In their sociopathic manner, Goldman Sachs successfully compartmentalizes their actions: they can, without conscience, buy up sub-prime mortgages (and even buy a servicing company to hurry things along), create CDOs, have them fraudulently rated AAA and sell them to unsuspecting investors (savers and pensioners) who take a loss. Without missing a beat, Goldman then puts forward its own ideas on why letting underwater homeowners rent would not work. Goldman does this without acknowledging their participation in bringing down the mortgage system in the US.
Goldman never has to acknowledge any of its
REO To Rental Fed Play Would Do Little For Housing Says Goldman SachsRead the rest of the article here
By Loren Berlin - HuffPost Business
The Federal Reserve's foreclosure rental program would do little to lift the ailing housing market, Goldman Sachs analysts wrote in a research paper released on Friday morning.
The analysis, written in response to a Federal Reserve paper released earlier this week, calculates the nationwide effects of renting foreclosed properties as "positive but modest," possibly fostering a 0.5 percent increase in home prices in the first year of program implementation, and a 1 percent increase in the second year. But those are Goldman's maximum increases, and the researchers are quick to add that the "actual effect would likely be less."
According to Goldman, three factors limit the program's potential. First, there is the possibility that some of the foreclosed properties that would become available for rent could sit vacant as rental properties, meaning that while the homeowner vacancy rate would decline (because the home has never come up for sale), the vacancy rate on rental properties would not, merely pushing the problem of vacant structures from one part of the market to another.
Goldman researchers also argue that the program likely wouldn't do much to decrease the overall availability of homes for sale, which is one of the biggest problems currently plaguing the American housing market: There is too much housing supply relative to the demand. As Goldman sees it, even if every single foreclosed home owned by Fannie Mae and Freddie Mac -- the two government-owned mortgage giants that would sell the foreclosed homes to investors in any federal rental program -- shifted to the rental market, banks and large investors that have held off on selling some of their foreclosed homes would likely bring them on the market, in effect perpetuating the problem of too many homes for too few buyers.
Finally, the Goldman analysts assert that some of the foreclosed properties aren't suitable for rental, either because of the home's condition or location, or because the economics of renting that specific home are unappealing to an investor. Though there's no easy way to determine what percentage of homes would be inappropriate for renting, Goldman suggests that as many as half of Fannie Mae's and Freddie Mac's homes wouldn't qualify, indicating that a rental program couldn't scale up to the size necessary to change the dynamics of the housing market in a meaningful way.
That some homes are unsuitable to rent is acknowledged in the Fed paper released Wednesday. But exactly because it's hard to get a sense for how big or small this issue would prove to be, the Fed's analysis on the issue remained very limited.