Thursday, February 07, 2013
De-house the owners, buy the house and rent it back
The next great money hoovering scam by Wall St. is becoming clear as all the smoke from the Housing Crash clears away. Having made their fortunes reducing the number of homeowners, the Wall St. Banksters are now exploiting them as renters.
The Blackstone group, the biggest player in the new REO to rental market, has spent $2.5 billion in the last year purchasing 16,000 homes, a number that amounts to over $100 million per week. Property records show that many of the homes Blackstone has acquired in Fulton County over the last few months were purchased on the courthouse steps at the monthly foreclosure auction, or through short sales—when a lender agrees to accept less than the amount owed on a loan. The vast majority of these homes are not empty, but occupied by homeowners who fell behind during the great recession.A rather neat and tidy way to continue sucking value from the de-housed. And it's all legal.
The sale often represents the last nail in the coffin of foreclosure in Georgia, a non-judicial foreclosure state where there is very little opportunity or time to make good once a homeowner falls into default. Blackstone, operating under its subsidiary, THR Georgia, buys the homes for cash, usually at deep discounts from the principle balance owed on the mortgage. Take one of the homes it snapped up at the November auction as an example: THR purchased the Southeast Atlanta home at auction for $90,000. The principle due on the mortgage that was foreclosed upon was $219,300.
If banks were willing to offer principle reduction on these inflated mortgages down to the same price they are willing to sell at auction, many homeowners would likely be able to afford their payments, and stay in their homes for years to come, contributing to the stability of the neighborhood. Instead, homeowners get a flier posted on their door the day after Blackstone purchases the home, offering them the opportunity to rent the home they once owned. Meanwhile, the deep pockets of firms like Blackstone allows them to outbid virtually everyone else in the market—eliminating any chance of owner occupants looking for a new home to get a good deal while prices and interest rates are low.
Even if they tore down all of the structures, they still own the real estate and all they had to do was wait for the market to rebound and make a killing.
I still stand by that hypothesis.
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