Thanks to one of our esteemed readers, RH, who had the thoughtful graciousness of forwarding us this Memorandum written so eloquently by Law Professor Robert C. Hockett from Cornell University Law School, we are able to present you with additional insight into how to fix the housing crisis for good, the most vexing obstacle to our road to recovery, and indeed can also be appreciated by countries such as Spain, which is crumbling under the same weight of a terrifying real estate crisis as experienced by the U.S.
This is a summary of the salient points that Professor Hockett put forth in his thought provoking and extraordinarily insightful Memorandum.
Reference Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2038029
But Here Are Highlights Of That Memorandum:
- No Time To Waste: Extreme urgency should be exercised in confronting the housing crisis, as the effects will be long enduring and solutions will become harder, if not impossible, to implement as time goes by.
- Reasons Why Present Rescue Plans Fail: The federal government and all of its institutions are not well suited for the task, being too far removed from local conditions. Mortgagors, on the other hand, have their hands tied due to the enormous complexity and more importantly, are constrained by the wide variety of constituents they have to deal with, from investors to mortgage servicers.
- Why Municipalities Are The Perfect Solution: Municipalities are “on the ground”, directly affected by the snowballing effect of foreclosures on their communities. The distressing toll that the adults, as well as children, have to suffer can witnessed firsthand while the municipalities in question lose revenues from rapidly declining property taxes. Blight sets in, and the virally vicious cycle of job loss along with foreclosures keeps feeding on itself. Professor Hockett cited a study that concluded that one single foreclosure within a neighborhood can have a negative impact on surrounding properties of as much as 8.7%.
- Lenders Most Likely Will Not Object To The Plan: Participants in the loan industry can very well see that the only solution to their own problems lies in capital reductions, as “shadow” foreclosures are fast increasing in the form of walkaways and strategic defaults.
- Legal Precedents: Professor Hockett also cited two legal precedents for what he dubbed “the Municipal Plan”. They are Kelo v. the City of New London and Hawaii Housing Authority v. Midkiff, which will make legal challenges harder to accomplish.
To fix the housing crisis for good absolutely requires a trial plan with a high degree of success that can become a blueprint for the rest of the country. Professor Hockett furthermore advocates San Bernardino County, California as the perfect experimental ground.
Time is of the essence, and perhaps, only a fast moving grassroots movement can speed up “the Municipal Plan” and end the suffering.