit bureaus from reporting them as “delinquent.”

Obama announced two other policies.  One is a plan allowing people to refi bubble-era FHA loans, reducing mortgage insurance premiums and interest rates.  I’ll ignore the question of who took out an FHA loan back when pulse-loans were available at cheaper prices and cut to the point: how does this help revive the private label MBS market?  It doesn’t.

If the Administration was willing to take a gamble on mortgage insurance why not offer it to private lenders willing to refi on the same or better terms?  As long as these plum government programs are available, private lenders will not be able to compete and, until they do, we’ll be holed up in housing purgatory forever.

Finally is the Service Members Civil Relief Act settlement, where wrongfully foreclosed service members were given a strong settlement, usually a free house and a six-digit check.  This is reasonable compensation to military personnel, and a justifiable penalty to the banks, but Obama had nothing to do with it: most major banks offered this months ago.  There’s nothing new.

I worked on some of the data related to military foreclosures and don’t remember much of a push from the Obama Administration.  Congressional Democrats were justifiably fierce about the issue but Obama was MIA.  I don’t remember any involvement at all by the White House.  If anything, people who knew people who knew people said that those people were interested in other things.  I guess that meant crafting more bailouts while labeling members of their own party “retarded” for caring about the subject the White House now boasts about.

OK, my test data run is finished so now my blog post is too.  19,477,672 pieces of digital data sitting about where they belong.  I can see there are a few hiccups — they need to be sitting exactly where they belong — so I’m back to the compilers.

I wish the Administration would work on fixing housing and the underlying economy in the same way I collect my data; maybe we really would see some hope, and we’d definitely see some change.  Even if they worked as hard as I do when making my morning coffee would be an improvement. But putting yet another tiny bandage on the gory mess that is the modern US housing market is, again repeating Obama’s Chief of Staff .. OK; even bleary eyed from programming I can’t sink to his level and write it again.