Friday, March 11, 2011

Remember the American Dream?

It's not just a dream for individuals. We grow up in the United States with the idea, hope, or plan to own our own home. Not everyone expects to do it, but it's definitely part of the American idea,, what used to be called without irony the American dream. Even if your vision of the dream isn't a house in the suburbs with a lawn, a swing hanging from the tree in your front yard, and you grilling burgers out on the deck, it's still a big thing for Americans. Why else would we have shows on cable around the clock showing people looking for that perfect house to buy?

Public policy for years has supported homeownership. In fact, our biggest subsidized housing program is the mortgage interest deduction. We spend $117 billion a year on it. The idea is that homeownership leads to stable communities, which may have some legitimacy to it.

But when you buy a house, or try to buy a house, you're not thinking about building a stable community, or public policy. You're thinking that you'll have a place to call your own, or that you won't have to move every year when your lease is up, or you won't have a landlord to deal with and tell you whether you can paint, or hang pictures, or have parties.

The dream's taken a beating the last couple of years. We've had the subprime mortgage crash, people losing their jobs, and millions of foreclosures.

Oh yes, we've had one other thing: fraud.

First off, we know now that the entire subprime industry, and the crash of the subprime bond market was built on fraud.

We also know that a lot of the foreclosures have been the product of fraud, and it's worth going into a little detail about that.

A mortgage is really two different transactions: the loan, a contract between the borrower and the lender, and the mortgage, whereby a property owner gives the secured party (remember: mortgagee rhymes with Simon Legree) the right to take the property away by foreclosure if the borrower doesn't pay. These mortgages get traded around, sold, so that the bank who gave you your loan might not be the bank you send your payment to every month; and if you fall behind the bank or mortgage company who owns the right to foreclose might be someone you've never heard of.

One thing we've learned lately is that the foreclosure system has been rife with fraud. If the bank forecloses on your mortgage it's like any other court case: the bank has to prove that it owns the right to foreclose, that it is the owner of your mortgage. This can be tricky if your mortgage has been bought and sold a few times between the day you signed the mortgage and the day the bank takes you to court. What has become obvious is that there are many, many foreclosures based purely on fraudulent affidavits. Banks have employed people, now referred to as robo-signers, whose job has just been to sign affidavits that establish the chain of title for these mortgages. These are essential to these foreclosures, because if the foreclosing bank can't establish that each one of the transactions in the chain of title happened the way they claim, the bank isn't entitled to foreclose.

As it happens, a lot of these affidavits are just lies. The banks and other financial institutions doing these foreclosures, including big institutions like Wells Fargo (it's not just stagecoaches any more!) J.P, Morgan, and GMAC, have been routinely going into court lying about their ownership of the mortgages.

It was so bad that even the Federal Reserve woke up and took notice. This week a special panel of the Federal Reserve released its report on mortgage foreclosures. They actually looked in detail at 500 foreclosures, and guess what: they found that 100% of the foreclosures were justified. Not a single wrongful foreclosure was wrongful!

But what about the robo-signers, you ask? It turns out that the standards of this study were so lax that no matter what improprieties, fraud, and lies were committed by the foreclosing lender, if the homeowner was behind in their mortgage payments the foreclosure was considered to have been justified.

But all 50 state attorneys general joined together last fall to probe banks' foreclosure practices after several companies halted home repossessions when improper paperwork practices -- like the so-called "robo-signing" scandal -- came to light. The law enforcement officers have said they've found banks violated numerous state laws. State and federal officials are considering a large-scale settlement with banks and mortgage servicers that could include penalties totaling up to $30 billion and requirements to modify more distressed mortgages.


I guess nobody needs to concern themselves too much with billions of dollars' worth of fraud in millions of foreclosures.

In related news, the Republicans in Congress also took action on foreclosures last week. Never let it be said they are blind to the suffering of their fellow Americans.

So what did they do? The Republicans in Congress voted to defund the federal program set up to provide relief to homeowners in foreclosure so they could keep their homes.

Should I repeat that?



According to Congressman Chaka Fattah, who is continuing to fight for the homeowners, "House Republicans today took another pound-foolish step by voting to de-fund the Emergency Mortgage Relief Program. This bridge-loan program provides a lifeline for middle-class homeowners who face foreclosure through no fault of their own because of the predatory and economy-wrecking policies of Wall Street".

And the Republicans never tire of accusing us of using "class warfare" when we point out who's winning the class war, and whose side the Republicans are on.

Congressman Fattah is obviously too polite to say this, but the most appropriate response to the Republicans in the face of this latest outrage is very clear.

In the words of the late Ashley Morris: Fuck you, you fucking fucks.

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