White Paper: Many Causes of Foreclosure Crisis

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Editor’s Comment:

I attended Darrell Blomberg’s Foreclosure Strategists’ meeting last night where Arizona Attorney General Tom Horne defended the relatively small size of the foreclosure settlement compared with the tobacco settlement. To be fair, it should be noted that the multi-state settlement relates only to issues brought by the attorneys general. True they did very little investigation but the settlement sets the guidelines for settling with individual homeowners without waiving anything except that the AG won’t bring the lawsuits to court. Anyone else can and will. It wasn’t a real settlement. But the effect was what the Banks wanted. They want you to think the game is over and move on. The game is far from over, it isn’t a game and I won’t stop until I get those homes back that were ripped from the arms of homeowners who never knew what hit them.

So this is the first full business day after AG Horne promised me he would get back to me on the question of whether the AG would bring criminal actions for racketeering and corruption against the banks and servicers for conducting sham auctions in which “credit bids” were used instead of cash to allow the banks to acquire title. These credit bids came from non-creditors and were used as the basis for issuing deeds on foreclosure, each of which carry a presumption of authenticity.  But the deeds based on credit bids from non-creditors represent outright theft and a ratification of a corrupt title system that was doing just fine before the banks started claiming the loans were securitized.

Those credit bids and the deeds issued upon foreclosure were sham transactions — just as the transactions originated with borrowers were based upon the lies and false pretenses of the acting lenders who were paid for their acting services. By pretending that the loan came from these thinly capitalised sham companies (all closed with no forwarding address), the banks and servicers started the lie that the loan was sold up the tree of securitization. Each transaction we are told was a sale of the loan, but none of them actually involved any money exchanging hands. So much for, “value received.”

The purpose of these loans was to create a process that would cover up the theft of the investor money that the investment bank received in exchange for “mortgage bonds” based upon non-existent transactions and the title equivalent of wild deeds.

So the answer to the question is that borrowers did not make bad decisions. They were tricked into these loans. Had there been full disclosure as required by TILA, the borrowers would never have closed on the papers presented to them. Had there been full disclosure to the investors, they never would have parted with a nickel. No money, no lender, no borrower no transactions. And practically barring lawyers from being hired by borrowers was the first clue that these deals were upside down and bogus. No, they didn’t make bad decisions. There was an asymmetry of information that the banks used to leverage against the borrowers who knew nothing and who understood nothing.  

“Just sign everywhere we marked for your signature” was the closing agent’s way of saying, “You are now totally screwed.” If you ask the wrong question you get the wrong answer. “Moral hazard” in this context is not a term anyone knowledgeable uses in connection with the borrowers. It is a term used to express the context in which unscrupulous Bankers acted without conscience and with reckless disregard to the public, violating every applicable law, rule and regulation in the process.

Why Did So Many People Make So Many Ex Post Bad Decisions? The Causes of the Foreclosure Crisis

Public Policy Discussion Paper No. 12-2

by Christopher L. Foote, Kristopher S. Gerardi, and Paul S. Willen

This paper presents 12 facts about the mortgage market. The authors argue that the facts refute the popular story that the crisis resulted from financial industry insiders deceiving uninformed mortgage borrowers and investors. Instead, they argue that borrowers and investors made decisions that were rational and logical given their ex post overly optimistic beliefs about house prices. The authors then show that neither institutional features of the mortgage market nor financial innovations are any more likely to explain those distorted beliefs than they are to explain the Dutch tulip bubble 400 years ago. Economists should acknowledge the limits of our understanding of asset price bubbles and design policies accordingly.

To ready the entire paper please go to this link: www.bostonfed.org/economic/ppdp/2012/ppdp1202.htm

23 Responses

  1. Fraud affidavits are against the law. You are correct and the all used fraud affidavits WHY? They dont have the real ones. They dont own the loans. http://stopforeclosurefraud.com/2012/05/11/joseph-a-smith-jr-monitor-of-foreclosure-fraud-settlement-wants-your-input-at-mortgageoversight-com-not-gov/

  2. One bank that the Long Island fraudsters use a lot is the Suffolk County National Bank. Bank insiders including the banks attorneys are all in this together.

  3. I live on Long Island NY. After examining the paperwork on my property purchased in 2002. Ibecame very aware that my formmer husband is involved in mortgage fraud. He is perpetrating this subprime fraud using his bank access that he has from his on the book job at a local car dealership. He does the auto financing has access to subprime auto loans & lein releases.
    When I attended the closing on my house. I was unaware of his involvement in fraud. Now I understand wht he did to me. I received a deed in the mail the next wk. for house # 67. But the problem is that I bought # 76. Unaware of this being fraud thinking it was just a typing error. I paid a mortgage on my house from 2002 until 2010. When I found that not only was this not my deed but that my house had been taken out of my name & financed again & again using my deceased fathers S.S.# . Shortly after he passed away in 03. Additional mortgages using my Mom’s S.S.#.
    After paying on 2 loan #s one HSBC the other HSBC PREMIER. WHERE IS MY DEED? is it being sored with the deed to our marital house. Never got the real deed to that house either. Goes back to 1986.

  4. And how did that course run for you? I am sure the corruption got in at some point, just when and how I ask?

  5. Give any offers of donations to neil garfield, for helping us and going after the banks. I am free. My payback will be you and all of winning our houses and America back. My email is Shelleystotalbodyworks@comcast.net

  6. Would love to get with you to review that or exchange other information for some of yours on that. Take donations?

  7. Pull up Wall street and the Financial Crisis; Anatomy of a financial Collaspe, report for the senate. One of my senators told me it was to many pages to read. She has more important things to do I quess. I read all 650 pages for myself, then read them again to highlight the crime. This report alone should have put a stop to this.

  8. I used to be able to pull up The Remicks have failed the Remicks have failed-deadly clear. But it is not coming up with the Oppenheim Report, reporting the Remicks have failed. Which means the PSA have failed the Remicks were empty. http://www.scribd.com/doc/82242361/Phil-Ting-Report-2012-FORECLOSURE-IRREGULARITIES-EXPOSED-IN-AUDIT-IN-CALIFORNIA This report says 100% of the securities pools are invalid in Kings county and 85% of the assignments are invalid.

  9. @Shelley A. Erickson,….. you are so very very correct! “paid ten dollars for the foreclosed house, or sometimes as much as 100.00 dollars” I went looking for my trust in all the counties I could through the US, and in my search, many many many are that way with either MERS or the Bank listed.

  10. Now it all makes sense, and it’s actually scary. Please correct me if I’m wrong. I wondered why the Trustee’s Deed Upon Sale had the “trust” my loan was foreclosed under the name of, but also another trust, listed as having an interest in. I thought that would be to my benefit, but after a bit of perspective on this article, they are going to state it was NOT a credit bit, but backed by the funds of the other trust that has assumed this one. Now they are really swapping, more like inserting more game pieces. Please share your thoughts. I have fought for 3 years, through many a scam, good intentions but really nothing but assumptions when it came down to performance. But I and my kids are tired. How can anyone have qualified for a payment that was $10K after 5 years. We had no prospect of making anymore than what we were and it was obvious. We asked for a 15yr fixed, it states that on one page, but then the whopping 3 little pages for the “note”, it just says we would pay 10K a month. But we paid extra, so what happened to that,,,, getting off track, dual interest in the TDUS??

  11. So tired of the LIES. Patriots, BRETHERN, citizens,!
    let make this all so simple. Lets go to the auctions, in a concerted effort, and BID, the we can file suit for “actions” based on false bids, from NON-CREDITORS, and lets START THIS DANCE!
    We must form allegiance, and act together!

    Brian Davies, my brother, you are now on the grant deed of the LOT hat I was GIFTED!

  12. All, you will find the FED [IS] in control of the banks and are the criminal master minds of all this. The Federal Reserve are the Warbucks, the Rothchilds, the Rockerfellers, and the Morgan bankster families. All the financial entities, their lawyers, and bought media are going to deni deni deni and make false claims. Neil is correct. I guessed this white paper issue right off. My son and I went to an auction just to watch them to see if we could find out if the banksters were bidding and taking the houses for themselves with no money paid. This was obvious to me due to the foreclosers filing on county records they paid ten dollars for the foreclosed house, or sometimes as much as 100.00 dollars. It is recorded on the county records. Three snobbish men came out of Northwest Trustees building onto the patio on their property and not public property, and knew the auctioneer very well. The prices of the houses at starting bid were almost full price over 200,000.00 or more in most cases. I believed to be set high to prevent the average person from bidding. The men looked at us like why are you here? We just watched in silence. They picked up their little paddles and began tossing bids between each other, and one would say to the other you take this one joe, and then joe would say you take this one Ted and so on. You could tell it was an absolute set up. The money trail of the money exchanged should be brought out publically, cause it was credit by frauds like Neil claims. I would bank on it. Why would they make claim they paid ten dollars for the house on county records? The three men purchased every house. Then walked back into Northwest Trustees tall towering building. I wanted to be a fly on their wall so bad. The entire con is at every peel of the onion. Albert in Florida had his house sold by email auction within two hours of auction scheduled to the very foreclosures forclosing on him. That is not a public bid.

  13. what? A white paper from the fed? LOL! Don’t people know the fed is a private enterprise owned by banks?

  14. @Joann,

    ‘What would happen if everyone defaulted and no one borrowed and everyone started paying with cash (or gold or whatever you wish). Perhaps that would be a free market.”

    I have been advocating exactly that for a long time: stop paying all the debts and not contract any new one. Anything you want to kill, stop feeding it. That would work in very little time.

    yet, this is not what is going on. We just went through a life-changing experience with debt and people have learned just about… nothing, as evidenced by what I posted a couple of days ago (below).

    “What the hell is wrong with people? It’s back to borrow your way through life. Know what? If people lose it all, they’re too stupid to keep it anyway!!! No wonder we can’t get our banks under control: people continue buying… MONEY!!!!!


    Banking Headlines
    Consumer credit surges again in March
    WASHINGTON (MarketWatch) – U.S. consumers increased their debt in March by a seasonally adjusted $21.3 billion, the Federal Reserve reported Monday. This is the seventh straight monthly gain in consumer borrowing. The increase in March, the largest since November 2001, was double the roughly $10 billion gain expected by Wall Street economists. Most of the increase came from non-revolving debt such as auto loans, personal loans and student loans-these three categories combined for a $16.2 billion jump in March. Credit card debt rose by $5.1 billion in the month after a $2.3 billion decline in February. Consumer credit increased at a 7.75% annual rate in the first quarter.

    3:00 p.m. Today3:00 p.m. May 7, 2012″

  15. Not sophisticated here – read the paper though. What a bunch of …..

    Have a feeling investors will be equally outraged along with homeowners if more of this …..is thrown at them.

    The days are coming – investors are going to align with homeowners – not out of goodwill but because they uncover the fraud in their own interest.

    Fraud=Bubble. Either the Fed doesn’t get it or they participated. Now anything goes to explain it away. It was just an act of nature, it could not be prevented or predicted so it’s just fine to party on until the next time ….uh huh.

  16. OK I read it the quote below and above is from the Boston Fed that posts the white paper. Still it ignores fraud in the equation.

    Securitized =easy money= higher and higher cost of everything because higher is “affordable,” Such a deal! Nice low teaser starter rate. Just keep selling stuff at higher and higher prices. More and more people can buy at higher prices. The price is irrelevant. Ability to buy and keep buying is the key. More money to be made by the sellers (and flippers).

    Bubble means the point where the debtor’s back got broken. The guy at the bottom paying the bill. The nice “cheap” high cost item with the now rising rate of interest gets defaulted. Bubble bursts.

    Why is education now not “affordable”? Did student loans get securitized? Are houses any more “affordable” now than ever? Less and less can buy anything. What would happen if everyone defaulted and no one borrowed and everyone started paying with cash (or gold or whatever you wish). Perhaps that would be a free market.

  17. The white paper provided is saying the opposite of what Neil is saying…isn’t it??? Haven’t actually linked to it or read it but here is what someone – Neil? is saying in the post….

    “The authors argue that the facts refute the popular story that the crisis resulted from financial industry insiders deceiving uninformed mortgage borrowers and investors. Instead, they argue that borrowers and investors made decisions that were rational and logical given their ex post overly optimistic beliefs about house prices. The authors then show that neither institutional features of the mortgage market nor financial innovations are any more likely to explain those distorted beliefs than they are to explain the Dutch tulip bubble 400 years ago.”

    Overly optimistic does not hold up as an excuse for fraud by the originators – especially fraud that profited by pumping it up, selling it a trillion times over and then profited from crashing it and collecting another multi trillion times over tax free.

  18. Where is my 120,000 hard money deposit and why did wells Fargo the only serviced the loan ever had change the account number 3 years in and never late a payment at time of loan # switch ….. This answer will answer all our questions

  19. “The game is far from over, it isn’t a game and I won’t stop until I get those homes back that were ripped from the arms of homeowners who never knew what hit them.”

    GO NEIL!!!


    I signed deeds of trust on 7/12/2007 on LOT 256 at the escrow company FIRST AMERICAN TITLE COMPANY. The escrow agent WAS Donna K. Demillo, indicted for fraud on 5/13/10 under the alias “Donna K. Demello.”
    Donna made me sign a interspousal grant deed conveying all my interest in LOT 256 to my elderly husband. Donna handed us the grant deed on LOT 256, and it said my husband had owned it all year long. (THIS WAS THEN THE PROPERTY OF MY COMMUNITY ESTATE!)
    Donna made my husband sign two deeds of trust with two loans that had the loan numbers of1001326-0000035177-1 and1001326-0000035176.
    They said “Richard Lawrence Nali, as sole and separate property.

    Then Donna said she was going to instantly refinance these two “construction” loans with two new loans, and these loans had the loan numbers of
    1001326-0000035175-5 and 1001326-0000035178-9
    Donna said she would record our grant deed to LOT 256, and then have copies made of everything, and send it to us.
    Donna made us sign the shared office notary journal.
    Her notary stamp was Donna K. McDaniels.

    On July 16th, we were made to come back to FATCO, and a person”Staycee Bland” was there, she made us hold up our hands and swear and affirm and aknolwdege that we had signed documents on the 12th, and of course we did.
    STAYCEE BLAND then made us sign the SAME notary journal that Donna had used.

    These persons and others, in conspiracy then forged documents, that we did not sign, and placed the paid off loan numbers onto them and recorded them. FOR A DIFFERENT LOT!

    Staycee Bland, has the apparent legal name of “Donna K. Escamillo,” and this is the name on the forged Documents, stamped with a notary daye of July 126th!

    and so two years later, when I discovered the fraud, “STAYCEE BLAND, she told me “I am the Donna, you remember,” but I did not recognize her, and I just found out she told my husband her name was “Staycee Bland.” (he just went into fatco in January, and herecognized her!)

    FATCO and Donna K. Demillo and Donna K. Escamillo (aka Bland) conspired to defraud me and my husband. They stole our grant deed to lot 256, and the forged our names to documents we did NOT sign. We have been deprived of our constitutional rights to own property by this illegal fraud.
    Lot 256 was conveyed to my husband, and it belongs to him, and to my community estate. Our constitutional rights have been abridged.
    FDIC! FATCO! OBAMA! Where is my grant deed to LOT 256??????
    Which VAULT is it in FANNIE?

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