It’s a visionary idea for beautifying Chicago and lifting a community’s property values whose time has never come.
But might it come at last? There’s still an allure here for making no little plans, even if they are arguably unwise.
The idea is the Kennedy Expressway cap, a green oasis that could be built on a deck over the highway as it cuts its swath west of downtown. It would cover that unsightly traffic, diminish its roar and provide open space for a West Loop region that teems with new residents, offices, hotels and restaurants. Think of it as Millennium Park replicated about a mile and a half west.
Capping the Kennedy is a notion that’s been out there for years, always with a dream-like quality to it. It was included in the city’s 2003 Central Area Plan, its first comprehensive look at the downtown region since 1958, and it also was featured in a 2009 “action plan” update that cheerily set a goal of completing it by 2020.
As a friend said on Twitter, Chicago covered up lots of railroads, why not highways too?
Seems like I’m not the only to think those thoughts:
I was at a meeting last week called by Ald. Walter Burnett Jr. (27th) and the West Loop Community Organization where residents offered comments about a new hotel and apartment tower connected to an office building on the block just west of the Kennedy between Washington and Randolph streets. People liked the project overall, but talk inevitably turned to traffic management and lack of park space for an area that now has many young families. Residents said the closest parks, Mary Bartelme and Skinner, can be overrun. That’s when Burnett brought up capping the Kennedy. I asked him about it later. He said the project could tap into funds in his ward’s tax increment financing districts that may be close to expiring. “If we don’t use it, we lose it,” he said. “That money has to be distributed back to all the taxing bodies, so let’s use it while we can.’’
Sarver said he still believes in the cap. If the experience of Millennium Park is a guide, the Kennedy cap “would generate billions in tax revenue for the city. It would be wonderful. That stretch of roadway is a real fissure in our city.’’ He said other cities, such as Dallas, have done well by relegating a highway to a tunnel and creating attractive public space above it.
“I think this really would be the kind of project that TIF dollars were intended for,” Sarver said.
The cost? Sarver estimates it at $50 million per block. If you did the stretch between Randolph and Adams streets, that would get you to $200 million. Others may suggest capping only two or three blocks.
The West Loop and Fulton Market has drastically changed in recent time, but there is dearth of greenspace. More greenspace is more better…
With principal tenants signed up, the developer of a mixed-use project on the block east of Halsted Street between Randolph and Washington streets said he hopes to start construction this summer and finish the complex in three years.
Related, one of Chicago’s most active developers, is proposing a 550-foot-tall tower at 725 W. Randolph St. with an Equinox hotel and fitness club, plus 370 apartments. The Washington side, currently a Bank of America branch, would get a 250-foot-tall office building. Bailey said Bank of America and a Soul Cycle fitness club will anchor that building’s retail portion.
A four-story building at 737 W. Randolph St., home to the Haymarket Pub & Brewery, would be kept.
Three long years of construction related irritations with traffic flow, contractors skirting laws, clouds of diesel smoke, extra wear and tear on the local infrastructure and so on. Can’t wait to be woken up at 6:30 AM some Saturday mornings with the sound of pile drivers or whatever.
In the wake of a vote to approve a sale that would reportedly pave the way for the largest condos-to-apartments conversion in Chicago to date, a group of condominium owners in the River City complex have filed suit to block the more than $90 million sale, accusing the condo association board of working with the would-be buyers to essentially target and bribe certain unit owners to persuade them with secret “side deals” to vote to approve the sale.
The collection of condo owners, including owners on both sides of the vote to sell the South Loop condo complex to developer Marc Realty, filed their complaint in Cook County Circuit Court on Oct. 3 through attorneys with the firm of Chuhak & Tecson, of Chicago.…
According to the River City owners’ complaint, River City voters rejected two initial offers from Marc Realty for about $83.1 million and $92.2 million, respectively. In December 2017, unit owners appeared to approve a sale worth $100 million, with 79 percent of owners voting yes.
However, in May, Marc Realty terminated the sale, and then came back with an offer worth $90.5 million. About 77 percent of owners purportedly approved the sale at the lower purchase price in balloting that closed at the end of August.
However, opponents of the sale cried foul, and, according to the complaint, conducted an audit of the votes cast. They assert their audit indicates the purchase deal actually received only 72 percent of the vote.
Further, they alleged their information indicates the River City board worked with Marc Realty to hold the vote open, even though more than 90 percent of owners had voted, to allow the buyer to “bribe” as many as 35 owners with “additional consideration not set forth in the contract,” to change their votes from no to yes.
The complaint asserts this maneuver stands as a violation of the law, and should invalidate the vote, which they said “was the result of substantial misrepresentations .. to induce the owners to vote against their best interest.”
John O’Brien of Chicago real estate website, The Real Deal reported back in April:
AIC Hotel Group is suing MCZ Development, saying the developer didn’t disclose an air-rights deal for a billboard when the two made a Fulton Market land transaction.
The failure cost the chain an opportunity to build a hotel, according to the suit.
AIC in December bought a parking lot at 600 West Randolph Street from MCZ for $7 million, with plans to build a hotel on the land, the lawsuit contends. But after the deal closed, AIC learned that Clear Channel had an air rights deal that guaranteed a billboard on the building next door would not be obstructed, the suit said.
The billboard deal runs through 2042. The suit claims MCZ didn’t tell AIC about the billboard agreement before the Randolph Street land deal closed, nor was the air rights agreement ever recorded with Cook County.
wow. As an interested observer of this parking lot, I was curious as to why nothing had been built here in the hot Fulton Market area, year after year. Perhaps this is this reason? Presumedly, Clear Channel could sell the rights to AIC Hotel Group for some fee, but perhaps they want more than AIC Hotel Group is willing to spend. 24 years, 12 months a year, how much revenue could one billboard generate? If Clear Channel got $5,000 a month1, that would be $1,440,000. If AIC offered Clear Channel $800,000 cash, would they accept it? I bet this is a solveable issue.
As a parenthetical thought, I miss the website, EveryBlock, as I would have heard of this story before today…
Protestors Headed Towards Trump International Tower
More than one-fifth of Donald Trump’s US condominiums have been purchased since the 1980s in secretive, all-cash transactions that enable buyers to avoid legal scrutiny by shielding their finances and identities, a BuzzFeed News investigation has found.
Records show that more than 1,300 Trump condominiums were bought not by people but by shell companies, and that the purchases were made without a mortgage, avoiding inquiries from lenders.
Those two characteristics signal that a buyer may be laundering money, the Treasury Department has said in a series of statements since 2016. Treasury’s financial-crimes unit has, in recent years, launched investigations around the country into all-cash shell-company real-estate purchases amid concerns that some such sales may involve money laundering. The agency is considering requiring real-estate professionals to adopt anti-money-laundering programs.
That’s a lot of Kompramat for Putin’s gang to have over the Resident in the White House, don’t you think?
Trump condo sales that match Treasury’s characteristics of possible money laundering totaled $1.5 billion, BuzzFeed News calculated. They accounted for 21% of the 6,400 Trump condos sold in the US. Those figures include condos that Trump developed as well as condos that others developed in his name under licensing deals that pay Trump a fee or a percentage of sales.
Macy’s is putting the historic Medinah Temple building in River North up for sale as the retailer continues cashing in on its valuable real estate portfolio.
Cincinnati-based Macy’s will market the landmark building at 600 N. Wabash Ave. to potential buyers, with plans to move the Bloomingdale’s home furnishings store out of the space, Macy’s spokeswoman Andrea Schwartz said.
The home store eventually will move to space within the existing Bloomingdale’s department store in the nearby 900 North Michigan Shops mall, Schwartz said. She declined to estimate when the store will move or how much the company expects to make in the property sale.
A buyer could redevelop the approximately 130,000-square-foot building into another use, such as offices or other types of retail.
The building is valuable because of its proximity to North Michigan Avenue, as well as its unusual architecture.
Plans to sell the building come 17 years after the former
Sterling Bay has a $25 million deal to buy an Archer Daniels Midland wheat mill in the Fulton Market district, and hopes to replace it with a project that would include the neighborhood’s first Metra station.
The busy Chicago developer has a contract to buy the 2.2-acre property at 1300 W. Carroll Ave., pending due diligence, ADM spokeswoman Jackie Anderson said in an email. She did not confirm the sale price, which sources said is about $25 million.
…Sterling Bay executives declined to comment on the deal with ADM, or on specific plans for the site, but people familiar with the firm’s plans say it wants to put a Metra station there. Erin Lavin Cabonargi, Sterling Bay’s director of development services, said the firm supports long-running efforts to create a Metra station, “further strengthening the expansion of the central business district and the job creation the neighborhood is promoting.”
It’s unclear whether the train station would be built into the base of a new structure, as seen in downtown skyscrapers, or if it would be a standalone platform. The estimated cost is unknown.
More public transit options are always more better, and traffic in this area is increasingly gridlocked even before all these new corporate HQs and new apartment/condo buildings come on line, so traffic is only going to get worse.
As an aside, Sterling Bay came of nowhere to become one of the biggest developers in the West Loop, and seemingly are targeting the entire city.
The technology giant is close to finalizing a lease for almost 14,000 square feet on the first and second floors of several connected, two-story brick buildings between 845 and 853 W. Randolph St., according to sources.
If completed as expected, Google’s deal will represent another milestone in the evolution of the longtime meatpacking district west of the Kennedy Expressway, where Google already has its Midwest office headquarters and more than 900 employees.
To date, Google’s only retail spaces have been pop-up stores and small shops within other stores.
Google’s lease will include former spaces of longtime area restaurants Jaipur and Perez.
Behind the connected buildings, an alley forms a pedestrian walkway between Peoria and Green streets. The property is directly across the street from the Nobu Hotel that is under construction.
I am very curious as to what exactly Google wants with a storefront. Are they planning to launch some new product? Expand the Next line? A new phone? Obviously, Alphabet has plenty of cash to throw around, but I’m puzzled as to what the point of this new endeavor is, other than being in the Hot West Loop1.
Archer Daniels Midland is planning to close a 120-year-old Chicago wheat mill and move operations to a new facility it is building in rural Mendota, Ill.
The Chicago-based food processing giant on Friday announced construction of the new flour mill, which is slated to open in mid-2019. The high-capacity facility will be adjacent to ADM’s existing Mendota grain facility, about 90 miles west of Chicago in LaSalle County.
The current plant on West Carroll Avenue in the trendy Fulton Market district, will continue to churn out flour until the new facility is fully operational, the company said Friday.
The Chicago plant was built in 1897 by B.A. Eckhart Milling, which operated it for decades. ADM purchased it from Dixie Portland Flour Mills in 1990 for about $14 million, according to Cook County records. Located in the once-gritty meatpacking district on the Near West Side, the plant is now something of an anachronism amid the trendy restaurants, bars and office buildings that have sprung up in recent years.
The 250,000-square-foot industrial facility sits on a 2-acre site, according to CoStar Group.
The red-hot West Loop/Fulton Market District’s hospitality scene is showing no signs of slowing down as Shapack Development is set to unveil a Morris Adjmi-designed 11-story hotel proposal at the northwest corner of Lake and Green Street. Fresh off the success of their acclaimed 40-room Soho House, the Chicago-based developer is upping the ante with a 165- to 171-room project just one block south at 832-850 W. Lake, a site currently occupied by a low-rise meat packing business and parking lot. According to a conversation with Crain’s, developer Jeff Shapack confirmed the new development will include ground floor retail and dining, parking on the second floor, office space on the third and fourth floors, and hotel rooms up to the building’s 11th level rooftop deck. The hotel operator has not been announced, but with both the nearby Ace and Nobu hotels also in the pipeline to meet the area’s surging demand for hip lodging, a boutique brand would be a good guess for Lake and Green as well.
I’ve heard of food deserts, perhaps New York City has a bank desert here? Why else would taxpayers fund real estate for one of the biggest, wealthiest banks on the planet? Well, other than the obvious reason, corruption. Sweet, sweet corporate welfare, it’s what makes the business world go ‘round…
City and state officials are negotiating with JPMorgan Chase over a potential deal in which the nation’s largest bank would build a vast $6.5 billion corporate campus with two high-rise towers in the new commercial district on the Far West Side of Manhattan.
The talks, which involve one of the largest real estate complexes for a single company in New York City history and a large package of incentives for Chase, have reached a feverish state after nearly falling apart this week.
The negotiations are so delicate that few people are willing to discuss them publicly for fear of alienating one side or another.
But a deal with the bank poses political risks for both the state and the city. Chase had initially sought, by one account, more than $1 billion in concessions from the city and the state while it continues to pare its payroll in the city. According to executives and officials, Chase wants to build the two towers — whose total space would be the equivalent of about two Empire State Buildings — at Hudson Yards on the north side of 33rd Street, between 10th and 11th Avenues. They would become home to 16,000 employees.
and additional evidence that Chase must have explicit photos of Governor Andrew Cuomo and NYC Mayor Bill de Blasio in compromising positions, possibly with each other, on a bed of lobbyist dollars while Jamie Dimon watches:
As is often the case in these kinds of deals, the bank drew up a lengthy list of possible concessions. Chase wanted to cut the mortgage recording tax, the transfer tax and sales taxes on construction materials. It also sought job-training grants, low-cost power from the state, an underground passageway between the two buildings that would require alterations to the newly built No. 7 subway station and financial help with reinforcing the foundation.
The neighborhood, formerly part of Hell’s Kitchen, was rezoned eight years ago for high-rise development by then-Mayor Michael R. Bloomberg. The rezoning included tax breaks and other incentives intended to encourage new construction.
City officials, who estimated that there are already $600 million in tax breaks and other incentives associated with the two sites, have been reluctant to sweeten the deal for Chase.
The Bloomberg administration issued $3 billion in bonds to pay for parks, a new tree-lined boulevard and an extension of the No. 7 subway line from Times Square to the spot where Chase wants to build the new towers.
Officials at the time had assured skeptics that development fees and payments in lieu of taxes from new towers would cover the debt payments. But development has been slower than anticipated, prompting the city to take more than $130 million from the city budget to make the annual debt payments.
Chase has been eager to reduce its costs in New York and move technical and operational employees to lower-cost locations in Delaware, New Jersey and elsewhere.
Austerity for thee, not for me…
How about instead of giving JPMorgan Chase the $600,000,000 -$1,000,000,000 it is asking for, instead New York gives Chase employees an equal amount in tax credits? Sales tax relief, income tax relief, whatever, but only for the employees who make less than $100,000 a year? Sure they’d all have to file 1040 returns, but seems like a better boost to New York’s economy than doling out government cheese to a filthy rich bank.
I continue to be flabbergasted at the number of new businesses and restaurants moving into the West Loop, especially in Fulton Market, despite the large number of remaining food processing plants remaining that share the space. If you walk down Fulton St in the late afternoon, you still have to evade being splashed by bleach, or stepping on raw chicken bits. The old companies haven’t been forced out yet, in other words. It isn’t a sleek, modern neighborhood by any stretch of one’s imagination. The sidewalks are often cracked, if available at all, the train tracks are a scant couple of blocks away – with accompanying noise and diesel fumes – and yet…
NAI Hiffman represented Drapac Group, an Australian-based company with U.S. headquarters in Los Angeles, in its new lease with event planner, The Revel Group, at 1215 W. Fulton St. in Chicago. Drapac closed on the 36,730-square-foot building purchase on Dec. 31; the new lease was completed just 10 days earlier. “The collective goal of our team was to secure a tenant and stabilize the asset prior to closing,” said Kelly Disser, vice president with NAI Hiffman’s industrial services group. “The transaction was a great success for Drapac as it enters a popular Chicago market.”
The activity reflects the growing transformation of Chicago’s West Loop neighborhood as dozens of office, residential, hotel and restaurant developments are underway, including: the makeover of the Fulton Market Cold Storage Building that will be anchored by Google, a Nobu hotel and restaurant on Randolph Street, and Soho House on Green Street. 1215 W. Fulton offers a premium West Loop location on the southwest corner of Fulton Street and Racine Avenue. The property includes a 30,862-square-foot warehouse with office space and a fenced and secured parking lot.
In 2010, Drapac Group USA was established with a head office in Los Angeles to invest in the rapidly rebounding US real estate market, and capitalise on the unprecedented real estate opportunities that were created as a result of the Global Financial Crisis.
Complications. This had sounded like an interesting way out of the national home owner crisis, but the banks are worried they will lose their paper money value. Of the 624 properties in discussion, 444 are still current in their payments, just that their houses assessed valuation is significantly less than the mortgaged value. Is eminent domain allowable in this sort of circumstance? The legal precedent is unclear, so presumedly, this lawsuit and similar is going to take a while to be settled.
Banks representing some of the nation’s largest bond investors filed suit against the city of Richmond, Calif., on Wednesday to block plans by city officials to seize and buy mortgages using their powers of eminent domain.
The lawsuit, filed in federal court in San Francisco, could serve as a key test for whether a city can move forward with such a strategy, which would allow it to forcibly buy mortgages from investors at a price potentially below the property’s current market value. The city would then reduce the loan balance and refinance the mortgage to help struggling homeowners avoid foreclosure.
The legal challenge could serve as a key test for whether cities from Newark, N.J., to Seattle are able to follow Richmond’s lead.
City leaders in Richmond, a working-class suburb of around 100,000 on the San Francisco Bay, began sending letters last week to mortgage companies seeking to purchase loans on 624 properties and threatening to force sales via eminent domain if investors resisted. The city is partnering with Mortgage Resolution Partners, a private investment firm based in San Francisco, which was also named a defendant in the lawsuit.
Back in Feburary, 2013, The New Yorker’s Tad Friend wrote an interesting overview about Steven Gluckstern’s plan1
LETTER FROM CALIFORNIA about Steven Gluckstern’s solution for the foreclosure crisis. At sixty-one, Steven Gluckstern has extensive experience handicapping risk propositions on Wall Street. This past fall, Gluckstern, the chairman of a San Francisco-based group called Mortgage Resolution Partners, was in the midst of a tour of Southern California. In between hasty meals, he raced his rented Mercedes to meetings with mayors and activists and real-estate agents and developers, trying to interest them in his company’s sole product: a plan for cities battered by the foreclosure crisis to keep their citizens in their homes.
It’s a tool so ingenious that Wall Street treats it as the gravest threat to civilization since the breakfast burrito. Even as America’s home prices have risen for six of the past seven months, twenty per cent of homeowners remain “underwater,” owing more in principal than the house is worth. It’s a national problem that’s concentrated in a few locales, most notably California. Mentions Salinas councilwoman Jyl Lutes.
In places like Salinas, a large part of the problem is not the loans that are held by banks. It’s the ones that were pooled in “private-label securitizations.” Under Gluckstern’s plan, a city would use its powers of eminent domain to seize a homeowner’s mortgage in court, pay off the bondholders, then arrange a new mortgage for the homeowner at a price much closer to what the home is actually worth. M.R.P. started its campaign in San Bernardino County. In June, the county and the cities of Fontana and Ontario established a “joint powers authority” to examine M.R.P.’s plan. The foes of eminent domain rose up almost instantly and assailed the plan. A coalition of twenty-six financial-service and real-estate groups sent a letter threatening lawsuits.
The opposition often invoked what’s known as the “moral-hazard argument”: if you reward people for risky behavior they’ll just do it more. By the time Gluckstern visited the San Bernardino area, last fall, he was a marked man. When Gluckstern dropped by county C.E.O. Greg Devereaux’s office, Devereaux ruefully acknowledged that the opposition had gummed up M.R.P.’s plans. Without quite conceding in San Bernardino, Gluckstern began stealthier campaigns, in Michigan, Maryland, and southern Florida. He hopes to convince the opposition that his campaign will continue.
and from what I recall, it turns out the mortgages are often held by multiple entities because of the mortgage derivative market.
and it is unclear if these particular legal challenges are going to stand up in court:
Legal advocates of the eminent domain plan have said that constitutional challenges aren’t likely to hold up in court. The loan strategy wouldn’t burden interstate commerce “because it doesn’t prevent credit from flowing in any particular way,” said Robert Hockett, the Cornell University law professor who was an early advocate of using eminent domain to seize underwater mortgages.
“This is a bluff,” said Mr. Hockett. “It’s meant to scare city officials into saying, ‘Oh, who are we to argue with the big guns.”
Supporters say their plan would help not only specific homeowners but also the broader community by reducing foreclosures that are hurting property values and eroding the tax base. “It’s the responsibility of banks to fix this, and they haven’t, so we’re taking it into our hands,” said Richmond Mayor Gayle McLaughlin in a call with reporters last week.
There were credible rumors1 that Google was going to move into the West Loop, but then Google signed a lease in River North instead. However, according to Crain’s Chicago, it still might happen:
Google Inc. is mapping new office territory in Chicago. The Mountain View, Calif.-based technology giant is in talks to move its Chicago office to the city’s meatpacking district, where it would lease more than 200,000 square feet, sources say. If a deal is struck, it would dramatically reshape the gentrifying Fulton Market-Randolph area, where foodies flock to a thriving restaurant row but major office tenants have yet to arrive. Landing one of the world’s most recognizable companies would bring instant legitimacy to an office market now made up of small tenants in low-rise loft buildings.
… “Google is an unbelievable engine,” says Chicago tenant broker Bob Chodos, a principal at Seattle-based Colliers International who is not involved in the Google deal. “Wherever they go gets bigger.” Google’s employees, mostly in sales, are outgrowing the Kinzie Street tower where the company’s lease for about 150,000 square feet expires at the end of 2015. As Google expands here, it is expected to need more than 200,000 square feet, and possibly up to 300,000, sources say.
Enter Sterling Bay Cos., which reached an agreement to buy the 10-story Fulton Market Cold Storage warehouse, the tallest in the neighborhood, in 2011. The Chicago developer is converting the existing building and an attached new structure into about 540,000 square feet of office and retail at 1000 W. Fulton St. by late next year.
In addition to Google, Boka Restaurant Group—which includes chef Stephanie Izard’s nearby Girl & the Goat and Little Goat Diner—is finalizing a deal for a steakhouse on the ground floor of the former meat storage facility, sources say.
Already, construction of a Soho House hotel is underway near the intersection of Halsted and Randolph streets. Nobu Hospitality Group, whose owners include actor Robert De Niro, in March confirmed its desire to put another boutique hotel and a Japanese restaurant on Randolph.
Continuing the story of a country and its corrupt institutions…
[U.S. District Judge William Pauley] has revived a securities fraud lawsuit accusing Bank of America Corp Chief Executive Brian Moynihan, his predecessor Kenneth Lewis, and others of misleading shareholders about the risk the bank might have to buy back large amounts of soured mortgages.…
But Pauley said the new allegations in an amended lawsuit “plausibly establish fraudulent conduct and a culpable state of mind as to all executive defendants” for allegedly concealing the buyback potential when certifying the bank’s financials.
The shareholders alleged they had been misled into buying shares of Charlotte, North Carolina-based Bank of America in 2009 and 2010.
They claimed that Bank of America knew at the time it faced capital shortfalls and large mortgage buybacks, and that recordkeeping in Merscorp Inc’s private Mortgage Electronic Registration Systems registry was so poor that it would not be able to legally foreclose on thousands of delinquent mortgages.
Mortgage finance giants Fannie Mae and Freddie Mac and several large banks had established MERS in 1995 to circumvent the often unwieldy process of transferring ownership of mortgages and recording changes with county clerks.
The idea behind MERS was to wipe away centuries of legal tradition that mandated the physical transfer of loan notes and ownership information. Whereas lenders once were required to physically register with county clerk offices every time a mortgage loan was extended or re-sold, MERS provided an “electronic registry” of mortgage notes where all such transfers were recorded in the wiry brain of a giant computer instead of on paper.
Instead of the individual banks or lenders registering with the counties each time a loan was sold or re-sold, MERS would handle the initial registration and then become the “nominal” note-holder. Then, each time the note was passed on, MERS would record the transaction in its computer — but no matter who the actual owner of the note was, MERS would remain the legally registered assignee of the note.
Imagine, say, a family of twelve, two elderly parents in Iowa and ten adult children scattered in different states all over the country. Mom and Dad on the farm own one Ford F-150 that they owe $300 a month on. Every month, the truck gets passed to a different family member, who in turn becomes responsible for the monthly payment. But no matter who has the car and whose turn it is to come up with the $300, the truck stays in Dad’s name and the money, in the end, comes to Ford Finance via Dad’s checking account.
Looking at this as an individual and unique case, you wouldn’t think there was much that was inherently wrong with this setup. Obviously the family arrangement violates the spirit of many laws and procedures — vehicle registration (from month to month, the true owner of the car is hidden from the state), credit application (Pops technically committed credit fraud if he got the car loan in his own name knowing the children would actually be paying), and taxes/fees (the state misses out on its registration fees every month, when the car is informally “sold” from child to child without the nominal paperwork fees being paid to the DMV of the state in question). But again, looking at this as an individual case, not many people would say any of these “violations” were major moral transgressions, if they were really moral transgressions at all. After all, this is family!
But once you take this setup and institutionalize it, and employ it everywhere on a vast scale, it becomes seriously problematic. This is particularly true if, say, Pop begins allowing his kids to “rent” the car out to non-family members, so long as they kick a small fee upstairs. Say it’s March and Pop gives the truck to son Jimmy in Toledo; in April Jimmy gives the truck to his buddy Rick in Akron, charging the $300 payment plus a $20 convenience fee. May: Jimmy gives the car to his girlfriend Trudy in Phoenix, telling her to wire $300 plus another $20 back to Pops in Iowa; she in turn lends the car to her occasional lesbian love interest Madison, who begins renting the car on a day-to-day basis in Tuba City as part of her family’s Painted Desert Resort and Tourism business, etc. etc. And she’s now kicking the fees back to Iowa.
Within a year Pop is buying fifty vehicles an hour and shuttling cars to new customers all over the country, collecting millions in fees every day; he becomes a billion-dollar corporate fixture, hiring the entire local Elks club to come with him to work as support staff.
So now, to take this already absurdly overwrought metaphor one final painful step further, there is a string of grisly homicides being committed on highways across America. Witnesses spot that original F-150 truck and the license plates at each of the murder scenes, but when cops come looking for the truck owner, they find old Pop in a wheelchair in Iowa, alibied on the night of every crime by forty-five fellow members of the Dubuque Elks. They drag Pop into the station to question him, but he won’t give up which of his boys did the crimes — hell, he doesn’t know, anyway.
This, roughly, is what MERS is. The functional effect of MERS is to create an obfuscatory wall between the homeowner and the actual owner of his mortgage loan. The problem with MERS is a paradox at the heart of the “ownership” question. On the one hand, MERS is the legal assignee of a lot of these mortgage notes. On the other hand, it’s not the “real” owner of the notes, in any way that could ever help you, or the state, or the investors in mortgage-backed securities.
Sounds pretty fucked up to me. But then I’m not an expert.
Never-Ending Condo Construction
and from Shah Gilani:
In order to easily buy and sell mortgages between themselves so that these loans might be repackaged, securitized and then sold to investors as mortgage-backed securities, banks and other lenders needed a quick way to “trade” individual mortgages. They created a company called Mortgage Electronic Registration Systems (MERS). This group includes Bank of America Corp. (NYSE: BAC), GMAC LLC (NYSE: GMA), Wells Fargo & Co. (NYSE: WFC), Washington Mutual (now owned by JPMorgan Chase), the United Guaranty Corp. unit of American International Group Inc. (NYSE: AIG), Fannie Mae (OTC: FNMA), Freddie Mac (OTC: FMCC), mortgage-servicing companies and other similarly interested members.
You may not realize it, but at your home-purchase “closing,” you sign a document that appoints MERS as the “nominee” for the lender that granted you a mortgage. That gives the nominee the right to flip your mortgage to any other bank or lender it chooses. That’s how banks move mortgages around to package them into different securities.
But that brings us to the crux of the controversy: Every time there’s change on the title (a change occurs when the nominee switches the lender on your title out for another), local governments require that a new title be recorded. Of course, those governments – the county or municipality that you live in – also charge a “recording fee.” MERS also charges a fee, but it’s a lot less than government recording fees.
Here’s the problem. In creating MERS, these institutions actually changed the land-title system that this country – for much of its history – has relied upon to determine legal ownership status of land titleholders.
Not only did the lenders sidestep (read that to mean avoid) paying billions of dollars in fees to local governments, they paid themselves from the fees that MERS collected.
MERS is facing class-action lawsuits and civil racketeering suits around the country and their members are being individually named in all these suits. One suit alleges that MERS owes California a potential $60 billion to $120 billion in unpaid land-recording fees.
If suits against MERS and all its members are successful, unpaid recording fees and fines (that can be as much as $10,000 per incident) would make every one of them insolvent.
And you wonder what the Federal Reserve meant when it warned of “potential negative shocks?”
The bottom line for investors is that until all these issues are cleaned up (which might take years, or even decades) – or until there’s perhaps some sort of legislative clarity that eases uncertainty – investors face the threat of a severe “correction” in any or all of the markets that have risen on the hope that the long-hoped-for U.S. recovery is finally taking hold.