Thursday, February 4, 2016


An article by Seattle City Council member Lisa Herbold today in The Seattle Times reminds us that hedge funds and private-equity firms have amassed 200,000 homes we lost during the Great Recession.  To top it off, they receive special treatment from our government:  To summarize:  Some 95 percent of delinquent Fannie Mae, Freddie Mac and HUD loans have gone to hedge fund, private-equity funds and Wall Street banks.  Yet, these federal agencies will not write-down the debt for homeowners, but are writing it down  for Wall Street speculators.  She writes:

               The speculators can then turn the properties into rentals - often bundling them
               into securities for investors, just like the bundling practice with mortgages that
               led to the housing crash.  Rents are then inceased and contribute to displacement
               of poor and working families - particularly African-American and Latino families.

Herbold would rather see the agencies sell delinquent mortgages to nonprofits, which work to prevent foreclosures and to create much-needed affordable housing.  "In  the Seattle metro area, 19.5 percent of the bottom-tier homes are still underwater . . . the continued loss of equity is bad enough without another insidious angle of the crisis, revealed in a 2014 article in The Seattle Times by Sanjay Bhatt who reported:  "Amid the region's tightest housing supply in a decade, a Wall Street-backed company stormed into the Seattle metro area and bought, on average, 10 homes a day."

She goes on to say that last month, RealtyTrac reported that in the Seattle area, the percentage of homebuyers paying cash rose to more than 31 percent.  "These cash-buyers are typically large investors who often don't live in Seattle or have the same kind of stake in our city.  The last thing we need is federal agencies selling our precious housing stock to hedge funds and private equity firms" she says.

Herbold and other elected officials and community groups on Thursday will ask the GSEs to reveal the number of delinquent mortgages that are in our cities and where these loans are located.  "There is no reason to sell these bundled mortgages to Wall Street speculators when they could be working with us on viable alternatives"  (i.e., sell the delinquent mortgages to nonprofits who can modify the terms with principal reduction, whenever possible).

Source:  The Seattle Times article:  Wall Street's Impact on Seattle's Housing Affordability, Feb.4, 2016.

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