This latest national crises over foreclosures, with banks putting a freeze on evictions because of shoddy paperwork, is interesting because most of the examples cited in the newspapers are clearly not injustices against homeowners but merely lawyers seizing on technicalities. For example, the NYT's "From this House, a National Foreclosure Freeze," makes no attempt to say that the lady who has been living in the house without paying a dime for two years has any moral claim to more free housing or that better paperwork handling would have led to any other outcome.
On the other hand, raising the fixed costs of housing transactions by enforcing costly paperwork procedures is probably a good idea in the long run. It would make flipping and, thus, housing bubbles a little less likely.
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53 comments:
Steve, its a big scandal because the robo-signing made no attempt to verify, in accordance with federal law, that homeowners were trying to re-negotiate payments to keep the mortgages intact.
Now, you might disagree with the law itself, requiring banks to verify that indeed, they had contacted the homeowners and did not work out a payment modification within the outlines of the law. But the law was the law.
The signing of the documents was not merely the outrage, it was that many folks who had made payment modifications were foreclosed upon in violation of the law. Because the banks figured they were too small and could be screwed over with impunity, in order to get bad or poorly valued loans off their books.
Please tell me that you are writing up a 5,000 to 10,000 word piece on the Russian/Jewish(?)/Armenian mobsters, working out of Glendale, who scammed a sixth of a billion dollars out of Medicare:
Dozens charged with largest Medicare scam ever
By TOM HAYS, Associated Press Writer Tom Hays, Associated Press Writer
Wed Oct 13, 9:33 pm ET
news.yahoo.com
A vast network of Armenian gangsters and their associates used phantom health care clinics and other means to try to cheat Medicare out of $163 million, the largest fraud by one criminal enterprise in the program's history, U.S. authorities said Wednesday...
The operation was under the protection of an Armenian crime boss, known in the former Soviet Union as a "vor," prosecutors said. The reputed boss, Armen Kazarian, was in custody in Los Angeles.
Bharara said it was the first time a vor - "the rough equivalent of a traditional godfather" - had been charged in a U.S. racketeering case.
Kazarian, 46, of Glendale, Calif., and two alleged ringleaders - Davit Mirzoyan, 34, also of Glendale, and Robert Terdjanian, 35, of Brooklyn - were named in an indictment charging racketeering conspiracy, bank fraud, money laundering and identity theft...
My favorite part of this whole kerfuffle is the feigned outrage:
"I had NO idea this bundle of mortgages from Florida and California that were given to people making no money were questionable, why didn't they tell me before I bought that MBS?!?!?"
It's like DotCom 1.0:
"I had no idea this company that has never turned a profit and is bleeding cash profusely was questionable, why didn't anyone tell me before I bought that IPO?!?!?"
I think the whole mess shows just how much there are literally no adults in charge. Obviously the banks have plenty of lawyers who know exactly how title transfers need to work. And obviously there are better computers and software than ever before to track the status of loans and paperwork. And most likely there were even a few old school people still working at the banks who saw things weren't going right and raised the alarm. But all of that was ignored. And it was ignored by people who were interested only in the shortest of short terms.
Until some of these people at the top see life in prison for fraud the system will never reform. As long as the banksters can safely gamble that they will make their nest egg before the hammer falls the whole system will remain corrupt.
Technicalities? Are you kidding? The bank went to court without any evidence that it was the lender!
Allowing squatters = war on responsible renters.
This has far less to do with bad paperwork than it does with the banks desperately seeking to avoid a 20% or greater plunge in real estate prices. If you're sitting on $5 billion in distressed properties, you really don;t want them to become worth only $3 billion in the space of a few weeks.
Thus home prices are still grossly overpriced in places like SoCal. See www.doctorhousingbubble.com for some good coverage
I think the issue is that the documents were originally cooked in order to make the loan acceptable to the investors. Then they were securitized and sold to foreign investors. The documents have a "buy-back" clause in the event the documents don't stand up to scrutiny. Yes, some people will make out like bandits, but what happens to the rule of law if we just turn our head and tell the foreign investors to go sc*ew them selves?
A few things, and sorry up front this is a long one.
Contrary to the media's portrayal, the fraudulent signings and notarizations occurred all through the system. If you have refinanced, the document showing you payed-off the original loan could well have been fraudulently signed. What then? It even happened to Barack Obama.
Next, as your good friend Barry Ritholtz has documented, there are a non-trivial number of truly wrongful foreclosures. Obviously they are far fewer than the ones with lawyers arguing technicalities, but they are out there. Given nobody can trust the signatures on any of the documents anymore, the whole system falls apart as each side can credibly claim the other has made a mistake.
[cont...] Finally, here's the brass tacks quote: "Fannie Mae and GMAC, which serviced the loan for Fannie, have now most likely spent more to dislodge Mrs. Bradbury than her house is worth." This is not going unnoticed. An enormous number, as in trillions, of these loans are insured (via FHA, Ginnie Mae, Fannie Mae, and Freddie Mac) or owned (via the Fed's $1.25 trillion in MBS mortgage purchases over the last year) by the US tax payer. Even if the insurers or MBS holders claimed fraud on the part of the loan originators and tried to put the mortgages back to the banks, the banks themselves are either owned outright by the Federal Government (such as Alley, formerly GMAC) or owes a sizeable amount of money to the Federal Government via the TARP hand-outs (isn't neo-fascism grand). Finally, in many cases the houses are not worth anything near what is due on the loan. Then the cost of foreclosing, cleaning/restoring, marketing and selling is going to exceed what the house would even bring when finally sold. When you figure the additional hit to the economy from all these people moving in with relatives or renting 2 bedroom squats, the foreclosure path easily exceeds the principle the homeowner is underwater.
Given all that, the only way out I can see is massive debt forgiveness brokered by the US Government. They will cram-down the principle on your existing loan to whatever the house appraises to, and you agree to start paying the mortgage again with a clear-up the title. The Treasury will sell bonds to raise money to allow Freddie and Fannie to keep paying the bond holders as if the old loan was still performing. The Feds will buy the bonds the Treasury is selling, thus printing money out of thin air to make everyone whole. Of course this will cause inflation and trash the dollar, but you gotta break eggs ya know. The "only" people hurt are savers, cheapskates that only bought as much house as they could afford, and the Asians who are massive holders of US bonds.
If China and Japan ever decide to stop hating each other and start hating the US, heaven help our children.
I am Lugash.
On the other hand, raising the fixed costs of housing transactions by enforcing costly paperwork procedures is probably a good idea in the long run. It would make flipping and, thus, housing bubbles a little less likely.
Yep. The digitization of the entire loan process was one of the hidden causes of the mortgage bubble. All steps of the process became much cheaper and quicker. You could also get away with people who barely graduated high school as your processors. And it was now possible to ship things to India. Which was fine, until things like loan modifications threw a huge bunch of complexity into the works.
Anecdotally, I know that higher ups of one major loan servicer were aware around 2005 or 2006 were aware that some people in the industry thought that MERS wasn't a legit way of recording mortgages. They gambled that they could ram it past the county and state governments. It's still up in the air if they will win on the gamble.
Another tidbit: New York state has a 2.5% tax on refinancing. While it's impossible to make apples to apples comparisons with the rest of the states, it's one of the reasons why NY's run up wasn't as bad.
I am Lugash.
Allowing squatters = war on responsible renters.
Absolutely.
Renters who stop paying the rent -- for whatever reason, e.g. losing a job -- are evicted. And law enforcement shows up if necessary to throw them out, usually with minimal 'paperwork'. This happens all the time. But no one notices or writes about that.
Foreclosure abuses should be stopped. And maybe a temporary moratorium is needed to make sure that happens.
But among the renters I know, the resentment is palpable and rising.
Check out the big brain on Eric! We have a winner. Demanding a moratorium on foreclosures from banks now is like offering to throw Brier Rabbit back in the brier patch. If the banks actually foreclosed on all their shadow foreclosures, they'd have to recognize and eat huge losses on their REO properties.
I am Lugash.
DocumentGate is composed of multiple scandals/problems. Off the top of my head:
1) Banks fucking up when it comes to what and who they are foreclosing on. These are normal, back office paperwork errors. Rare, but more prevalent due to the volume of foreclosures and poorly trained staff.
2) The MERS issue. MERS as nominee may or may not have legal standing to foreclose.
3) Notes not being correctly put into MBS. Potentially cataclysmic to the financial system unless the federal government rewrites the rules.
4) Robo-signers. Wide spread, overblown as reported by the media. Could result in a massive gumming up of the foreclosure pipeline unless the federal government rewrites the rules.
5) Banks abusing the lost note affidavit process when they possess the original note. If I understand it correctly, they use LNAs to avoid shipping(and potentially losing) the original note.
6) Banks actually losing the original note and note having a legal copy.
7) Banks creating fraudulent documents for processing foreclosures. Who knows how widespread this really is.
8) Banks not creating a chain of assignment with the proper county recorder. Very prevalent. Extremely time consuming and expensive to fix. Once again, the feds will probably rewrite the rules to fix it. They'll throw a hundred billion to the counties to get them to go along.
I am Lugash.
But, if someone was trying to kick you and your's out of your house and on to the street, wouldn't you just fight, fight and fight again against homelessness, regardless of 'morality'?
I am Lugash.
Renters who stop paying the rent -- for whatever reason, e.g. losing a job -- are evicted. And law enforcement shows up if necessary to throw them out, usually with minimal 'paperwork'. This happens all the time. But no one notices or writes about that.
The issue is that the banks may not have the legal standing to foreclose. It's a really ugly mix of securitization(REMICS), trustees, nominees, county and state real property laws and probably some other stuff. It sucks to see shitheads like Casey Serin get to live rent free in a nice house. But it's WORSE that the banks might have fucked up a big chunk of the title system in this country by trying to shove everything into MERS, a la Hermand de Soto.
I am Lugash.
Largest Medicare scam Ever:
Most of the defendants "were Armenian nationals or immigrants and many maintained substantial ties to Armenia" and criminals there, the indictment said. Couriers would often carry cash proceeds from the fraud back to Armenia, it added.
http://news.yahoo.com/s/ap/20101014/ap_on_bi_ge/us_medicare_fraud_arrests
The 800 lb gorilla in this room is what is referred to as shadow inventory. The same financial institutions that allowed nearly unfettered borrowing take place and drive up home prices in bubble markets are manipulating prices on the way down.
They are purposely not letting all of their foreclosed/REO homes hit the market at the same pace because they do not want the additional inventory to bring real estate down to it's true market value now that they are the ones trying to mitigate losses via the short sale. These freezes have more than a slight side benefit of slowing the trickle of inventory while the lending institutions look like they have a chance at some good PR for a change. I suspect there may be more federal bailout money available to banks showing this phony goodwill.
This real estate market will recover when real estate finds it true bottom, and anything slowing that down from happening, like this freeze on foreclosures, is keeping that from happening. Regions with average home prices still more than 3x average incomes are still a bad deal.
Raising the fixed costs of housing by imposing costly paperwork procedures is an awful idea. It would raise the cost of housing to everyone, decrease employment, and there's no evidence to suggest such a move would dampen price volatility.
This is in some ways similar to the onion futures ban, which raised the costs of trading in onions in order to keep out the demonized speculators. Since the ban, you have to grow them, take delivery of the physical, or find a counterparty to write you a contract in order to speculate in onions. But that has resulted in higher rather than lower volatility.
I submit that it's no coincidence that a bunch of government officials who were nowhere to be found when prices were rallying are stepping in as prices fall to prevent the market from clearing by erecting obstacles to price discovery.
It's too bad they didn't read your blog years ago, but it's a good thing they don't read it today. They'd love your idea not because it's a barrier to buying a house, but because it's a barrier to selling one, and they sure don't like people selling houses right now.
Deadbeats of the world unite!
http://www.zerohedge.com/article/meet-danielle-and-jim-plus-9-part-2-time-squatting-ratigan-show
Maybe we should outsource regulation of the financial industry to the Chinese.
http://www.chinadaily.com.cn/china/2009-08/07/content_8542177.htm
What people keep calling "formailities" which were omitted by the banks are legal requirements for the transfer of an interest in real estate. The requirements are all designed to prevent fraud and provide a way to verify title and guarantee quiet enjoyment. The requirement of a writing to transfer an interest in RE, for example, is called "the statue of frauds"
Banks destroyed the writing and try tomake transactions on affidavit by people who have no knowledge. Perhaps they are taking such a dangerous step because there was fraud in the documents. Probably the warranties about the quality of the borrower in the offering prospectus of the mortgage backed security was plain fiction.
Everyone talks about the poor borrower in a forclosure. If you try to sell you home and you are current on your mortgage, the bank may well not know who ownes a valid security interest in your home and hence cannot release its lean in an effective way under law. Wait until your buyer sees that his title insurance policy has exclusions for bank fraud. Will he buy when there may be a valid unreleased lean against the property in his hands?
He may not have worked in corporate America in many years, but there's still a bit of the man in the grey flannel suit in Steve, methinks. His analysis of the whole mortgage/economic meltdown has been rather one note from the start, compared to the more sophisticated analyses available elsewhere. But at least while he was focusing on the extreme credit unworthiness of the famous low-IQ dry-waller in Compton with the note for a half million and avoiding mentioning the gigantic mess underlying it and deriving from it caused by the high-IQ bankers with their quant theories and incomprehensible securitizations, we could say he was at least just working his beat, churlish though he sounded. In this case, though, there's really no excuse for letting the bankers off the hook and sticking the whole problem on the mortgagees, deadbeats though they may be, especially when doing so involves basically jettisoning the entire concept of rule of law and centuries of Anglo-Saxon property law to justify kicking Pedro out of his worthless fiberboard and vinyl palace 115 miles in the desert from L.A. a little quicker.
Read Naked Capitalism or Denninger for more on this. (This is a good place to start just on the legal issues: http://market-ticker.org/akcs-www?post=168845 Also here: http://market-ticker.org/akcs-www?post=169035) There is more at stake here than letting some poor fool stay in his house a little longer than he may strictly deserve (a rather tellingly lower middle class concern, frankly). Steve is a brilliant guy, he should focus his mind for a moment on the implications of a complete breakdown of the title insurance system, the loss of any clear title to a vast number of properties (60% of all U.S. mortgages are in MERS now), the potential for wrongful evictions, the potential to have a house you bought at sheriff's auction re-foreclosed by its rightful mortgage holder, the removal from counties of their ancient right to keep authoritative records of who owns land in their jurisdictions, and so on, ending with the potential total collapse of the banking sector and pensions worldwide (AGAIN) if their debt "assets" are shown to be backed by unrecoverable properties. Want to TARP your way out of that one? Say Guten Tag, Weimar!. It's an almost bottomless nightmare and it's got just about squat to do with deadbeat Mexicans and their 5,100 sq. ft. of the American dream. Calling it "lawyers seizing on technicalities" is just ludicrously glib.
Read Naked Capitalism or Denninger for more on this. (This is a good place to start just on the legal issues: http://market-ticker.org/akcs-www?post=168845 Also here: http://market-ticker.org/akcs-www?post=169035) There is more at stake here than letting some poor fool stay in his house a little longer than he may strictly deserve (a rather tellingly lower middle class concern, frankly). Steve is a brilliant guy, he should focus his mind for a moment on the implications of a complete breakdown of the title insurance system, the loss of any clear title to a vast number of properties (60% of all U.S. mortgages are in MERS now), the potential for wrongful evictions, the potential to have a house you bought at sheriff's auction re-foreclosed by its rightful mortgage holder, the removal from counties of their ancient right to keep authoritative records of who owns land in their jurisdictions, and so on, ending with the potential total collapse of the banking sector and pensions worldwide (AGAIN) if their debt "assets" are shown to be backed by unrecoverable properties. Want to TARP your way out of that one? Say Guten Tag, Weimar!. It's an almost bottomless nightmare and it's got just about squat to do with deadbeat Mexicans and their 5,100 sq. ft. of the American dream. Calling it "lawyers seizing on technicalities" is just ludicrously glib.
More than that, it will slow the slide of the US into a 3rd world country. It is scary that courts are accepting completely forged documents.
This reminds me of 3rd world countries where you need to bribe a judge to obtain a title to a piece of property.
Your initial posters are correct, Steve. Mortgages on real property are in a different class. It's not like signing over a check. These loans were assigned, securitized, sliced and diced into tranches, credit-swapped and derivatized before the ink was dry. Now it's time for the schleps like me to indulge in some schadenfreude.
There was no need for a bailout. The American people, in their refinement and compassion, have already provided a safety net for underwater individuals and business entities: it's called the US Bankruptcy Code.
For that matter, TARP could have just gone to pay down bad mortgages, and the idiots who loaned on crack dens in Compton would just have to take their lumps. Instead, the Fed prints up money, hands it out to the banks, and they loan it to the government, extracting generous bonuses for themselves from the spread. It's the biggest theft in history.
The good news is the government is very obviously engaged in its last official acts before its fall: the looting of the Treasury. I'm enjoying this.
The defendants contesting the foreclosures are often not the most sympathetic characters. In fact the law books are full of actions brought by assholes that uncovered massive frauds and trampling of rights. A relentless and unchecked foreclosure machine could be used against any of us.
Anyone who owns real property or homes to someday ought to hope that our mundane rules regarding chain of title are followed scrupulously.
This is delaying the economic recovery. The sooner the banks can get these loans off their books, the sooner they will start to have more certainty and lend to businesses etc. If there are a lot of uncertainty about their portfolio, they will not be so eager to make loans of all kinds.
"Raising the fixed costs ... by enforcing costly paperwork"
Uh, no. One of the few times i disagree with Steve. This is non productive bull shit -- the "new economy" (bureaucracy public of private) -- and exactly what this country needs to do less of, not more of.
What we need is simple reliable, low cost chain of ownership and lein documentation. If we want to bump up transaction costs ... just levy a tax, and cut some other more damaging tax (income tax).
More importantly what we need is for mortgages to
a) not be securitized so they stay with the lender who is responsible for, has the *incentive* to write only good ones
b) be written not from bank's demand deposits but from several highly capitalized large public corporations. In other words, financed primarily by investment, rather than debt, and subject to the analysis and discipline of the stock market.
If housing was financed by a bunch of corporations with Microsoft sized market caps ... we'd have seen no big bubble, because as prices rose investors would have beaten down the stock of any company that was out there writing garbage.
The discipline of the market was precisely what was missing. Responsibility was all third hand and everything\everyone government insured.
The converse of raising transaction costs on selling houses is that people at the margin will be less likely to sell their house to move across town to be close to work or school or family. They'll waste more of their life commuting. Perhaps not a decision that we should make for them...
Suppose, Steve, that you get a foreclosure notice from some bank you've never heard of on your paid-for house. You tell them to take a leap, and they sue you.
They arrive in court with no document signed by you saying you owe them a mortgage payment. Instead, they have a notarized document signed by some other guy you never heard of saying "Steve owes us, but we just lost the paperwork, I swear!"
The judge says "Don't trouble me with technicalities, pay up you deadbeat!"
The fact that the current cases aren't like that is perfectly irrelevant. The rules exist to make it hard for Armenians to steal Steve Sailer's house.
Disappointed in you, Steve-o.
Answer me this - what happens to the money that a family already paid the bank month after month, before they (pick a tragedy here - sickness, loss of job, economic depression).
Do they get any of it back?
Hmmmmmmm?
And these technicalities - banks were caught blatantly FORGING documents, with fake date stamps... tut tut, pish posh, different rules for us little people, and different ones for the ones on top, eh?
Here's tasty anecdote:
Todd Phelps and Paul Whitehead bought at a foreclosure auction. It turns out the lender who had seized the house was the second mortgage-holder; unbeknownst to them, the property had a large first mortgage outstanding, which meant it was now their obligation.
The buyers had asked their broker to check the records to make sure the title was clear; he appears not to have done so. The auction company would not refund their payment.
But the really nasty bit here is…both loans on the house were from the same bank, Wachovia, now part of Wells Fargo. The Times story does not draw out the implication: first, that the bank foreclosed on a second, rather than a first (is that a weird way to provide a data point to justify not writing all seconds down to zero? And the fact that the buyers were saddled with the first says, in effect, that Wells defrauded the first mortgage holders, presuming, as is likely, that the first mortgage was part of a securitization, as opposed to on Wells’ books. The proceeds of the foreclosure sale should have gone to the first lien holder, not the second.
But, hey, just technicalities, you know?
(http://www.nakedcapitalism.com/2010/10/msm-distancing-itself-from-bank-party-line-on-foreclosure-crisis.html)
I heartily recommend Yves Smith blog Naked Capitalism and her book, Econned.
Thanks for reminding ERM.
The banks have already been the recipients of over four trillion dollars in government aid.
So we already have socialism. We have socialism for the rich. The only question left to debate is whether or not we'll have socialism for everyone else as well.
I think Steve is right. How many foreclosures involve homeowners who were still current on their mortgage ? Is there any data that shows it is a significant fraction ?
In any complex process, mistakes do sometimes happen, and banks that commit mistakes should be sanctioned.However, slowing down the foreclosure process will keep distressed inventory around longer, and delay any real recovery in the housing market. It is also unfair on those of us who live within our means and pay our debts to have to subsidize who do not.
So, let's re-state the facts one more time:
(1) Banks loaned money to buy houses, secured by mortgages.
(2) Banks wanted to resell those mortgages, slice them into securities ("secretization"), etc.
(3) For hundreds of years, the law has required that changes in liens be filed with the county recorder. There's a small fee every time.
(4) To improve their profits, starting around 2001 banks fraudulently avoided filing those fees. The fraud also helped them hide other things like the really bad risks they were taking.
(5) Fraud in a mortgage has always meant that the bank loses its security. It still has a loan, and the buyer still owes it, but it's now an unsecured loan. The principle that defects in a filing will defeat security is as old as the hills, and extends way beyond real estate.
There were no surprises here. The banks knew about those fees and documentation requirements; they'd been paying them for decades. They tried to save a few bucks per deal by avoiding them, and now it's time to pay the piper. Unfortunately, since both political parties enthusiastically bail out big banks, we'll be the ones paying.
It is also unfair on those of us who live within our means and pay our debts to have to subsidize who do not.
That's a mistaken way of looking at things. Those of us who live within our means and pay our debts are already subsidizing the wealthy.
I have a HELOC on my house. A couple years ago, the bank admitted to me that it had lost all the documents and asked me to sign new ones. I told them to go to hell.
Not sure if this is relevant, I just found it amusing.
"In any complex process, mistakes do sometimes happen,"
I dontknow. I received thousands of paychecks in my lifetime and I never failed to endorse and deposit one of them. No lost paychecks. No affidavits.
A sane government would put its citizens to work hunting down mortgage and securitization fraudsters, evicting deadbeats, and deporting illegal aliens.
I think Steve is right. How many foreclosures involve homeowners who were still current on their mortgage ?
How does that make Steve right?
"I think Steve is right. How many foreclosures involve homeowners who were still current on their mortgage ?
How does that make Steve right?"
Almost all foreclosures are on people who have stopped making their mortgage payments, and hence are delinquent on their mortgage. Lawyers are using allegations of improper paperwork to halt these foreclosures. A technicality, similar to a criminal getting off because a cop did not properly inform him of his Miranda rights.
Some lenders, especially Wells Fargo, have made a practice of fabricating bogus defaults and foreclosing on commercial properties. But let's ignore that, and focus on residential mortgages.
How in the hell is it a technicality to require a putative creditor to prove that he is in fact a creditor? Everyone owes somebody something, but if you're going to collect you had better be able to prove that you're that someone.
As a bankruptcy lawyer who's been representing secured creditors for almost twenty years, I can't believe your disregard for debtors, a/k/a humans.
"Some lenders, especially Wells Fargo, have made a practice of fabricating bogus defaults and foreclosing on commercial properties. But let's ignore that, and focus on residential mortgages.
How in the hell is it a technicality to require a putative creditor to prove that he is in fact a creditor? Everyone owes somebody something, but if you're going to collect you had better be able to prove that you're that someone.
As a bankruptcy lawyer who's been representing secured creditors for almost twenty years, I can't believe your disregard for debtors, a/k/a humans."
All the parties involved - the vast majority of homeowners who are not delinquent, the small fraction that is delinquent, etc., are "humans".
Is the USA a country that believes in the rule of law or not? If it is, then people who are delinquent need to be subjected to the standard laws regarding delinquency and bankruptcy.
Is the USA a country that believes in the rule of law or not? If it is, then people who are delinquent need to be subjected to the standard laws regarding delinquency and bankruptcy.
Right, that's my point. You propose to deny putative debtors the most basic legal process. The "standard laws regarding delinquency and bankruptcy" require the putative creditor to prove that the putative debtor owes it money.
All the parties involved - the vast majority of homeowners who are not delinquent, the small fraction that is delinquent, etc., are "humans".
Not so. There are other parties involved, and they are the most significant parties. They are also non-human. They are called corporations - the banks and other financial institutions which caused the current financial crisis.
The "vast majority of homeowners" really don't factor into this at all, except insofar as they are expected to make good the banks foolish behavior.
>If China and Japan ever decide to stop hating each other and start hating the US, heaven help our children.<
Debt-forgiveness will be necessary to keep the world spinning, with its usual share of individual winners and losers. If the US remains in business per status quo, then plenty of Chinamen will continue to make financial killings. Very similar to the game of musical chairs - not everyone ends up on his ass.
And remember, the US has more nuclear weaponry than has most of the rest of the world. So the US holds the "stick" AND the "carrot"; while the pieces of paper that China (and Japan) hold represent the past. Think of those loans as admission fee to the game.
>I have a HELOC on my house. A couple years ago, the bank admitted to me that it had lost all the documents and asked me to sign new ones. I told them to go to hell.<
Good for you. You might get the rest of the house for free if you successfully file for bankruptcy, stop paying the mortgage, and then challenge the consequent foreclosure.
If we must observe every jot and tittle or else we're undone, then the same should apply equally to the people on the other side of the table. Otherwise, there is no rule of law whatsoever - only the rule that we should be absolutely servile to our "providers."
Soon, the powers that be will have to decide between maintaining the normal legal rules involving property ownership, debt, etc., or another banking crisis. Three guesses which way they'll decide....
Wow. Steve seems to be woefully ignorant as to what's going on here.
As a former regular reader, Steve seems to be on the same horse of blaming blacks and hispanics for our problems. Now, it is true that PC goes against blatantly obvious facts of human nature, including several impolite facts. Of course, once Steve gives you some good PC Chemo, he seems to leave it there. That's fine, perhaps he serves this unique function.
But making the argument that Mozillo was a true believer is either stupid or deliberate disinformation. Mozillo got where he is today by giving preferential treatment to all the right players.
Mozillo never bought a share in his own company after 1987. He cashed out of his company in 2007. There are people, Mozillo among them, who not only knew that the housing bubble would crash, but knew precisely when it would crash, because they were crashing it.
Mozillo was a willing participant in the great housing fraud that was intended, from the beginning, to confiscate the wealth of the country through fraudulent loans and fraudulent derivatives based on those loans.
It's simple at the bottom. A big bank can essentially create all the money it wants, but it can't legally just create money and give it to itself to buy everything. It has to be issued as a loan to another party. So they created the money for the loan and loaned the money to counterparties who were certain not to pay it back, using convenient middlemen like Mozillo as fronts to take the heat and the immediate risks. They then claimed all the assets acquired with the loans. Illegal aliens were the pawns in the asset grab.
Paul DeReno says:
"Wow. Steve seems to be woefully ignorant as to what's going on here."
Thanks, I like your explanation, a lot. I intend to borrow it in some fashion. Could I sum it up by saying: Bringing a whole bunch of financially marginal and submarginal people into the mortgagesphere, justifying loans to them on the grounds of fighting discrimination, allowed the big financial operators to make "Heads we win, tails the public loses" bets on mortgage-backed securities. To do this, the big boys needed to extend mortgage lending to a lot of people whose attitude paralleled that of the big boys: "Heads we win, tails we don't have much to lose." From Wall Street's perspective, the problem with traditional mortgage borrowers was that they were stick-in-the-muds who though along lines of "Heads we win, tails we lose most of our lifesavings" and thus were less likely to roll the dice.
Go ahead, and my apologies for hinting at that whole "deliberate disinfo" thing. Uncalled for.
That's actually just the beginning. When you give NINJA (No, income, no job or asset) loans at 0% down and 0 payments for a year, you can inflate house prices up to infinity, because the borrower intends to pay zero percent of the loan and get a free house until he gets back to Mexico. Even for honest/foolish borrowers, credit as cheap as this can delude many people into purchasing houses at prices they can't remotely afford.
Combine this with the constant propaganda of "house prices always go up" and you can imagine the inflation this would cause in the asset market. Soon, even responsible people, if they want a house, will be *forced* to get into more debt than they can handle because wages do not keep up with the asset inflation. (The asset inflation trickles down to tons of construction and landscaping jobs and Real Estate Brokerages distorting the market.) Inevitably when the bubble bursts and the defaults begin, a much bigger segment suffers than the marginals who were the original marks.
For this to work, the big banks had to have rating agencies and regulatory agencies on board, because there was some measure of fraud (at least fraudulent inducement) in every step of the process on a very large percentage of these loans. (And I haven't even gotten to the derivative bubble yet, which, as you investigate it further, is just Maddoff writ large. A lot of people creating worthless securities, inflating their value through fraud, and passing it on through a system that was so lathered with Other People's Money, that no one cared too much as long as they were taken care of.)
If the banks were at all concerned with legitimacy, they wouldn't have gotten Burger King teens to process their foreclosure documents.
http://www.businessinsider.com/banks-hired-burger-king-workers-to-sign-foreclosure-documents-2010-10
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