Livinglies's Weblog

As to foreclosures, homeowners face an enemy that is very challenging to defeat: themselves. As long as they believe the lie, homeowners will not retain lawyers to win the foreclosure cases. In fact, they will not even look for an opportunity to defend against illegal claims.

see https://wallstreetjournal-ny.newsmemory.com/?publink=05d326cad_134abfa

I started writing about home financing back in 2004. It was obvious something was very wrong. Two factors alerted me to what I eventually identified as a horrific problem in our economy.

As a lawyer, I was disturbed by the fact that people were not using original documentation anymore. They insisted on using copies and refused to exchange original documents with original signatures. It does not take a rocket scientist to understand that this opened the door to moral hazard and illegal behavior. Although the law allows you to plead on a copy it requires the proof to be the original document, or the claim fails.

The second factor was that newly formed, thinly capitalized companies were posing as lenders, even though they had no money, capital, or source of capital. These companies were appearing on the documents at the closing table, with the closing agent, who knew nothing about the transaction, or even the parties that were involved. In addition, community banks and regional banks were starting to act as feeders instead of lenders. And they were all making more money than was commercially feasible for a transaction that purported to be a loan to homeowners.

Back in the 1990s, I had several friends who had stayed on Wall Street. They were all starting to make more money than a securities broker has ever made in history. They all explained their sudden wealth with one word: securitization. Brokers who were making a comfortable salary in six figures suddenly were being paid 7 figures. I knew what was happening. When I was an investment banker on Wall Street, I attended a meeting in 1970 in which this version of “securitization” was first discussed. It was obvious to me that it was now being used, even though it violated practically every law governing securities, homeowner transactions, and finance.

As most of the readers of this blog already know, I continue to follow the slow-motion train wreck that I had predicted two years earlier, and which I explained in detail in my first CLE seminar that I presented in Santa Monica, California. I had two goals. The first was to stop illegal foreclosures. I could do that case-by-case, but not statewide, regional or national.

The second was to alert everyone that the entire economic game board has been tilted toward Wall Street, and that the sheer weight of it would eventually slow or stop economic growth. Virtually every institutional and non-institutional player had converted their entire business plan to being a feeder and participant in the new version of securitization.

The entire reason for allowing Wall Street to exist and operate was that they were needed to provide capital in a capitalist society. Wall Street became a juggernaut, taking over half of GDP despite having a place where they were only the source of 16% of GDP. They accomplished this by subterfuge — pretending to enter the lending marketplace. And the easiest victim was an uninformed homeowner or prospective homeowner.

So today, capital is generated for pretender loans to consumers instead of driving capitalist needs.

Of course, Europe and the rest of the world are heavily influenced by Wall Street. But only this country suffers from a political death grip exercised by the leaders of the major investment banks. Those firms operate on a business plan that includes an even requires throwing lesser firms (even if they are large) under the bus.

Now, for the first time, it is Europe, and not the US, recognizing the danger of having most of its institutional and non-institutional players relying almost entirely on the trading of instruments that neither acquire nor convey anything.

All of the trading is based upon a lie. The certificates do not represent any rate, title, or ownership in any debt, note or mortgage. The certificates do not represent any status as a beneficiary of any trust. The certificates merely represent an IOU from an investment bank, which has made a conditional discretionary promise to make periodic payments to the holder of the certificate.

As to foreclosures, homeowners face an enemy that is very challenging to defeat: themselves. As long as they believe the lie, homeowners will not retain lawyers to win the foreclosure cases. In fact, they will not even look for an opportunity to defend against illegal claims. Thus they ensure defeat and disaster for themselves and even argue for it.

Filed under: foreclosure |