The foreclosure process in the US has been rather brutal. On this side of the pond we became aware of the so-called ‘tent cities’ springing up across the US back in 2008 (it took the American media a little longer to pick up on this meme; it not fitting in, apparently, with popular conceptions of the ‘American Dream’). The images and stories were shocking – and distinctly reminiscent of the Great Depression.
We good Europeans reacted with a sort of bemused horror – safe in the certainty that such things could never happen to us. And yet it is not exactly clear what form the looming Irish foreclosure crisis will take.
The Irish foreclosure rate has yet to reach its nadir. Certainly, there has been an increase in homelessness – but many of these unfortunate people were probably balancing on a razor’s edge through the Tiger years. Why is this? Moody’s have this to say:
“The negligible level of repossessions to-date in the Irish mortgage market is associated to [sic] the lengthy foreclosure process in Ireland as well as to the moratorium on legal proceedings introduced in February 2009 by the Irish government.”
Moody’s – the Devil in this short narrative – have also expressed concern that the lack of fast foreclosures taking place might distort the true situation in Ireland’s financial sector and make it more difficult to determine what our credit-rating should be. Just one more indication why we should stop listening to these heartless actuaries at international ratings agencies – accountants, little McNamara’s whose death-maths is just as proficient in the case of rising homelessness as it is in calculating body counts in wartime.
Anyway, I don’t feel confident making any predictions about how the foreclosure situation in Ireland will play out – although, if the past two years has taught me anything, it is to always dwell on the negative. The best we can do, I think, is to keep a close eye on what’s occurring in the States. We took over their economic model, after all; our financial crises bore certain similarities; so, why should we not assume that our foreclosure process will not come to resemble that of our American neighbors?
In the US there has been scandal after scandal in the dodgy mortgage market. The worst of which was probably the attempt by certain US banks – the Bailiff McGlynns of this short narrative – to forge documents in order to boot people out of their houses quicker. (Here’s a guide to this process for the financially curious).
These scandals have caused many people to take legal action against the financial institutions. And it looks like the costs of this legal action are going to be rather large. Just how large? Simon Johnson, over at Baseline Scenario, estimates that the losses are going to be around $50 – $100bn – at the very least! He even gives a 10% chance that these losses are much larger than this!
What’s more, these costs weren’t anticipated by those in charge of overseeing the so-called reforms in the US financial system. When asked whether previous stress-tests had taken account of the costs of litigation surrounding mortgage-backed securities, US Treasury Secretary Timothy ‘Gorden Gecko’ Geithner, replied, “I…I don’t think so….”
I wonder if we all sit here staring into a crystal ball. I wonder if the Irish people will also discover at some point that the vultures in the Irish banking system are pulling dirty tricks to foreclose on properties with dodgy paperwork. I wonder will litigation become commonplace. I wonder will this hollow Ireland’s financial system out even further.
The Devil – in the shape of the international ratings agencies – is certainly whispering in the ear of this pack of Bailiff McGlynns to speed up the foreclosure process.
And what I wonder most of all, is whether or not various business, economic and political commentators, in sucking up to the international ratings agencies as the arbiters of the coming international economic order, are not, unwittingly, being seduced by the Devil himself… With their insistence that we get our house in order ASAP no matter what the consequences for the Irish people, so that the international financial community will once again coddle us, I wonder are they not playing a dangerous game and creating an environment that will be perfect to incubate these tendencies. I guess we’ll see…
Well one of these lads was the divil The other was bailiff McGlynn And the one was as nice as the other For both were as ugly as sin. Says the ould lad, "Ye know I'm the divil and you are a bailiff I see" "It's the divil himself" says the bailiff "Oh well that bates the divil" says he.
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