City Hall's coming foreclosure shopping spree

From today's L.A. Times, on the Senate's housing bill: "The bill also includes $4 billion in block grants to allow communities hard-hit by foreclosures to buy and rehabilitate vacant or abandoned homes."

Think about this one for a second. Do you really think this is the best way to sell off foreclosed houses? Do you really want the city of Los Angeles running around town with a pile of your money buying foreclosed houses from the banks and lenders? And then using your money to renovate those houses?  We're talking about the Los Angeles Housing Department -- the same people who paid $18,000 to a Zen Buddhist priest from Hawaii for management training. Do you really think that crowd will spend money wisely fixing up foreclosed properties? How much do you suppose the city will pay for a $109 toilet? Do you think for a second the city's buying criteria and process will be transparent?

Sorry, I got a little worked up there.

This is all a wind-up to pitch yet another worthwhile op-ed piece today on latimes.com, in which Paul Thornton argues that government should not be in the business of propping up housing prices: "Congress ought to get out of the way of market forces and let home prices drop -- and yes, that does mean more foreclosures. For those of us who don't qualify for government assistance, it's our only shot at affordable housing."

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Los Angeles Mayor Antonio Villaraigosa, by Getty Images

Comments

[Fred]

Surely smart thinking will prevail. Yes? Please?

[Michael Snyder]

A-R-R-R-R-G!!!! Sorry, Peter can't post what I'm thinking. Is there no limit to the arrogance of our elected officials? Given the sad state of our educational system it's small wonder they tend to treat us like children, but I just got my AARP renewal in the mail & I'm not feeling like I need to be coddled by a bunch of corrupt politicians. This brain trust downtown has a consistent track record of bad ways to spend our money that stretches back to the city's foundation. Zapata Construction built County Hospital & is still repairing the sidewalks outside. I'm "sure" there would be no insider dealings with this infusion of funds. Right! This is just an even worse idea than the last bad idea which was more preposterous than the one before that. We're treading perilously close to defining "subprime chutzpa".

[JohnnyB]

Our representatives of the people - with a vested interest in propping up these artificially high "bubble" prices - need to let the market correct on it’s own.

THE PEOPLE ARE NOT SERVED BY ATTEMPTS TO CREATE AN ARTIFICIAL PRICE FLOOR!

PEOPLE WANT OWNERSHIP, NOT ENDLESS DEBT SERVITUDE WITHOUT EQUITY.

These current prices are not sustainable. That’s why they are collapsing under their own weight. Please wake up and smell Ponzi’s rotting army of corpses, strewn about the land.

Using our tax dollars to perpetuate this horrendous scam is ludicrous.

IT’s CALLED INCOMES and they are not able to pay off the over-inflated principle on these over-inflated home prices. These prices were based upon FREE MONEY and FREE CREDIT and a huge pool of millions of people who could not have otherwise afforded such an expensive home.

People don't care what Wall Street derivative investment crap has these over inflated home values hidden in their proprietary, overly complex, leveraging formulae. All that SIV/CDO waste is garbage in garbage out. Please raise your hand if you really want to “default swap” your way into a sustainable future.

Any mass bailout is putting money directly into the LOSING gamblers hands and taking it out of taxpayer’s pockets.

Isn’t it time to be straight forward with the citizenry? Don’t we want the banks to come clean, be transparent, use proper accounting and exercise proper risk management? Shouldn’t our leaders do the same?

The sooner the better.

[Cal]

I read a very simple line once that said, "When you subsidize something, you get more of that thing".

Sounds logical enough.

Guess what happens when you subsidize unaffordable housing... you get more unaffordable housing.

Now they don't call it that, they call it "affordability" programs and low income credits because the government people (and this is me being naive) actually believe they are helping people get into homes, but the net effect is in fact a price support and makes houses less affordable and put people more in debt.

So the people getting mortgage interest deductions and special subsidized loan programs, etc are all creating less affordable home prices.

So throwing another $4 billion on top of that is just another price support on top of a bunch of previous price supports. $4 billion divided by 200k is 20k homes.. divide 20k by 50 states and you get 400 homes each.. they'd be better off just giving it to Fannie and Freddie as additional capital to lend on, they leverage like 30 times. That would be $120 billion in new lending that could be done.. that seems like a smarter move.

[mapletree]

Since this is local, maybe just maybe we can do something about this idiotic idea, if you can call it an idea....
from being implemented.

Do you know that LAUSD gets 7 billion dollars, that's just LAUSD....I don't want these idiots in real estate. It's enough they are in education and everywhere else......

I don't know---you should be worked up Peter, you have every right to...you wouldn't be a rational intelligent man if you didn't get angry at this...

I don't know these so called "solutions" are out of control...

[eternal summer]

Are any politicians listening? Is anyone vaguely aware of what is going on with the prices to incomes in California?

Yes, we rent (I guess this is tantamount to "Hi, I'm Summer and I'm an alcoholic) and are like many others who have waited or saved money (just to watch the interest go under the rate of inflation.) & increased salary over the years to buy a house. I am not bitter that I don't own a home. I would like to not worry that our landlord will sell our house or raise our rent-again. Sure I could afford a home where the other recent buyers profiled on the blog bought, but with two kids I don't want to do that.

Now, here's where I have a problem: the bailing out of businesses/homeowners/speculators or anyone seeking to use our taxes to keep the prices propped up and rewarding the greed, yes greed with tax breaks, rebates, and just plain "here you go, here's some money."

I am also a small business owner located downtown. I am being taxed right out of business by the city. I am a designer/manufacturer that produces clothing made in Los Angeles with fabric produced in Los Angeles. Am I getting a bailout when the stores decide not to pay for their goods? No. Am I get getting a bailout for my excess inventory from the deadbeat stores? No. Am I getting incentives to produce in the USA? No. We've got problems here when our local businesses go unsupported & our local families cannot afford to live here and the Goverment thinks that is a GOOD thing.

[eternal summer]

BTW

great picture of mayor V. he looks like dracula waiting to suck the money out this town.

[sfvrealestate]

Okay, so the city is incompetent. But abandoned homes aren't exactly a great thing, either. And once a bunch of homes in a neighborhood are abandoned, blight (along with crime) is pretty much there to stay. And you all know you won't buy a home in a bad neighborhood, no matter how inexpensive it is. So let's head this off at the pass. And only a big entity, like government, has the resources to control this anyway.

[mbob]

To quote that old saw, "...we should be grateful we do not get all the government we pay for."

Take a look at big city mayors' recent track records in the judgement derby: our very own garden variety philadanderer, the ever amusing hothouse Kwame in Detroit, Washington D.C's guy who was all he was cracked up to be, etc. etc. Then there's the hammer of Wall Street, Senor Spitzer.

Ay yay yay, Jesusita La Chihuahua. Whadda krewe to scuttle around with a wad o' cash to strew around in abandoned neighborhoods.

Pretty soon, our currency will be on a par with the peso.
This whole rattone fiesta just keeps ripening to a higher level of odor.

[peter m]

"Do you really want the city of Los Angeles running around town with a pile of your money buying foreclosed houses from the banks and lenders? And then using your money to renovate those houses"

The city of LA will grant the contracts to rennovate these brought up foreclosed properties to favored insider contactors , with all the attendant kickbacks and payola corruption. They wiil end up overpaying and run massive cost overruns as any project involving money handed to them from taxpayers . Big city gov't involved in buying up foreclosures means wasteful unaccountable spending by incompetent bureacratic hacks .

Another wasteful gov't-involved boondoogle to alter free market economic ajdustments.

[peter m]

Greetings Peter V,

I just want to say I really enjoy posting on LA land blog. I have gained a thorough penetrating knowledge of the greater LA metro region as well as 5 other Scal counties through having been a roving road- warrier contract delivery driver past 12 years going into vitually every neighborhood, district, zip code & region all over Scal. Through this experience i have gained a great deal of insight into the actual demographic, geographic & topographic landscape and makeup of LA/OC/IE. I go all over and into areas & places few angelinos venture to go into, including some really neglected impoverished forgotten corners of this large and varied county. I have a great deal of insight into the industrial/commercial/jobs sectors of Scal as i have been to quite a few industrial parks and businesses.
I know dwtn LA quite well and love commenting on the ongoing 'improvements' which i have been a bit overly critical of as i see Dwtn as few see it, having
delivered to each and every dwtn sector and seen all it warts and problems.
LA county is really vast and no one can comprehend it unless one has traveled all over it as i have done last 12 years and seen the changes wrought by the
great RE bubble runup and consequent current decline. Quite a bit of damage unfortunately has been done to formerly old quaint stable neighborhoods with all the flipper/speculator-driven teardowns & quick fix- and- flips i have observed in a hundred LA zips .

Also have an extensive knowledge of the IE and what the HB'ers /developers have done to the landscape there is beyond description. The IE has literally been bulldozed, graded, and tract homes simply plunked down without any regards to environmental or asthetic effects. They literally paved over the IE and the story is little known and gets no coverage. Lots of pollution and eco-destruction out there and also in some little-known neglected corners of LA county.

[peter m]

"Do you know that LAUSD gets 7 billion dollars, that's just LAUSD....I don't want these idiots in real estate. It's enough they are in education and everywhere else"

The LASUD is spending untold sums to buy up foreclosed/eminent-domained gutted homes in the slum barrio districts of LA to build new primary schools. I have seen entire block-sized lots of foreclosed/shuttered fenced off gutted properties being prepared for eventual conversion into new inner city schools. The amt of monies being spend, whether CA or LA taxpayer dollars, has to be enormous, as the state requires all sorts of environmental testing and stringent pre-preparation of the grounds before the actual contruction. Lots of well-paid fat contactors making big bucks on these gov't projects.

[MyLessThanPrimeBeef]

You can always telll who the communists are. They have to tendency to preserver dead things - like Lenin and Mao, in formaldehyde.

So, now we have people here want to to preserve the dead housing market and its prices, which are also dead, though you can make a case that the prices were even alive, they were mere mirages, that is, mere fata morganas.

If prices don't fall, the market will remain dead. And like the real world, if there is no death, there is no new birth, no new growth. Each generation must make way for the next. We have already burdened our children and grand-children with enough national and private debts; let's not taking up more room, stifle future growth by refusing to let the dead decay and decompose.

You can call the bailout a solution; I guess it's a solution alright...a Formaldehyde Solution that will preserve dead things.

[MyLessThanPrimeBeef]

That should be 'have a tendency to...,' 'have people here who want to...' and 'let's not take up more room...' Oh, well...

[adoptivefather]

Peter

I have been trying to figure you out. I always suspect that everyone working at LAT is a leftist socialist wacko until I have direct evidence to the contrary.

This blog item and your comments have me almost believing you are a conservative.

Could it be??

Cheers and welcome to the club! Must be awfully uncomfortable work environment for you.

[Laker]

Trust mayor Vilargosa to hire his contractors to fix the houses, then sell them to who? at what price?
Buy the foreclosed houses from the banks for how much???
Then the mayor will sell these house to "poor" people that SE HABLA ESPANOL...without even checking their legal status...how many pesos will the city charge??? (ops dollars i mean)
It is unbelievable how these politicians are so stupid, greedy, and think that we all are stupid to vote for them again...
What is the problem in letting the banks sell the foreclosed houses to people. These buyers will fix and rehabilitate the houses as they wish with THEIR money. Every the worst shack has its market value.
I think i found a solution, after thinking about it for years....
Hey, why don't you simply charge the banks to upkeep their empty REO houses.? After a month or two, the banks will realize that they better sell the houses than to keep them. Then, they will lower the price, until they find a buyer....wow what a novel concept....
There should not be even $1.00 of tax money spent on this stupid idea.
As i said before, if this passes, rest assured I will do anything i can to not pay taxes. Trust me i can hide a lot!
This is justified since WE ARE SEEING HERE A TAXATION WITHOUT REPRESENTATION - THAT IS A REASON TO REVOLT.

[IToldu2CashOut]

Yes I'm a democrat, no I'm not proud of it. Not anymore. We need new politcal parties.

[left of lefty]

don't worry too much about it, folks. the 4 billion is for the entire country. california will get more than its porprotional share, to be sure, but it'll still be less than a billion. that amount will be distributed to all of california, including the bay area, central valley, inland empire, the antelope valley, san diego, etc. so in the end, greater l.a. gets a few hundred million at most.

thanks to the government's (in)efficiency, that'll only buy and rehab a few hundred foreclosures, mostly in places like compton and watts, where many people on this list have said in no uncertain terms that they are too clean for anyway.

the 7k tax credit is more interesting. it'll boost the price of foreclosed homes somewhat. so those of you waiting for a 4bd/3ba in manhattan beach to drop to 200k will have to boost your target to 207k. enjoy the wait.

[Snacker]

If you feel strongly about this, consider writing to your representatives.

Here is a link:

http://www.congress.org/congressorg/issues/
alert/?alertid=11216396&type=ML&ref=patrick.net

I did it last night. Even though I know they don't really read it (probably just some assistants), it felt good to get it off my chest anyways.

Too bad there are no lobbyists for taxpayers against a government bailout.

[jaded]

so the city of L.A. will get billions of dollars to buy foreclosed houses. Then the City Council will insist that they all go to the "poor," which is code for illegal aliens and the unemployable, at below market prices. And then the houses won't be maintained, the blight will continue, and more people will pour into L.A. looking for their handout. And once again, the middle class will unfairly be shut out of a government program, while at the same time paying for it.

My life is just a series of reruns.

[the problemwithcaring]

Peter

This blog item and your comments have me almost believing you are a conservative.

Could it be??

Posted by: adoptivefather

Adoptive father sounds like someone who went to a private college, used a foreign adoptive agency, plans to send his kid to provide schools and doesn't even know where his public library is. Excuse those of us vaguely familiar with "government" to be a little critical of it. That doesn't make you a socialist. It doesn’t mean you “hate LA.”

Further, you don't have to be a conservative to detest lascivious liberals, like Villaraigosa, their disgusting urban pandering on the one hand, while hand-greasing moneyed interests with the other.

Republican leadership gets paid by corporate interest to lay the groundwork for financial illegality and to turn the other cheek, and then Democratic leadership willingly profits by exploiting the new system to its full capacity, all the while blaming "conservatives." It’s time to stop buying into the labels that alllow us to swallow the bad medicine getting forced on the state and the city from all sides.

[Corntrollio]

I love the smell of corruption in the morning.

So now city council members who bought "investment properties" will con the government into buying their soon to be foreclosed on properties. Their buddies will get all kinds of construction contracts. All the "commoners" get screwed.

[peteviles]

adoptivefather writes, "This blog item and your comments have me almost believing you are a conservative. Could it be??

Thanks, adoptive. Jeez, who knows, and frankly, who cares. I find that I have fewer political beliefs with each passing day. Put me in the category of those who believe our Democracy has morphed into something unresponsive and unsatisfactory. We expect and praise innovation in the private sector but it is absent in the public sector, and nobody seems to miss it. The lack of intellectual energy and honesty in our governments -- local and national -- drives me nuts. I've never seen Democracy practiced the way it is in Los Angeles, where the same 78 people trade the same 78 jobs and elected offices among themselves until they become lobbyists. Once in a blue moon there is a "competitive election" between two of the 78, and this is what passes for Democracy.

[skubiszm]

Here is my idea to get rid of foreclosures and make housing affordable all at once. All without 4 billion dollars as well.

Require lenders who own REO to auction them off, not just hide them on their books forever. They get 3 months to try and sell it at an inflated price, if they can't, then it goes directly to an auction with a $0 reserve price. Also, ban speculators and investors from bidding. You must buy it as your primary residence and live in it. No crazy financing either. You need 10% a down and have to qualify for a 30 fixed.

It would drive down prices everywhere and we would finally find a bottom. And then average Californians could actually buy and have a place to live.

[amir]

It's really unfortunate that the bubble burst several months before an election. Representatives are freaking out and will do any stupid thing to get re-elected.

However (to paraphrase 'Alien'): After November nobody can hear you scream.

Just imagine, a Democratic congress and maybe a Democrat in the White house. Taxes going up, recession, and facing a huge government deficit from entitlement programs. Money for housing will disappear.

2008 will be remembered as the good old times when 2009 rolls around.