No “almost” about it. The key to home prices — proven over the last 140 years (see Case Schiller index) , is median income. Median income is what determines home value. Home value cannot be manipulated. But home PRICES can be manipulated. The difference between the two is what causes booms and busts.
And the ability to confuse consumers into thinking that home value and home prices are the same is what enables market manipulation. In the past, the only major factor as a restricting force in the marketplace was the risk of loss to lenders. Wall Street eliminated that risk of loss and now uses servicers and foreclosure as a means to gain extra profit.
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By controlling appraisal reports and flooding the emirate with money that appeared to be “free” the homep[roices were driven upward helped in large measure by developers who knew that every time they raised prices the homeowner would get a loan for that amount. Plus the developers started their own mortgage brokerage companies that received fees and kickbacks and bonuses in yield spread premiums.
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The higher the price the more money was paid to intermediaries including pizza delivery guys who were suddenly making $500k per year. Meanwhile the securities brokerage firms (“investment banks) were making money hand over fist on each transaction with homeowners by selling and trading multiple layers of “securities”, the revenue from which exceeded the amount of the transaction with homeowners by a factor of 12.
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But wait, there is more! Nobody knew better than the financial analysts at those securities brokerage firms what would happen in that scenario. Mortgage brokers and originators would spring up and sell defective loan products to millions of people. That meant, especially in the highest interest rate “loans” that if you take a group of them you were guaranteed that many of them would fail even if you could not predict which ones specifically would fail.
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So the investment bankers had a sure thing. All they needed was a vehicle by which they could package the fact that in a certain group of loans (tranche), a predictable number of loans would fail. Then they purchased insurance contracts and hedge contracts from people who didn’t know about the defective financial products in the tranche.
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And they wrote into the contracts that the insurer would pay off upon a declaration from the security firm that the value of the tranche had declined to a level set forth in the contract, which was based the sole knowledge of the investment banker. This was in the sole discretion of the investment banker and could not be questioned or reviewed. So unless they were able to prove a case for fraud, companies like AIG were screwed.
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So you can see that the Paradigm of lending had changed. Whereas before there was a risk of loss that was controlling market factors, the new “lenders” were unknown to “Borrowers,” and had no interest in Lending. Their financial interest was in the issuance and trading of unregulated securities. Homeowners had no idea about the true nature of their transaction.
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At the same time that they were granting “loans” the undisclosed lenders were betting against the success of the loans knowing that they would make even more money from failure of the “loans” than from performance.
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The payment of money to homeowners was merely a loss leader in their business plan. The undisclosed lenders had no plans to make a profit from interest payments. That’s why their receipt of money from this scheme was never booked on their own records as interest income.
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So it is not a matter of thinking that this is almost like they planned it. It is exactly the way they planned it.
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PRACTICE HINT:
One seemingly innocuous question or discovery demand could address this issue. You could demand identification of the party who received the interest payments of the homeowner as interest income and/or as return of principal due.*The point which everyone still has a hard time understanding is that there is no such party. That leaves the foreclosure mill trying to explain how a foreclosure is justified in favor of a party who is neither owner of the loan nor the legal representative of anyone who does own the “loan.”*The issue presented elsewhere on this blog that there is no “loan” once the transaction is subject to claims of securitization does not need to be reached. But it should be implied in argument, since that is the best tool to fend off the free house myth. Arguing that we have no way of knowing the true nature of the transaction, who was involved and how they were making money. Just because we don’t know doesn’t and shouldn’t mean a negative inference for the homeowner. This argument opens the door to the possibility that while the “borrower” may be getting the house, it could only be a completely just and proper payment for securing intangible rights to resell the homeowner’s private data and engage in a widespread securities scheme involving issuance and trading of unregulated securities. The tactic here is to reframe the issue from a windfall for the homeowner to the possibility that the homeowner is being justly paid and not unjustly enriched.
*You defend the discovery demand by simply saying that the defense narrative as set forth in the answer and affirmative defenses or the TRO complaint is that this claimant is not the party who is foreclosing even though it is named as the claimant and that the underlying debt is not owned by the claimant or anyone who is represented by the claimant.*Maybe you get an affidavit from a CPA that says that if it is a loan and the debt represents the obligation in the loan then the interest paid by the borrower must be booked as interest income by the owner of the debt. Maybe the CPA would be willing to state categorically that if a party does not show interest income rom the loan when the interest payments were being made then it cannot be the owner of the “loan” debt.*Note my careful use of words here. I know that there is no such party in existence. Nobody is reporting interest income as owner of the debt, but investors are reporting cash flow and revenue from their “investment” arising from certificates purchased from the investment banker.*Under the slippery labels used in false claims of securitization of debt, some of the money paid to investors might be reported as interest income; but in no case is it actually interest income because the investors never purchased any share of any flow if interest or principal cash flow.*And in tax cases it has been repeatedly been concluded that investors have no right, title or interest in any debt, note or mortgage nor any enforcement or collection rights or even the right to demand that the REMIC trustee exercise rights to demand repurchase of “bad loans.” The reason is simple. Neither the trustee (i.e., the trust) nor the investors owned any loans — even if they thought they did.
*But remember this if nothing else. Don’t bother making discovery demands if you don’t have the intent, resources and motivation to enforce those demands. You will not get any meaningful response. You will always get obfuscation, objections and motions to strike. You must be prepared to persuade the judge that you are entitled to a proper direct answer to the question or direct response to the demand for production.
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That means a motion to compel, a hearing, and hopefully an order from the judge compelling the response. Still no response will be forthcoming. So that means a motion for sanctions — for violating civil procedure and a court order. Hopefully another court order. It also means taking advantage of the inability of your opposition to respond and to start persuading the judge that it is now YOU who are entitled to the presumption that they are not the creditor and that they are not an authorized representative of a creditor. That could mean a motion in limine to prevent them from introducing evidence to the contrary since they failed to produce or respond in discovery. And it means preserving your position by objections at trial that are both timely and properly framed.
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Neil F Garfield, MBA, JD, 73, is a Florida licensed trial attorney since 1977. He has received multiple academic and achievement awards in business and law. He is a former investment banker, securities broker, securities analyst, and financial analyst.
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John Reed — the healthy are passing it around. But in my area — even they are dying — or have horrible consequence.
Agree – cannot keep shut down. They have to do something. But scientists behind. Should have some “cure” by now. At least a better way to handle. Not happening.
As to this post – I agree. But have to be able to withstand it. Most cannot.
FaceBook bought GIPHY in order to develop better censorship coding… they can’t yet stop MEMES that they don’t like but they’re working on it… https://www.zerohedge.com/technology/facebook-buys-giphy-400-million-pledges-crack-down-hateful-memes
Modern day book burning at it’s finest.
@ John Reed ,
Facebook is censoring like crazy ,, and deleting posts and entire accounts … Don’t post anything critical of Biden , Fauci or Obama if you value your FB (actually it’s LIFELOG a DARPA program) account… posting anything related to Dr. Judy Mikovits will get you deleted. The deepstate is desperate to keep this entire shutdown going… When do you lock up the healthy? You quarantine the sick.
The podcast terminated at 2 minutes… re-Upload??
This is the second time FaceBook hasn’t let me include a link to your article. So I have to copy/paste the whole thing instead! Which is cool… except there’s no link to your site!