Richard Wood of Bradenton, Fla., told Romney he’d folded his title insurance company in October 2010. “I invested in some real estate, some rental properties, made what I considered to be very conservative investments during the boom times and right now I am negotiating with the same bank who has mortgages on each of those and an approximate $200,000 deficiency,” he said. “We have been exploring the possibility of moving to another to another country where we might be able to live on our retirement and our Social Security.”
“Yeah. It’s just tragic, isn’t it? Just tragic, just tragic,” Romney said. “We’re just so overleveraged, so much debt in our society, and some of the institutions that hold it aren’t willing to write it off and say they made a mistake, they loaned too much, we’re overextended, write those down and start over. They keep on trying to harangue and pretend what they have on their books is still what it’s worth.”
“Also, Gov. Romney, we got hit with a double whammy,” Wood continued. “My wife, she’s a Realtor — she is in the process of filing for bankruptcy on some debts that she needed to take out in order to try and stay in business the past five years. I’m probably right behind her.”
“That’s tragic,” Romney said. “In some cases, if the debt is not in something you can service, it’s like you have to move on and start over away from those debts. It’s helpful if you get an institution that’s willing to work with you, but if you don’t you have no other option.”
The Sunshine State had the seventh-highest foreclosure rate of any state in 2011, according to RealtyTrac, an online foreclosure marketplace and data firm. All of the homeowners at the table Monday said they owed more than their homes were worth and that their banks wouldn’t negotiate on modifications or refinancing. More than 22 percent of all residential properties in the U.S. are “underwater,” according to housing research firm CoreLogic. In Florida, a full 44 percent of mortgage properties are underwater.
“The banks are scared to death, of course, because they think they’re going to go out of business,” Romney said. “They’re afraid that if they write all these loans off, they’re going to go broke. And so they’re feeling the same thing you’re feeling. They just want to pretend all of this is going to get paid someday so they don’t have to write it off and potentially go out of business themselves.”
“This is cascading throughout our system and in some respects government is trying to just hold things in place, hoping things get better,” Romney continued. “My own view is you recognize the distress, you take the loss and let people reset. Let people start over again, let the banks start over again. Those that are prudent will be able to restart, those that aren’t will go out of business. This effort to try and exact the burden of their mistakes on homeowners and commercial property owners, I think, is a mistake.”
Wow. This seems to me to be a huge move in a very different direction than any politician in the race. He’s supporting the concept of strategic default which until now has been considered something only very sophisticated rich people were allowed to do. The CW is that it’s a huge moral hazard for the rubes.
In fairness, these people sound as if they were heavily involved in Real Estate speculation and weren’t just your average homeowner screwed by the crash, so maybe it’s not as unusual after all. But still, the language the “empathy” the idea that it’s “prudent” for non-billionaires to get a restart are all anathemas to the 1%ers. I will be shocked if Romney doesn’t walk this back if it’s picked up by the press. It’s a class betrayal of epic proportions.
That’s if he means what he’s saying which I very much doubt. This has all the hallmarks of Mitt’s compassion chip misfiring and mistakenly saying what these voters want to hear. If it isn’t, and he sticks with it, we will see Romney to the left of the administration on the foreclosure crisis, which is fairly shocking. After all, this is what’s happening right now:
Rumor has it that on Monday, after months of negotiation with big banks, the White House may announce a settlement that would let the banks off the hook for their role in the foreclosure crisis — paying a tiny fraction of what’s needed in exchange for blanket immunity from future lawsuits.
We hope these rumors are untrue.
President Obama has the ability to stop and change the direction of this sweetheart deal. He should reject any deal that benefits the one percent and lets the big banks get away with their crimes. Instead, the president should stand with the 99 percent and push for real accountability and a solution that will help millions of people in this country.
Here are the hard facts about the housing crisis we face:
- 3.5 million Americans are homeless.
- 18.5 million homes sit vacant.
- Since 2007, more than 7.5 million homes have been foreclosed.
- Default and foreclosure rates are now several times higher than at any time since the Great Depression.
If President Obama is serious about solving this crisis, he must ensure three things:
First: The banks must pay a minimum $300 billion in principal reduction for homeowners with underwater mortgages and/or restitution for foreclosed-on families. This is essential. Every effort to date to reboot the housing market has failed because it has not done the most essential thing — actually reduce the massive debt load carried by homeowners.
As it stands, the deal likely to be announced Monday would have the banks pay only $20 billion, an astonishingly small fraction of what’s needed. Add up all the underwater homes in America, and there’s an estimated $700 billion in negative equity in the country, according to a recent study. If banks fix what they broke and write down principals for all underwater mortgages, this would free up millions of people to pump billions of dollars back into local economies, create jobs, and ultimately generate revenue to help invest in things that will help our economy grow.
This was addressed on Up with Chris Hayes yesterday with Eliot Spitzer:
Florida has been ground zero for foreclosure fraud and the housing slump. It stands to reason that the GOP would be trying to find a populist appeal to the average people in the state. It will be especially helpful to them if the administration does their dirty work for them and they can run against this settlement. The politics are very, very stupid. On the merits, it’s just plain wrong.
Update: Also too, this:
The nation’s top six banks — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, Morgan Stanley and Goldman Sachs — paid out $144 billion in bonuses and compensation for 2011, second only to the record $147 billion they paid out in 2007 at the height of the economic boom, according to a report released today by The New Bottom Line. Four banks – Bank of America, JPMorgan Chase, Wells Fargo, and Morgan Stanley – were awarded record high bonuses and compensation in 2011, despite their bleak stock performance during the year.
“Even though top bank executives have claimed that bonuses are down as much as 30 percent for 2011, total compensation has not decreased at all,” according to The New Bottom Line’s report, “Pulling Back The Curtain: The 1% Behind The 2011 Big Bank Bonuses.”
Update: Dday has a detailed analysis of Mitt’s comments. (I had missed the part where he praised Pam Bondi .. oy vey, he is confused.) His political analysis is the same as mine.