The Myth About How Greedy Borrowers Caused the Financial Crisis and Should Pay By Losing Their Homes

The law needs to be changed to permit securitization schemes to designate a specific receiver or player to act as the real party in interest — or there will continue to be an absence of such real parties. Without that the debt can never be legally retired even if paid off to some securitization player. The courts lack jurisdiction (authority) to do anything about that. The statutes must change.

I there is one thing I know for sure and most people agree with me, it is that the banks caused the 2008 crash just like they did repeatedly in the past, most notably in 1929. Another thing I know for sure is that greedy bankers have always successfully controlled the narrative after such crashes and placed the blame on the victims. And the third thing I know for sure is that most of all bought that bulls–t.

Paul Krugman, with whom I sometimes agree pretty much nails it in his article about Zombie ideas that have been completely debunked by reality and are still perpetuated by the banks and other capitalists who simply want to make more money without regard to the impact on our society.

I’m all for free markets if they are free. But if you want to keep them free then you need to put the referees back on the playing field. If you want to rely on free market forces to correct imbalances and excesses then you need a free market. I think that most potential voters understand that, which accounts for the rise of Sanders, Warren and lately Bloomberg.

The current lending market is not free. it is corrupt and controlled by a few mega players at the top who push out any meaningful competition from thousands of other sources of lending (i.e., the 7,000 other banks, credit unions and S&Ls). You can’t compete if your competition is willing to offer incentives like no interest for 7 years because they are making pornographic profits selling securities based on the the apparent existence of loans many of which might be toxic or failing.

One or both of two things needs to happen — securitization must become totally transparent to investors and borrowers and small banks need to have access to the securitization process. Then borrowers will get the chance to bargain for incentives and investors will be able to bargain for greater returns.

But that still doesn’t address the current illegality of securitization as practiced. Under current law it is illegal to split ownership of the debt from payment of value. But the banks did it anyway when they sold certificates to investors who were forced to disclaim any interest in any debt, note or mortgage.

The law needs to be changed to permit securitization schemes to designate a specific receiver or player to act as the real party in interest — or there will continue to be an absence of such real parties. Without that the debt can never be legally retired even if paid off to some securitization player.

Without a change in the law, and a change in the documentation of loans, there is no official record of who actually has the legally right to act as designee-creditor of any debt that is subject to claims of securitization. Securitization as currently practiced is simply illegal — not just confused as many courts choose to think.

Without such legal and practical changes in law and practice, no lien could be legally released. That’s why hundreds of recording offices came out long ago and said that title has been irrevocably clouded by securitization. Right now “authority” and “ownership” are based upon off record assertions that consist entirely of “Because we said so.” What happens if the banks say something else tomorrow?  Do we really want to leave property law in the hands of the banks?

The banks would have made that change by lobbying lawmakers but for one fact: they would also need to address transparency. Under SEC and Federal State lending laws, all compensation arising out of the purchase of the certificates and arising out of the loan origination must be disclosed. Right now the main compensation arising from those sales is deeply concealed from government, investors and borrowers, contrary to existing long-standing law. The taxable profits that were untaxed was in the trillions of dollars.

If the banks told investors that they were going to create profits equal to multiples of the amount invested and multiples of the amounts loaned, the both borrowers and investors would truly understand the scope and nature of the transactions. Banks don’t want that because they want to keep all those profits for themselves and they want to continue keeping those profits as off balance sheet and offshore non taxable accounts.

If we enforce the laws, rules and regulations then small banks can compete on an even playing field. Loans would again become local and nobody would be making  toxic loans just so they could bet against them and keep the profits from sale of the loan product and the failure of the loan product. There would be no crash because there be no bubble.

My message to homeowners is “Stop blaming yourself.” You were a victim of a carefully constructed scheme to outwit the government, investors and you and it worked. You got screwed not by your own greed or some liberal idea of giving away free money but rather by the greed of corrupt banks.

Krugman writes:

Although few saw 2008 coming, [Editor’s note: I did along with many others in 2007] in retrospect it was a classic banking panic, the type of thing that happened frequently before the 1930s. First, lenders got caught up in a gigantic housing bubble; then, when the bubble burst, much of the financial system just froze up

What made this panic possible, after two generations of relative financial calm? The answer, clearly, was the erosion of effective financial regulation over the previous few decades.

Seehttps://www.nytimes.com/2020/02/17/opinion/bloomberg-buttigieg-economy.html?smid=nytcore-ios-share

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FORECLOSURE DEFENSE IS NOT SIMPLE. THERE IS NO GUARANTEE OF A FAVORABLE RESULT. IN FACT, STATISTICS SHOW THAT MOST HOMEOWNERS FAIL TO PRESENT THEIR DEFENSE PROPERLY. EVEN THOSE THAT PRESENT THE DEFENSES PROPERLY LOSE, AT LEAST AT THE TRIAL COURT LEVEL, AT LEAST 1/3 OF THE TIME. IN ADDITION IT IS NOT A SHORT PROCESS IF YOU PREVAIL. THE FORECLOSURE MILLS WILL DO EVERYTHING POSSIBLE TO WEAR YOU DOWN AND UNDERMINE YOUR CONFIDENCE. ALL EVIDENCE SHOWS THAT NO MEANINGFUL SETTLEMENT OCCURS UNTIL THE 11TH HOUR OF LITIGATION.
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5 Responses

  1. Of one thing I am sure…no matter who’s opinion is shared: 10 million people, did not, overbuy a house and walk off on payments…rubbish all of that talk.
    Plenty tried to fight. The one’s that did try and fight got pummeled by counterfeit documents, false affidavits, etc… and the parties coming before the court had “no standing” to do so. No legal title, no rights to enforce anything…in breaching their agreements, they never acquired rights to anything and the money did not go to any trust after the foreclosure. (Footnote: many people are still owed money from overages on the foreclosures) Certificates were in fact sold for securities; however, the securities were falsified-fake….a Mike Miliken move. There is confusion, intentionally in the narrative as, the investors who bought the debt (questions about that abound) are not the same people who invested in the original certificates for the MBS’s..they were the chumps, who were deceived. Disgraceful…horrific!

  2. Mr. Krugman misses much of what was never publicized. I know I have written this before, but i repeat:

    The Community Reinvestment Act (CRA) was set up to help low and middle class Americans achieve the American dream of owning a home. The CRA had good intentions, but good intentions is not something banks want to be a part of. It was originally intended to help minorities who had difficulty achieving the American Dream. But the rules made no sense to banks. The banks had to fund the loans, and then sell them to the GSEs. Banks don’t like being the good guy. So they went to Congress and complained — “What is in this for us? There is no profit for us.” They suddenly stopped complaining to Congress (this is publicized). The banks figured out a way around the CRA. The banks were servicers to GSEs, and they could report anything they wanted. The GSEs were struggling themselves – stuck with fixed interest rates that were not profitable when rates rose. The scheme the banks concocted was to get the loans out of the GSEs into their own pockets (and fake trusts) and then sell the top tranches back to the GSEs – who put them into their own REMICs. This allowed profit for all – the banks and the GSEs. The scheme was so profitable, and investors, and pension funds loved it so much the demand for these loans increased. These loans were usually not fixed in rate, but adjustable rates that could go as high as 15%, This does not sound like a plan to help low/middle income people — how could they ever pay these high rates? Sounds like collusion to me.

    Although the scheme satisfied the CRA (as the quotas to help low/middle income people were satisfied – and it spilled way over than just minorities), deregulation allowed fake securization. The government knew way back when that rules were not being followed for pilot programs set up to promote the bank (rather than the GSE) securitization. Nothing was done to fix it. . .

  3. Most of these “securities” were never actual securities. There was no securitization for many of these loans. The word “ security” is false as it relates to securitization.

  4. “Paul Krugman, with whom I sometimes agree pretty much nails it in his article about Zombie ideas that have been completely debunked by reality.”
    Krugman predicted the end of the financial world with the election of President Donald J. Trump.
    TRUMP 2020!!

  5. Once again we are talking about these securities but we know one securities in Ginnie Mae have one way the loans are attached to the securities and that with a blank endorsed Note that can never have been purchase to place into the pool.

    As the Notes are owned by Ginnie once the blank Note are transferred to Ginnie, but as there not debt purchased in this transaction meaning no value is owed!

    Washington Mutual Bank (WAMU) with as many as 1.3 million FHA & VA loan being mortgage servicing by Wells Fargo Bank, who services end once the bank stop existing. If there is a claim of ownership of the debt of the loan then proof of purchase is required per UCC9.

    MERS cannot leap over a dead lender and hand out this broken link title situation so that somehow Ginnie Mae in the background directing these foreclosure. RICO is the name of the game!

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