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Why Banks Are Using Bulldozers on Foreclosed Homes | The …

curiouscapitalist.blogs.time.com8/1/11

UPDATED (5:29 PM) Banks have a new remedy for America's ailing housing market: bulldozers. There are nearly 1.7 million homes in the U.S. in some state of foreclosure. Banks already own some of these homes and will …

Council to bulldoze 175 homes in Gateshead – Chronicle News …

www.chroniclelive.co.uk12/6/11

YET more families are being forced from their homes as Gateshead Council flattens a third housing estate.

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The growing number of abandoned properties across the country has caused property values and tax revenues to drop substantially, which in turn has led to fewer buyers and a growing number of vacant properties.

As of March 31, about 4 million homes had been empty for at least three months, a higher figure than in 2008, and about 3% of all U.S. homes.

Many cities and States, are themselves struggling with potential bankruptcy, and they’re finding it difficult to pay the firemen and policeman who are expected to deal with the increasing number of abandoned homes.

All is not doom and gloom however, and an innovative solution is now rapidly spreading across the country which entails local governments bulldozing abandoned properties, and using the newly reclaimed land for parks and playgrounds.

It’s a seemingly win-win situation, because it not only pleases local residents, but also creates jobs, and the icing on the cake is that the federal government is funding the action.

Last summer, Congress allocated $3.9 billion in emergency funds for cities to acquire and rehabilitate foreclosed properties, and a further $2 billion was assigned after Cleveland and other cities lobbied Congress.

In fact, Cleveland, which has over 10,000 abandoned homes, says it will use more than half of its $25.5 million stabilization fund to demolish more than 1,700 houses.

In addition to Cleveland, Cincinnati, Detroit, Minneapolis and Youngstown all say they have plans to use at least one-third of their neighborhood-stabilization funds for demolition.

Housing supply presently stands at about nine months, which is almost double the historic level of around five months, and approximately one in four home-buyers is in arrears on their mortgages, both of which sadly suggest the appearance of more and more abandoned homes, but happily, more jobs and more parks and playgrounds.

Consumer confidence is important, but what should we believe when one headline tells us that, “The banks have enough cash”, whilst another screams, “Mortgage delinquencies among the most creditworthy homeowners rose by 50% last month”.

After Treasury Secretary Timothy Geithner said, “the vast majority of the nation’s banks have enough capital”, U.S. stocks advanced the most in almost two weeks, and Walter “Bucky” Hellwig, who helps oversee $30 billion at Morgan Asset said, “Geithner’s comments that most banks are OK got money coming back into stocks because that pretty much allays yesterday’s fears about stress tests and banks having to raise more capital”.

Even General Motors Corp. rose 2.4 percent to $1.70 after a government auditor said the Treasury will supply the automaker with $5 billion in additional aid.

Meanwhile, David Heupel, who helps manage $60 billion at Thrivent Financial for Lutherans said, “There are still signs of a tough economic environment, but companies that have really cut down their expenses are starting to see a little glimmer of life”.

The “tough economic environment” part of his comment would appear to be something of an understatement however, because the number of so-called prime borrowers who are at least sixty days behind on mortgages owned or guaranteed by Fannie Mae and Freddie Mac rose to 743,686 in January, from 497,131 in December, and that’s almost double the October total.

Fannie Mae and Freddie Mac who are the biggest U.S. mortgage-finance companies, either owning or guaranteeing 56% of all U.S. home loans, just announced that mortgage delinquencies among their “most creditworthy homeowners”, rose by 50% in just one month, and they blamed the fall on both drops in income and too much debt, with 34% of borrowers telling Fannie and Freddie that they were earning less money, and around 20% citing too much debt as their reason for missing their mortgage payments, with a further 8.1% blaming unemployment.

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