It’s politically incorrect to suggest that sub-prime mortgages could be used as a tool for social engineering, but that’s exactly what’s happening. News reports from various sources are replete with examples of entire neighbourhoods in the US boarded up and vacant as home owners simply walk away from the sting of their Adjustable Rate Mortgages. Those empty neighbourhoods are now subject to crime waves and vandalism. Remember that property taxes are a major source of revenue for cities and municipalities. Who’s paying now? But that’s only the first stage.
The second stage is also underway: banks and mortgage companies have commenced foreclosure proceedings against those still sitting in their houses. Some banks are acting in their capacity as agents for the investment syndicate that bought the CDOs; mortgage companies are acting in their capacity as lender (and originator of this sub-prime scam). From the anecdotal evidence in the news reports, US mortgage companies are showing a pointed reluctance to talk to their defaulting customer, give further information, explain the contract they signed, or consider re-financing.
Which all suggests one thing: the residual value of the real estate is more important than any cash flow that might be generated from it in the interim. And who would the residual value of the real estate appeal to most? Investors and developers.
Many sub-prime mortgages were issued in urban areas where the skin colour of the population implied that they might be children of a lesser god. It’s no secret that they were in economically depressed areas to begin with. But it didn’t end there. The middle class in all hues, with less than stellar credit and living in suburban belts were also enticed.
But here’s the question: if they’re abandoning their houses in droves or are evicted pursuant to foreclosure, where are they going?
And if the sub-prime scenario is as pervasive in the US as is being reported, isn’t there now a floating internal population of economic refugees?
© 2007 Sanjeev Aaron Williams & Cashwerks All Rights Reserved
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