Coming Soon! The Attack of the Hedge Fund Landlords!

David Dayen has a fantastic post up on debunking all the much celebrated recent good news in the media on housing issues.

Headlines proclaim home sales are up, prices are up, bidding wars, realtors going door to door begging people to sell, inventory down, home-builder industry exuding “confidence”.

On the ground, we know what’s going on.  And it is not hordes of families lining up to buy homes.  Please.  That is so 2005!   In fact, in 2011, mortgage loan lending was at it’s lowest since 1995.  The banks blame this on poor credit worthiness, which they neglect to connect to the harm done to the American people in the wake of the financial crisis.  The median American family is facing a terrible loss of wealth, a 40% plunge from 2007 to 2010.

So if the homes are not being purchased with mortgage loans, then the uptick in home sales is from cash transactions.  Per this Wall Street Journal article, “Housing demand has improved this year, largely because investors and other buyers who have been paying in cash have scooped up quantities of foreclosed and other distressed properties.”  Hedge funds, similar to the securitization machine that bundled housing boom-time mortgages, are snapping up single family homes in bulk.  Stonecrest is one such hedge fund.  They brag to potential clients about Stonecrest’s return on investment in a fund that bulk buys homes in foreclosure.  Stonecrest calls it “turning scrap metal into gold.”  Another investment scheme for these bulk home buyers is to turn the rental income into an investment scam for easily duped investors, likely the same ones who lost so much in the mortgage securitization scheme.

These are the real stories behind the recent housing “recovery”.  The same tried-and-true mortgage servicer abuse will migrate to the rental property managers.  Expect bogus fees, unexplained payment increases, holding of payments to force delinquency, illegal evictions, slumlord rental management companies rewarded for “cost containment” (ie: refusal to expend money to do needed repairs), locks changed without notice or warning, and even cost shifting basic maintenance and appliance repair to tenants.  Expect courts, law makers, and regulatory agencies to favor the bulk rental property managers and their rental default vendors.  Expect tenant families’ rights to be ignored and violated as the financial wizards exploitate of millions of tenants to be housed in the financiers’ “scrap metal” homes.

David poses a list of thought-provoking questions and closes out his article, “It’s worth looking beyond the numbers and the happy talk and at what the housing market will look like for human beings over the next few years.”.   Read it here.

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