(I have worked to understand the issues of the housing Ponzi scheme since I saw a bubble of inventory growing back in 2005. Here, I will discuss the fatal flaw regarding most reactions to people who are fighting for their houses when behind on their payments.)
I want to focus on the rule of law as it applies to foreclosures. Essentially, we are seeing mortgages that have been divided from their loan documents. This is not supposed to happen. So when someone is in a position to be turned out of their homes for non-payment, there are people who cannot prove they have the right to foreclose, who are going into court, using fake papers, and getting judges and sheriffs to improperly foreclose on the owners.
But we have a history of both English common law and 400 years of US property law that has allowed the US to prosper. If this certainty of title, certainty of who owns the loan and who has the right to foreclose is not sorted out, then we weaken the rules. We weaken the rule of law.
That is why it is necessary for people who are concerned about the law to make sure that people are not stealing property that they cannot prove is theirs. If anyone thinks that the big banks were not involved in the original housing scam that resulted in foreclosurgate, please read this.
The Santelli Rant
It is my hope that people will no longer be distracted by Rick Santelli. He was the motivation for the Tea Party. I am not here to tell you all the Tea Party movement is bad. Some is good. I have argued that many of the leaders and funders of the Tea Party are bad.
The Santelli rant that motivated the Tea Party was a rant that was factually inaccurate. The Tea Party is founded on this rant, and that foundation is fatally flawed. Indeed, the Chicago and St. Louis Tea Parties, the first Tea Parties formed on February 22, while the rant took place on February 19, 2009, cite Santelli’s rant as their inspiration. Santelli said that those borrowers who were underwater were “losers.” The tone was clearly derogatory as it means that the borrowers were poor quality people. The claim is actually inaccurate. I can prove that it is inaccurate. We must understand that Santelli is a paid employee of CNBC, a network that I watch and have observed defending the big banks over many years.
The tag “losers” implies that these people understood the nature of the Ponzi that was going on around them, that they made a bet and lost. I would say that by far the vast majority did not understand it. Furthermore, the price appreciation of the houses was artificial based upon the easy money loans themselves.
People were told they could refinance later. They were told that real estate always goes up. They were told that if they didn’t get in they would be locked out of the market. Almost every day on CNBC, David Lereah of the National Association of Realtors (NAR), was allowed to come on and say these things.
So then, this was a very sophisticated scam that included bankers, real estate professionals and mortgage professionals. Underwater borrowers were victims of a very sophisticated and lawless scam. The lawlessness centres on the corruption and taking away of underwriters, who have historically protected sound and honest banks. The underwriters were the law, the authority, of the banks regarding good loans and solvency. While not having sound underwriting violates no governmental law, it violates the principles that guide banking. Take away sound underwriting and you are guaranteeing bank insolvency and government bailouts of the biggest banks. That is exactly what happened.
Not only was it a sophisticated scam, but it was a scam that deliberately corrupted the underwriting process. These underwriters were important assets to banks because they always made sure in the past that people would not buy “too much house” based on their incomes. But with the new plan, the desire banks had for everyone to “qualify,” so that they could get as many mortgages as they could to pool into the mortgage bonds sold abroad and to cities and counties, resulted in the massive Ponzi that has caused foreclosuregate.
To repeat, because this is so important: The banks needed warm bodies to qualify for mortgages. So they took away the police of mortgages, the underwriters, and left it to buyers to determine how much house they could afford. Now,this is not good, because underwriters are well trained and knowledgeable about the process, but home buyers were not at all skilled at this process. The banks wanted it this way because they could show the investors that they would be getting a good investment, as prices artificially appreciated.
But it was a process built on sand, and the crash has now resulted in the real lawlessness of illegal foreclosures, called foreclosuregate.
People Behind on Their Payments Should Be Foreclosed Upon? Maybe Not!
We must understand that the housing bubble drove prices up artificially. People would not have qualified for mortgages, or if they did they would not have been given equity loans, without proper underwriting. Many people would have had houses that they could afford, had this Ponzi scheme not created the motive to drive prices up on the part of the banks.The Ponzi was set up by the banks, starting with the Bank of International Settlements in Basel, which is the central bank to our Federal Reserve Bank and the other central banks.
So, most people who are being ousted, many without documentation, should never have been put in this position of humiliation in the first place. Banks are not supposed to behave like this. They are not supposed to grant loans willy nilly, drive up the price of houses to unsustainable levels, and then mop up through the foreclosure process after the storm that they caused.
It is my hope that people will understand, and give some slack to people who choose to fight the banks. They are doing all of us who own property a favour. They are strengthening the title process, and it must be done or your title may be clouded in the future!