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Squatters

Aug 28th, 2007 at 7:39 am by Susie

This home-foreclosure scenario isn’t gonna be pretty. Already, California communities report problems with squatters.

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6 Responses to “Squatters”

on 28 Aug 2007 at 9:51 am1k

so, if you want to be a squatter, keep the lawn mowed and the loud parties to a minimum? and give your neighbors a hand with their lawn care.
on 28 Aug 2007 at 1:46 pm2Peter VE

Susie,

I think I know a way you can save on your rent…..
on 28 Aug 2007 at 5:20 pm3somegirl

i don’t get it. the banks own the houses, so why aren’t they responsible for the upkeep?
on 28 Aug 2007 at 7:01 pm4Peter VE

somegirl:

The problem is that many of the mortgages are not owned by banks, but are part of a bundle of mortgages that was sold as a bond. The issuer of the bond is a shell which only exists to issue the bond. A third party (probably made up of the same people who issued the bond) is the servicing agent, responsible for managing the income from the bond, and collecting a nice fee, but not actually owning anything. As a result, the “owner” of the property is a mutual fund which buys CDOs (mortgage bonds) and similar income instruments. In effect, no one owns the house.
on 28 Aug 2007 at 9:47 pm5somegirl

duh i knew that peter but still - when (if)the house is eventually sold, who gets paid? i guess i just don’t understand why the bondholder/fund/whatever bears no responsibility.

when i owned a house my mortgage was held by a mega mortgage company. they were listed as co-owners on the homeowners policy. isn’t this the case with all mortgages?

i suspect i’m being really dense here, i don’t understand financial instruments.
on 29 Aug 2007 at 12:01 pm6Peter VE

The ownership of CDOs is split amongst the many purchasers of the final bond. Each bondholder gets a small piece when the property is sold. Because the ownership is so diffuse, it is almost impossible for the city to track the owners, and make them take care of the property.

As Wall Street develops each new generation of financial instruments and institutions, they eventually develop problems (can you say “hedge fund”?). Regulations are developed to protect investors. A new generation of instruments and institutions are developed to get around the regulations. Lack of transparency is a feature, not a bug, for the developers of the latest toys.

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