Foreclosure

It isn’t the prettiest word in the dictionary. Don’t skip this. You might become an evictee and I have an idea.

It isn’t bad enough that people are losing their homes. The banks and mortgage companies are doing everything possible to make matters worse for their customers. In the process, they are stretching out this recession for years longer than it need be.

Do you remember the Bailout? Most people misremember it. No. It didn’t happen after Obama took office.

And just who was bailed out? First it was banks and mortgage companies and their investors. Next were foreign banks and investors. Then there was the insurance company, AIG.

Remind me. Who came up with this scheme? Oh, yeah, Hank Paulson, Secretary of the Treasury, known locally as the smartest man in Washington – faint praise, as it turns out.

On September 17, 2008, Hank told us, “Don’t Worry, The Banking System Is Sound.” Later that month he gave us a 3-page note, saying he needed $700 billion for his friends.

Surely, someone, somewhere thought to help out the taxpayer who was going to lose his home. No? Oh well. Guano happens.

Let’s simplify this by looking at just one company. You remember GMAC. How do you remember them? They financed your car? They sponsor a NASCAR racing team? They sponsored the GMAC Bowl? I think that featured those two traditional powerhouses, Troy vs. Central Michigan. I’m sure you Tivoed it. No? You don’t watch where your money goes?

Note: General Motors sold its 51% of GMAC in 2006. To fool the public and avoid its reputation for the shenanigans noted herein, it changed its name to Ally Financial in May of 2010.

Maybe they hold your mortgage. Maybe they screwed you. We all got screwed when they got several billions of our tax money but some have a more intimate knowledge of that former icon.

Nearly half the states require the courts to be involved in foreclosures. The mortgage companies have been flooding the courts with paper. The law requires a representative of the mortgage company to sign an affidavit that they have read all of the relevant documents and have full knowledge of the situation.

An employee of GMAC admitted that he signed off on about 10,000 a month. Now other employees have come forth. The courts in the State of Florida are facing a deluge of nearly half a million foreclosures at this moment.

Why would the mortgage companies do this? They don’t want the courts to have the luxury of actually examining the paperwork. That would not be to the mortgage companies’ advantage. A homeowner might catch a break. We can’t have that.

Those Congressmen taking bribes from the banks and mortgage companies thwarted a change to allow a bankruptcy court judge to modify a home loan on a primary residence, allowing them to avoid getting kicked to the street. The law permits John McCain to protect 6 of his 7 homes, if he ever had to. If you only have one home, you are out of luck.

With the taxpayers saving the banks rectums, the average Joe is the only one to face the consequences of the disaster created by the bankers and the government. Of, by and for the people, indeed.

I have a suggestion or two to redress the balance. It would also shorten the recession. Yeah, I know. It doesn’t stand a chance.

Our economy revolves around the real estate market. It represents the bulk of our savings and lately became an ATM for many. To understand the full import and impact of this sector, I refer you to an earlier post of mine: The American Dream. It would be a good predicate to the remainder of this post.

Let me begin by acknowledging that there have been people out there flipping houses to make a personal buck as they contributed to a distortion of the housing market and the bubble that burst. I would recommend freezing them out of any benefits from my suggested policy changes.

A couple goes to buy a house. It may be their first, or their second. Whatever, they hardly qualify as experts on real estate. They must rely on supposed experts: real estate agents, mortgage brokers, appraisers and real estate attorneys. Since the money these people get comes from this couple, they have every right to expect these professionals to be working on their behalf.

If these “experts” put them in a house and mortgage they cannot manage, who’s fault is that? Right. But, who gets dehoused? Right, again. Unfair is fair?

Let’s say, for arguments sake, that these experts realize the couple can afford a $100,000 house but finagle a way to put them in a $400,000 house. They didn’t do it out of the goodness of their hearts. They did it to get larger commissions. When the fecal matter hits the fan, let’s say the law requires the mortgage be refigured for a $100,000 house.

The result is that those who connived to benefit themselves at the expense of the couple forced to rely on their expertise get hoisted on their own petard. The same holds true for the packagers and investors who are aware of the fraud but feel their bribes will result in salvation by the taxpayers. There are other ramifications.

The trusting couple get a much nicer house. Now, here is the important part. That house is not added to the inventory of houses on the market. Fewer houses on the market depresses the market less. This means that the prices of homes not on the market will not be as depressed if the owner needs to sell. The market gets back to normal much sooner. All to the good.

Also, those investors speculators, being the ones who lose their shirts will have far less money to use to distort the economy in the near future. The same holds for the banks, mortgage houses and hedge funds.

As it is now, we have people needing housing. We have a record number of empty houses. This brings the value of everyone’s home down and extends the recession. All to the bad.

The idea is too fair and makes too much sense to ever see the light of day but it is fun to “speculate” on just how much it could do to correct the problems of the system as is.