AMERICAN BANKS AND “INSTANT HOMES”
Banks Can Fix Crisis by Easing U.S. Homeowner Debt, Ranieri Says
By Dan Levy and Nadja Brandt, from Bloomberg
U.S. lenders can assist millions of owners who are underwater or in default by offering short-term leases on their homes, said Lewis Ranieri, the pioneer of mortgage securitization.
“There are unfortunately millions of lower -and middle- class people who reached for the American dream and were coached into how to buy a house,†Ranieri said yesterday during a panel discussion at the Milken Institute Global Conference in Beverly Hills, California. Borrowers whose property values have fallen below the amount owed “should get help,†he said.
As many as 11 million troubled mortgages are weighing on the U.S. housing market, said Ranieri, who packaged home loans into securities at Salomon Brothers, making it Wall Street’s most profitable firm in the 1980s. Distressed sales were 40 percent of transactions in March, the National Association of Realtors said April 20, while the S&P/Case-Shiller index showed prices falling 3.3 percent in February from a year earlier.
“If his house was $220,000, and now it’s $90,000, give me the keys, I give you a lease for seven years,†said Ranieri, chairman of New York-based investment company Ranieri Partners LLC. “If you behave well, I will give you back the house.â€
Ranieri and Kenneth Rosen, a University of California economist and chairman of Rosen Consulting Group in Berkeley, published a five-point plan last month urging banks to reduce debt for qualified borrowers and recognize losses on second mortgages and home-equity lines of credit. They also favor having the mortgage market continue to be backed by Fannie Mae and Freddie Mac or a “successor entity.â€
“Qualified borrowers for the last 30 years don’t get underwritten today,†Ranieri said during the panel discussion. “First thing today is putting the government back to work to provide good loans to good borrowers. We can’t foreclose on all those that are delinquent. It would be economically and socially catastrophic.â€
Dr. Pinna says:
The American Bank Power Group are short sighted predators who are about to kill a weak wave of economic recovery.
The entire American Government (Slaves of the Oil Industry, the Financial Industry and the Health Care Industry), are under the infantile impression that American capital resources are infinite and can be squandered endlessly.
For example, the banking Industry believes that homes are made of granite and will last indefinitely, until that day when prosperity returns and home prices begin to soar again.
But, American homes are the shoddiest homes constructed on the planet. Perhaps in Africa or the jungles of Brazil, where homes are made of bamboo and leaves, the homes are more friable and the rain and winds will tear them down in a shorter period of time than the American homes.
Anyone who has watched an American house being constructed, by illiterate and untrained and illegal workers, who know nothing about carpentry, physics, wood, plastic, tubing and the forces with which a house must contend over the years, can easily envision the short number of years that house will last without continuous maintenance and repair.
The bankers have been told by the architects and building engineers that these houses should last fifteen to thirty years with “minimal maintenance.” The bankers who know nothing about the construction of anything, even toilets, smile and think of the billions of dollars in interest that they can collect from the owners before the house turns into a worthless shack.
OF WHAT IS A “MODERN HOUSE” CONSTRUCTED?
There are four major components to any building:
1. The foundation which holds the weight of the building.
2. The walls which hold the inner and outer sheathings.
3. The roof which keeps water and wind out and heat and cold air in.
4. The Connecting Elements, which allow for the transmission of liquids, electricity, air and sewage.
THE HISTORY OF HOME BUILDING
Prior to thirty years ago, homes in Europe and South America were built to last centuries.
The foundation and the walls were made of large stones cemented together. The ceilings were made of large timbers from heavy hard wood, such as oak or elm. The roofs were made of stone. Water and snow never reached the inside of the home. The connections were all heavy copper, and the drains were of lead.
I see homes like these all over Europe that are many centuries old.
Anybody who invested in a home like this invested well. The cost of construction is minute compared to the value of the home over the years. In contrast, in America, homes are made of cardboard and plastic. In many cities, entire neighborhoods are being destroyed so that the banks need not maintain their “homes.”
This type of “Instant Home”, “Instant Food”, “Instant Everything” mentality is leading to disaster.
The Bankers and the U.S. Government are supporting this type of “Instant Thinking.” They are unaware that they too will pay an unexpected price. What these rulers do not realize is that nature is impervious to the desires of its components, whether large or microscopic.
The Laws of Nature are blind. These Laws are universal and apply to all beings.
Dynasties have fallen for thousands of years, carrying corrupt kings and their henchmen to the endless night. With them comes most of the population. Very few survive. Those that do are quite unusual. They are the source of new species.
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