Saturday, December 22, 2007 :: monica davis
Mortgage Meltdown; the Lying, Crying and Fire Sale Buying Begins
By Monica Davis - There is more than meets the eye to the upcoming mortgage meltdown, much of which has its genesis in the deregulation of the savings and loan industry and banking back in the 1980s.
Evansville, IN - infoZine - An economic tsunami, fueled by the mortgage industry, is shaking a lot of crooks, thieves and mortgage fraud victims from the trees. The lying, crying, and fire sale buying is about to begin; along with a massive upheaval in the way the housing finance industry operates-supposedly.
Just as they did in the savings and loan robbery, it seems some folk just want to blame them mean ole gubmint regulations for this fiasco. If the government would keep its cotton pickin' hands off the market, "the market" would correct itself.
Ah, but "the market" is not a disembodied entity, devoid of substance. It is comprised of billions of transactions, trillions of generational consequences of accumulated fiscal, political, economic and environmental factors which coalesce into almost living forces. And all of this "accumulated data" represents people, millions of people with millions of dollars in mortgage and credit card debt on their backs.
The sheer weight of these financial transactions, the credit black hole, which has been generated by generations of risky banking industry practices and often reckless consumer spending is about to take us by the throat and shake us like a dead rat. Ultimately, the by-products of this fiscal meltdown will affect every man, woman and beast on this planet in some form or other.
From global warming, to dead zones in seas, to mass evictions of renters whose landlords went bust and failed to pay mortgages on their rental properties, the intertwined relationship between lending, risk management, fiscal responsibility and economic catastrophe are slowly wending their way through the nation's consciousness.
Industrial farming in the nation's Corn Belt produces massive farm chemical run off in the Gulf of Mexico, which decreases fish stocks, which diminish fishermen's take, which causes financial hardship and foreclosure in the fishing industry. Thousands of fishing jobs have now disappeared, leaving behind rusting canneries, rotting foreclosed homes and demoralized fishermen and their families.
Failure to credit loan payments to the proper accounts in farm, student and home lending results in foreclosure, eviction and loss of income-- all the way from the individual farmer and homeowner, and former student, up to the grocery stores, farm implement stores, department stores, car dealerships, home builders, malls, catalog outlets, plumbers, electricians, mechanics, home repair companies and other businesses which depend on consumer spending for their survival.
The number of people being evicted, and some even becoming homeless in this country is staggering--all the more so because the leading edge of the wave has yet to hit. That won't hit until perhaps 2009, when millions of mortgages with adjustable rates reset to higher rates, perhaps becoming the straw that broke the camel's back.
Cities across the nation are reporting a massive increase in foreclosures and evictions, where former home owners and apartment dwellers alike are evicted because of alleged mortgage defaults.
It is ironic that the "sub prime market", which is often a code for "African-American mortgages", is bearing the brunt of blame for this economic catastrophe. If all of "those people" hadn't been so unrealistic and bought homes they couldn't afford, this would not be a problem.
Well, ye of racially blinded vision, while many black and ethnic buyers were shoved into sub prime mortgages, regardless of credit; the main fact is that many people with standard mortgages are having problems paying their bills. Not only is this NOT making headlines, but no body is stepping up to the plate to admit that our entire economy is on the skids, thanks to consumer over-spending, the war on whatever, and the deregulation of the banking industry.
That's right: D-E-R-E-G-U-L-A-T-I-O-N.
When banks were allowed to buy each other out across state lines, to move out of banking into financial services such as insurance, mortgage brokerage, to package risky mortgage products as "investments", they created a series of institutional dominoes, massively vulnerable economic entities, whose "distance banking" amounted to a toxic pig in the poke real estate investment strategy. These strategies evolved into the monstrosity known as bundled mortgage securities.
In the catastrophic wake of deregulation, as banks gobbled each other in a cannibalistic frenzy, they created massive national and international fiancé organizations, all built on a deck of risky cards, and all now hold trillions of dollars in mortgages, many mortgage backed securities comprised of risky packages of over-valued real estate loans whose toxicity threatens their entire investment portfolio.
Deregulation, arrogance, greed and criminal collusion has created a magnificent platform for industry insiders and outside fraudsters to plunder borrowers and banks at will. The sheer volume and extent of the funds involved are mind boggling and the intricacies of the investigations and research necessary to smoke out the crooks and expose the dirty secrets of the mortgage banking industry are often far beyond the average law enforcement investigator, or local reporter.
The cross-jurisdictional nature of mortgage fraud leaves many small organizations stumped. There is so much thievery going on that the FBI, by its own admission, doesn't go after cases under $50,000.
The backyard fraudster, money laundering kingpin, insider co-conspirator, along with a host of large and small opportunists, took advantage of deregulation to line their pockets and steal billions of dollars worth of real estate, and now borrowers are feeling the bite. While today's headlines are screaming about the problems in the sub prime mortgage market, few are talking about the massive fraud inside the nation's mortgage servicing industry, fraud, which has stolen thousands of homes and property from people who do not have sub prime mortgages.
Mortgage servicing companies and their agents have been accused of a cornucopia of dirty tricks including: ignoring payments, falsely crediting payments, denying receiving payments-even when the borrower produces a sack full of cancelled checks. The companies have allegedly released homeowners' credit information to unauthorized recipients, even allegedly engaged in economic sabotage, all the while judges continue to rule in favor of foreclosing banks.
A federal judge in Ohio has thrown a gauntlet down, forcing banks and alleged lien holders to prove ownership of properties before a foreclosure can be completed. His decision has been followed by another Ohio judge, and both judges have attracted the ire of many in the banking industry who say the banks bought the securitized mortgages in good faith and proof of their ownership-is in some warehouse, somewhere.
The judges didn't throw out the case completely. They told the banks to come back with proof that they own the property they are foreclosing on. Although the particular ruling applies to banks who foreclose based on their purchase of bundled mortgages as securities, many property rights advocates see this is a move in the right direction.
Unbelievably, in thousands of cases, consumers have been foreclosed on without the bank or mortgage company haven proven that the debt is owed, without presentation of paperwork proving the existence of the debt, which is a violation of several federal laws. In many cases, some involving the federal government's farm, home and student loan programs, borrowers have had to pay loans that were paid off and were not allowed to present evidence showing the debt had been paid off..
Borrowers have come to court with their proof in hand, only to be dismissed by judges who can't believe a bank or federal agency would try to foreclose or garnish wages unless a debt was owed. Not paying a debt and getting hauled into court, foreclosed on, or wages garnished is one thing, but to have your property sold or your wages garnished for a loan that has long been paid off is an entirely different kettle of fish.
There are all sorts of theories floating around about the courts' alleged dismissal of victims' proof of loan payment in civil actions, but one thing is clear: there is a lot more going on in the American loan crisis than currently meets the eye.