In January of 2008, Bank of America CEO Kenneth Lewis announced that his company had the “rare opportunity” to buy Countrywide Mortgage for the amount of $4 billion.
“Countrywide presents a rare opportunity for Bank of America to add what we believe is the best domestic mortgage platform at an attractive price and to affirm our position as the nation’s premier lender to consumers,” Lewis said.
Now with Lewis long gone, Bank of America (BoA) owns a glut of abandoned houses it can’t sell. So the largest mortgage servicer has decided to bulldoze some of its inventory. And BoA isn’t alone. Wells Fargo, Citicorp, JP Morgan Chase and Fannie Mae have started knocking over a few of their repos already. Lindsey Rupp reports for Bloomberg,
The biggest U.S. mortgage servicer will donate 100 foreclosed houses in the Cleveland area and in some cases contribute to their demolition in partnership with a local agency that manages blighted property. The bank has similar plans in Detroit and Chicago, with more cities to come, and Wells Fargo & Co. (WFC), Citigroup Inc. (C), JPMorgan Chase & Co. (JPM) and Fannie Mae are conducting or considering their own programs.
“There is way too much supply,” said Gus Frangos, president of the Cleveland-based Cuyahoga County Land Reutilization Corp., which works with lenders, government officials and homeowners to salvage vacant homes. “The best thing we can do to stabilize the market is to get the garbage off.”
Last May, I wrote of Detroit mayor Dave Bing’s plan to” right-size” the motor city by razing complete neighborhoods and speculated that the idea might catch on.
With millions of vacant homes and commercial building sitting empty around the country, this is an idea that could catch on. Don’t laugh, after all the government killed cattle and poured milk on the ground in compliance with the Agricultural Act of 1933 to support prices even as people where starving. Most farmers at the time couldn’t afford not to take the government money.
Is it too far-fetched to think that Washington, in yet another way to bail out the banks, would pay financial institutions to knock down repossessed homes and buildings? This would cure the glut, clean up public nuisances and blight (like the Romney place), with the added benefit of helping out homebuilders. Plus, good high-paying jobs knocking down buildings would be created: a right-sizing of employment if you will. This is a win-win-win-and then some policy.
BoA will donate and bulldoze 100 houses in Cleveland, 100 in Detroit, 150 in Chicago and may donate and detonate homes in nine other cities. And if you thought some federal money was lurking somewhere in this story, you’d be right.
The lender will pay as much as $7,500 for demolition or $3,500 in areas eligible to receive funds through the federal Neighborhood Stabilization Program. Uses for the land include development, open space and urban farming, according to the statement.
“No one needs these homes, no one is going to buy them,” said Christopher Thornberg, founding partner at the Los Angeles office of Beacon Economics LLC, a forecasting firm. “Bank of America is not going to be able to cover its losses, so it might as well give them away and get a little write-off and some nice public relations.”
No one needs these homes? Just as FDR’s administration didn’t care about those starving during the depression and destroyed foodstuffs in an attempt to raise farm prices, the current administration doesn’t care about the millions of homeless who could use one of these roofs that are being bulldozed over their heads.
Warren Buffett says “blow up a lot of houses — a tactic similar to the destruction of autos that occurred with the ‘cash-for-clunkers’ program.’” The hope is to raise used home prices as “cash for clunkers” did for the used car market.