SYNDICATED COLUMN: Toxic Assets

Many Foreclosed Houses Are Infested by Mold

The next time someone tells you that capitalism is efficient, remember the mold houses.

I used to be a banker. Some of my customers had trouble making their loan payments. We usually had recourse to some sort of collateral—often real estate. But my bank really didn’t want to foreclose.

“We’re bankers,” my boss told me the first time this issue came up. “Not landlords.”

Back in the 1980s most banks held this view. Bankers sat on their butts in air-conditioned offices. They didn’t want to manage vacated properties, much less try to sell them. They understood banking. Banking was a straightforward business: take deposits, issue loans, collect the difference in interest as profit.

It was boring. Just the way they liked it.

My bank did a lot to avoid declaring a default. We lowered interest rates. We allowed skipped payments. Sometimes we even reduced principal.

Banking became exciting during the 1990s. Glass-Steagall got repealed, allowing formerly staid bankers to compete with high-flying Wall Street financiers in the securities business. Bank consulting firms invented big new fees for services that used to be free, like using an ATM.

Banks issued millions of home loans to borrowers whom they knew couldn’t afford to pay them back. Crédit Suisse estimates that such “liars’ loans” accounted for 49 percent of originations by 2006. Why they’d do it? Like mobsters, bank executives were “busting out” their companies—generating false short-term profits in order to collect annual performance bonuses. By the time the toxic chickens came home to roost, as they did in the form of the September 2008 financial crisis, they and their paychecks had moved on.

As the global financial system was in the midst of total collapse, greedy bankers conjured up a way to profit from the very misery they had caused. Rather than work with distressed homeowners who faced foreclosure (for example, refinancing subprime and adjustable rate mortgages into old-fashioned 30-year fixed mortgages) they dragged out the process in order to collect more late fees.

Banks were eager to foreclose. They were merciless. They evicted homeowners while they were on active-duty serving in Iraq and Afghanistan, a violation of federal law. They even evicted people who didn’t owe them a cent.

Now banks are sitting on top of nearly a million homes. “All told, [banks] own more than 872,000 homes as a result of the groundswell in foreclosures, almost twice as many as when the financial crisis began in 2007, according to RealtyTrac, a real estate data provider,” reports The New York Times. “In addition, they are in the process of foreclosing on an additional one million homes and are poised to take possession of several million more in the years ahead.”

Which is where the wonderful tragic tale of the mold houses comes in.

“In most homes,” reported NPR recently, “as residents go in and out and the seasons change, natural ventilation sucks moisture up to the attic and out through the roof. It’s called the ‘stack effect.’ And in many parts of the country, it’s driven by air conditioning in the summer and heat in the winter. But no one is going in or out of most foreclosed homes—regardless of climate—and the effects can be devastating.”

Far from the profit center imagined by freshly-minted analysts with MBAs, empty houses depreciate faster than a new car driving off the lot. They fall apart quickly. Mildew and mold sets in, some of it toxic.

“In some states, it’s estimated that more than half of foreclosed homes have mold and mildew issues,” reported NPR. “Realtors across the country say they’re seeing the problem in everything from bungalows to mansions.”

Turns out those old-fashioned bankers were on to something. Bankers shouldn’t become landlords.

A minor mold problem starts at $5,000 and can easily run $20,000 or more. Considering that the average house in the Midwest is valued at $136,000, that’s not insignificant. Many houses with toxic mold have to be demolished.

Greed may be good. But it doesn’t always pay.

(Ted Rall is the author of “The Anti-American Manifesto.” His website is tedrall.com.)

COPYRIGHT 2011 TED RALL

9 thoughts on “SYNDICATED COLUMN: Toxic Assets

  1. It’s ironic that rotten bankers with rotten ethics would have rotten houses. Wait a minute, it isn’t ironic at all, it’s fitting.

  2. The loony left (e.g. Mr. Rall and his followers) have no understanding of what is going on. Beginning in the Clinton administration, we saw that America was suffering severely from the most painful and pernicious problem that ever faced any nation: the servant problem. The people who must run the world were repeatedly embarrassed by the yellow press (e.g., the New York Times) because they had no choice but to hire illegal servants.

    The people who have the responsibility for running the world cannot be burdened with things like laundry or dusting or walking from their limos into their homes, they MUST have footmen, valets, cooks, maids, butlers, housekeepers, etc., etc. Deprive them of these servants, and they will be distracted and cannot run the world as well as it should be run, to the severe detriment of us all.

    So Clinton, Bush, Jr., and now Obama have done and are doing everything they can to alleviate this serious problem. Get these people out of their owner-occupied homes with cunning ploys: promise them flat screen TVs and SUVs for what appears to be almost nothing, what appears to be tiny monthly payments, but which actually requires them to hand over their homes for the aforesaid SUV and TV. Send all their jobs to the desperate Chinese. And end up with millions of homeless, desperate people who will gladly serve for a room in the basement and scraps from the tables of their betters.

    Do you think you know better than all the Presidents, with their broad world-view, with their access to classified information not available to you complainers? Democrats and Republicans are in complete agreement: we must solve the servant problem, whatever it takes. And who are you to question your betters?

  3. Another good column.

    I’ll have to find the paper, but there was an academic paper not too long ago assessing how much people learned in various undergraduate and higher degree programs. They issued general reasoning, writing, and reading comprehension tests before and after these various programs. The general conclusion was that while Americans on average don’t really improve that much in any of these programs, the absolute failures, both on the initial test and the one that assessed improvement since the initial test, were the MBA students and business majors. To summarize but be less academic about the conclusion, these people, who go on to run everything in our society, are indeed the dumbest fucks in all the land and their degree programs teaches them nothing to boot.

    Ironically shortly after the paper was published, it had to be retracted because so many wealthy (likely former MBA recipients) complained about its conclusions and threatened to withdraw monetary support from the various funding and academic agencies involved that all hands involved became tied and arms twisted. There is a brilliant “apology” the scholars involved with the paper wrote in response to the debacle that can best be summarized and paraphrased by: “we are very sorry about this publication and the offense it has brought. We shouldn’t have ever published any of this. The data and findings, however, are indeed correct though.” Thus the business types who run everything are not only the dumbest fucks of the land, but they are also the whiniest, and will gladly manipulate things just to make the world look favorably on how they would like to see it, as opposed to you know, work properly or be factually correct.

    I have a relative who teaches in a prestigious (top 10 US) business school. He has admitted that while there are some intelligent hard working individuals who take his classes there (mostly foreigners), a disturbingly large number of his students do little to nothing and then twist his arm to get passing or even good grades. One notable student, who took one of his projects classes involving real business consulting to actual business, screwed up things so badly that the student put the school’s and my relatives business reputation at risk. My relative basically had to redo the entire project himself to satisfy the business transactions and work triple time (for free) to do damage control on all the problems that had been created.

    The grade one received for that class was 90% dependent on performance on that project. The student in question received a B–. The student responded to this grade by calling in all his contacts and threatening the dean of the school enough that my relative was forced to upgrade the student’s score to a low A, apologize to the student, and be on the receiving end of various disciplinary process.

    This is unregulated capitalism for you. For the most part it is NOT a meritocracy. The majority (but certainly not all) of people who make it to the top got there by failing upwards. Competent people with talents get stuck where their talents can be more applicable to detailed problems and operations, which does mean they are getting put to better use for society, but means they are “not worthy” of the big CEO and board bonuses, power, and connection that such positions and wealth entail, but which the generally less useful class gets to receive as a result of their ability to whine and flex connections when faced with their gross incompetence. These are the people who run almost everything in the US.

  4. I guess to summarize, unregulated capitalism doesn’t typically reward those who do good work, rather it rewards those who are willing to steal the work of others and play politic power games at every level over any honest and hard working individual.

  5. In my area, banks were calling the police. The soon-to-be former homeowners were stripping their homes of anything of possible value; like copper wiring, the plumbing, etc. The banks wanted these people arrested before they destroyed what was going to become bank property.

    The banks were not pleased when they were told that since no criminal activity was involved, the police weren’t going to arrest anyone. So, in addition to mold homes, there are some homes that are quite literally uninhabitable.

  6. What’s more ironic is that they are still building more NEW houses. Why? Because people don’t want to move into a neighbourhood where half the houses are abandoned/empty/reposessed.

    This also has the effect of giving a false impression that the economy is in great shape, otherwise why the new construction when a million homes sit empty?

    Not that the government has been giving us true stats for decades anyhow. And of course the MSM just blathers on and takes the figures as sent in without questioning the numbers or how they got them.

    • As you point out, stats devoid of context are crap.

      If our government were sane, all construction would cease until there were no more abandoned or vacant homes. It’s ridiculous to bulldoze forests while tens of millions of houses are empty.