When you do the TVM value chain analysis for housing the idea that there are unoccupied houses and needed housing comes as no surprise.

When the society and the economy are driven by profit, completely ignoring valuadd, entrepreneurs build where they think there is going to be profit. This is aggravated by bankers who finance entrepreneurs where there already has been profit. The combination is toxic for society. The combination almost guarantees an overshoot in an economic trend and the creation of a bubble that will eventually burst.

The mechanisms of the society and economy are based largely on the idea of 'rule of law'. But rule of law is not very much suited to a world where paperwork has been replaced by computerized bytes. Sadly there is a terrible disconnect between what is actually done in business transactions and what ought to be done in the letter of the law was followed by all parties. The business profit opportunity from securitized products, the law of these products and the administrative routines to support these products was never established until it was too late.

When everything is going right, the fact that rule of law and administrative routines are not being followed does not really matter. Everyone can be happy with the outcome of all the transactions because everyone is earning the expected profits. When something in this chain goes wrong, then it gets difficult to get blame to the right party and a just recourse.

In the case of mortgage backed securities, it seems that banks have done much of their securitiezed investment based on computerized representations that have little standing under traditional rule of law. The 'paperwork' was never completed in an appropriate way ... the paperwork seems to have been completely ignored. At the bottom end of the mortgage transaction, the part where there is a home-owner and mortgage payer things obviously go wrong when the mortgage payer stops paying, and it is easy to enforcer something against the non-payer of the mortgage when the non-payer is occupying the house they own ... they may easily be evicted. Send in the Sheriff and the job is done ... except for the paperwork and the question of responsibility for home ownership.

Who actually owns the house? Who is going to take responsibility for all the things that need to be done to keep the house maintained, pay the taxes, utilities, etc needed to ensure the security of the house. The banks have broken that part of the value chain into a zillion pieces and have no idea what to do about it ... the lawyers and courts cannot help very much because most of the time the paperwork does not exist, or if it does it is most likely merely some form of 'robot' signed inadmissible copy.