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Thursday, October 21, 2010

Fraudclosure 101: Bursting the Piñata

What have we been hearing since this economic debacle began in September 2008? We have a capital crunch is the story line of Banking and Government interests. At that end of 2008 the recognized deficit of the United States was a little less than $10 trillion, which is bad enough, and now it currently stands at over $13.4 trillion.

OK, so the government was supposedly spending $3.4+ trillion on the Federal level in order to prime the pump and the TARP bailout money was supposed to be a revolving credit line meant to recreate liquidity in the credit markets related to the residential housing crisis and the loans related to the real estate bubble. The government will tell you that TARP has only cost about $30 billion, but the way the books have been cooked, and with the lack of transparency, there is really no way to know what the real cost of that program has been.

Have we seen any real improvement in the real estate market and have these governmental investments improved the economic outlook of our nation? I don't really think that anyone can say that they have. Housing prices are still artificially inflated beyond reality. Most of the people that I know that I've tried to sell property cannot and the only way that they will be able to sell their property is to decrease the asking price of that property. In reality most housing investments are far below the price (value-principal) that they took the loans out at.

The financial lending institutions have been in a win-win, can't lose situation. They're making money off of fees related to the introductory loan, derivative investments related to the loan, any fees related to late payments on the loan, fees from for foreclosure proceedings, and money related to the resale of the foreclosed properties. The lending institution was supposed to have a fiduciary responsibility to ensure that the person taking out the loan could afford the loan. What has been revealed over the last few weeks related to this issue of fraudulent foreclosures is that the banks not only have not acted in the best interest of their clients (the person who took out the loan), but they have played their client as a dupe and in doing so they have broken the law.

Think back to a few years ago and all of the mortgage companies that came out of the woodwork and aggressively pressed consumers to take out first, second, and third mortgages also known as equity loans. They had people believing that the value of their homes would increase forever. When the bubble burst it led to where we are today. It began the downward spiral that is continuously feeding off of itself. There's a lot of productivity that is no longer a part of our economic engine. With the glut of houses on the market, there is no need for the labor to create the products needed to build houses in the construction industry is at a standstill. And all of the ancillary jobs related to the construction of homes are gone.

The only people who benefited from this bubble or the people at the top of the food chain of the financial institutions. Fraud has been perpetrated on multiple levels. They make their money off of the fees associated with the instruments that are a part of the financial system. The troubled derivative investments associated with housing have been Collateralized Debt Obligations (CDOs) and Credit Default Swaps. What appears to have been the case is that the financial institutions packaged individual loans and sold them as financial instruments on Wall Street. The main problem is that they sold these packaged instruments multiple times to multiple entities. It appears that there's been no accountability, because an individual loan could have been placed into multiple packages. In essence your personal loan could belong to multiple parties. So it is virtually impossible to know who has the title to your loan or who you owe the money to. Therein lies the problem.

If one looks at Credit Default Swaps, they will see that the financial institutions involved in these investments have a vested interest to see that these loans would become nonperforming assets. That means it was in their interests that the client not pay off the loan and subsequently go into default. Once the client went into default, then the financial institution could collect on the credit default swap, which in essence is a form of insurance. Not only that, but then the financial institution has made money off of the initial loan, off of late fees, then off of the credit default swap, and finally off of the resale of the home.

That is what has brought me to this crossroad. I see the hoodoo that has taken place. This scam has been perpetrated at the expense of the American people and for the pleasure of the executives on Wall Street who are continuously being paid billions of dollars in bonuses and in turn buying off our political system and our court system to represent the interests of very few people. As I have further delved into this issue, I realize how rigged and perverted the system is. It is not only the housing industry, but it is every facet of the financial industry and thus the economic system in our country.

If you want to free up capital and bring liquidity back to our financial structure, then you're going to have to rein in the corruption. The wealth has been concentrated at the top of our socioeconomic food chain. The megarich continue to get richer and the disparity in income continues to grow. This was not the intention of our forefathers in this country is not what it once was. We need to bust open the piñata, if you want small businesses to form and be able to have lines of credit and if you want average people to be able to own homes, then you are going to have to bust open this concentration of wealth. It can no longer be ignored.

The best way to do this is to hold the parties who are responsible for these fraudulent loans, fraudulent financial instruments, and the resulting fraudulent foreclosures responsible for their actions. People have been displaced because of this fraud. This has not been a victimless crime. Sure, some people faulted on their loans because of their ineptitude, but the lending institution had a fiduciary responsibility to act in the interests of the person who took out the line. If the lending institution gave a loan to an individual who they knew most likely could never pay back the loan, then they had no business giving the loan to the person in the first place.

Look at all the predatory lending that took place a few years ago. In my opinion, adjustable rate mortgages should be illegal. Mortgage companies aggressively pushed these types of loans. There were many fly-by-night mortgage companies that aggressively marketed second mortgages as a way to tap into the over appraised equity of primary residences. That equity was created by the housing bubble. It was not real equity. People got caught up in the irrational exuberance. Most people don't understand the laws of economics and finance. They get caught up in the hysteria of the upswing created by a bubble market.

Most of the people that were hired as loan officers at these financial institutions did not understand their position of responsibility as a representative in the financial marketplace. They look to themselves as salespeople. They wanted to flip commissions. Anyone who studies finance understands that there are rules and laws that must be adhered to in these circumstances. Everyone from the top to the bottom of these financial institutions abrogated their duties as representatives of the public good. And as a result we are now going to pay the price of these grievances. I think everyone realizes that the "Too Big to Fails" have already failed. It is only a matter of how long we are going to carry out the charade of propping them up and continuing to pay the Executive Bonuses with Governmental dollars.

I really don't care whether you are in default on your mortgage or not. The only way that we can bring the housing market (and frankly our entire economic system) back into balance is to challenge this fraudulent system that overinflated housing values and thus the amount of money we pay for shelter. The excessive amount of money that we are paying for shelter, because of this bubble, is taken away from monies that could be spent elsewhere in this economy. We need to bring balance back to the marketplace and if we stand back and let this corruption go on then this depression will continue to dig deeper until it ravages our country to its core.

Personally, after reading the information that I have, I don't believe that it does any good to renegotiate with the bank under the current environment. The best thing to do is to find all the free resources and reference material that you can and sue the lending institution yorself without hiring a lawyer -- Pro se legal representation in the United States. I know that I'm going to look into this myself and I have already networked with a few people who are interested in pursuing this venture. When you decide that this is worth your time, then you can contact me at

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