Predatory Lending IS THE Cause For Systemic Mortgage Foreclosures

To better understand the Foreclosure mess, you have to start at the beginning. Since we now have 15 Million people currently in default of their mortgages and struggling to keep their homes, we must cut through all the BS and get to the heart of the matter.

We don’t have 15 million irresponsible families. We have 15 Million victims of predatory lending.

It starts with the sub prime loan and Alt=A Loan products.

There are 7.5 million sub prime loans.

Ameriquest – The one who started it all.

In February 2005, reporters Michael Hudson (reporter) and Scott Reckard broke a story in the Los Angeles Times about “boiler room” sales tactics at Ameriquest. Their investigation found evidence that the lender had in various questionable practices, including “deceiving borrowers about the terms of their loans, forging documents, falsifying appraisals and fabricating borrowers' income to qualify them for loans they couldn't afford.”

Brian Montgomery, the Federal Housing Administration commissioner said that the Ameriquest settlement reinforced his concern that the industry was exploiting borrowers, and that he "was shocked to find those customers had been lured away by the “fool’s gold” of subprime loans".

Former employees from Ameriquest, which was United States's leading wholesale lender, described a system in which they were pushed to falsify documents on bad mortgages and then sell them to Wall Street banks eager to make fast profits.[6] There is growing evidence that such mortgage fraud may be at the heart of the Financial crisis of 2007–2010.

INTERVIEW WITH AMERIQUEST LOAN OFFICERS:
www.npr.org...


ARNOLD: Russum says managers encouraged loan officers to conceal the actual cost and interest rates on loans. He says the bulk of these subprime loans that the company was selling adjusted sharply upwards after two years. The payments would then rise by hundreds of dollars a month.

Mr. RUSSUM: Let's say the borrower said to the loan officer, the account executive, I don't like the fact that this is only fixed for two years. And the branch manager would come back to him and say, listen, you need to tell these guys it's fixed for as long as they need it to be.

ARNOLD: Even though, Russum says, that wasn't true. Then Russum says he started seeing things that were even more over the line. Russum says he was honest with customers, but he says many of his co-workers weren't. He says some would white out income numbers on W2s and bank statements and fill in bigger amounts basically to qualify people for loans that they couldn't afford. That was called taking the loan to the art department.

Mr. RUSSUM: You started seeing forging of signatures on loan documentation. You started seeing a lot of bait-and-switch tactics.

ARNOLD: Russum says some loan officers would even print up fake fixed rate loan documents and put them on the top of the stack of papers the customer was signing at their closing.

Mr. RUSSUM: Maybe the first couple of documents they saw in their package were fixed rate, and then they would slip in the adjustable rate docs at the end and then trashing the fixed-rate docs.

Mr. MOORE: People are still being cheated. The terms of the deals are not being made clear to folks. They're going to be paying payments that they cannot afford. And there are going to be billions of dollars in defaults and foreclosures, and somebody needs to do something about this very, very soon.

This interview was May 2007.


Michael Hudson, Center for Responsible Lending

Michael Hudson, and investigative reporter who wrote Merchants of Misery: How Corporate America Profits from Poverty, Common Courage Press, 1996. He is also the author of The Monster: How a gang of predatory lenders and Wall Street bankers fleeced America – and spawned a global crisis which will be published in October 2010 by Times Books. The book focuses on two firms – Ameriquest Mortgage and Lehman Brothers – that were key players in the rise and fall of the subprime mortgage industry.

Hudson wrote:

IndyMac: What Went Wrong?, which found evidence that the bank had “engaged in unsound and abusive lending during the mortgage boom, routinely making loans without regard to borrowers’ ability to repay.” Shortly before the bank was seized by federal regulators, an IndyMac spokesman dismissed the report as a “hit piece” that “relies on unsubstantiated anecdotal evidence.”

The U.S. Department of the Treasury inspector general’s office later reported that its investigation indicated IndyMac had done “little, if any, review of borrower qualifications, including income, assets and employment.”

en.wikipedia.org...(reporter)

The amount of Predatory Lending perpetrated on the consumer is rampant massive fraud. I find it sad that those who are uniformed and brainwashed by the banksters continue to blame the consumers as “deadbeats”.

PREDATORY LENDING: A DECADE OF WARNINGS
www.publicintegrity.org...

A little more than a decade ago, William Brennan foresaw the financial collapse of 2008.

As director of the Home Defense Program at the Atlanta Legal Aid Society, he watched as subprime lenders earned enormous profits making mortgages to people who clearly couldn’t afford them.

The loans were bad for borrowers — Brennan knew that. He also knew the loans were bad for the Wall Street investors buying up these shaky mortgages by the thousands. And he spoke up about his fears.

“I think this house of cards may tumble some day, and it will mean great losses for the investors who own stock in those companies,” he told members of the Senate Special Committee on Aging in 1998.

It turns out that Brennan didn’t know how right he was.

I HIGHLY suggest reading this website. There is a lot of info, charts and videos.

A Decade of Warnings

The amount of mortgage defaults is rising 200,000 per month, and unless the government steps in to stop this madness I fear for all of us.

THE SOLUTION:
I’m sure many of those might not agree on some great solutions that have been offered up by some leading business colleges, but I find just massive foreclosures as unacceptable as well.

We need to immediately re-write all existing mortgages with a fixed 4% interest rate for 30 years, regardless of credit, income, debt or loan to value.

Roll in all missed back payments into the new loan and “start over”.

This allows the old bad loans to be paid off and frees up that cash to lenders to offer new loans for homebuyers.

This reduces mortgage payments and frees up descretionary money for people to start “spending” again to jump start the economy into recovery.

SEPTEMBER 20, 2010 - Economic Stimulus Through Refinancing

Columbia Business School’s thought leadership on issues related to the U.S. housing crisis has gained the attention of the media and policymakers alike.
Our latest proposal for stimulating the economy involves providing an opportunity for all borrowers who have government-backed mortgages to refinance their loans to today’s record-low interest rates. This will have two intertwined benefits: more homeowners will be able to stay in their homes thanks to the reduction in monthly payments that comes with the lower mortgage rate, while much of the extra money will be spent and go into the economy. As a bonus, thanks to the inexpensive design of this program, the initial government spending associated with the mass refinancing will be minimal, and it will likely reduce the government deficit in the long term.

Columbia Business School

See the Link for and outline of their brilliant plan!

ALSO SEE:

VIDEO Interview with William Black



The financial industry brought the economy to its knees, but how did they get away with it? With the nation wondering how to hold the bankers accountable, Bill Moyers sits down with William K. Black, the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s. Black offers his analysis of what went wrong and his critique of the bailout.

William K. Black suspects that it was more than greed and incompetence that brought down the U.S. financial sector and plunged the economy in recession — it was fraud. And he would know. When it comes to financial shenanigans, William K. Black, the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s, has seen pretty much everything.

Now an Associate Professor of Economics and Law at the University of Missouri, William K. Black tells Bill Moyers on the JOURNAL that the tool at the very center of mortgage collapse, creating triple-A rated bonds out of "liars' loans" — loans issued without verifying income, assets or employment — was a fraud, and the banks knew it.

IT WAS FRAUD - AND THE BANKS KNEW IT.

THE RUSH TO FORECLOSURE IS TO HIDE THE FRAUD CONTAINED IN THE LOAN PAPERWORK.

"Between 1989 and 2008, the financial services sector gave $2.2 billion in federal campaign contributions, according to the Center for Responsive Politics.

Since 1998, the sector spent over $3.5 billion lobbying members of Congress — more than any other single sector, again according to the Center."

Ira Rheingold, executive director of the National Association of Consumer Advocates, asserts that the financial industry’s lobbying power shut down efforts to help consumers, both during the early 2000s and more recently, when advocates were pushing for foreclosure assistance in the bailout bill. “People were making lots of money,” Rheingold said. “Congress was dependent upon their money.”

In Philadelphia, subprime loans were devastating entire communities, Irv Ackelsberg, an attorney with Community Legal Services, told the committee.

“I believe that predatory lending is the housing finance equivalent of the crack coc aine crisis. It is poison sucking the life out of our communities. And it is hard to fight because people are making so much money.”

In July 2001, Congress was again warned about the risks of the subprime mortgage market, this time in a hearing before the Senate Banking Committee. “There is a veritable gold rush going on in our neighborhoods and the gold that is being mined is home equity,” Ackelsberg added

Source

The Government failed to act when they were warned years ago when they had the chance.

They need to act now. Obama are you listening?

I am trying to stay out of these threads, as my opinion is vastly different than most here based on my previous career.

There is another side to predatory lending. The company I first worked for was closed by the NYS AG for this infraction. However, the term is a bit too vague. Let me give an example:

I was very friendly with a few guys in the originations side of the business, who were given an application for a 30 year mortgage for a widowed woman who was 75. Her credit was terrible, but she did qualify for a loan that had an interest rate about 13%. The mortgage monthly payment was astronomical, and one she could never afford and they knew it. When they advised her that it wouldnt work as she couldnt afford it, she told them that she was going to go to the AG and turn them in for age discrimination. In NY at the time (2001) she could do it, and we would have been crushed for it. So the loan was approved and she lasted a few months and then filed a chapter 13 for a plan to pay off debt.

My point....it is not just banks. The politicians going back to the Carter administration have built this country up to make the citizens believe that we all should have a house and we all deserve one, even if we cant afford it. Then when we fall flat on our faces, we blame everyone else, when in reality it was our own fault. Why in the world would you take out a loan for something that you can never pay back? It is ridiculous

reply to post by aew14


Yes... you are right in that it isn't only the banks. There are plenty of stories of those that abused the easy ability to get money.

But those stories don't add up to the volume of predatory lending, which I mean not only by fraud done by loan originators, but the "sub-prime" and "Alt-A" loan products should never had been invented as they are nothing but predatory in their terms.

And we must not forget that these products were given their "blessings" by our governement. And because of that I feel strongly the government must step in and save these people from the mass foreclosures, which is ruining our country's economy.

Also you must question - why the rush to foreclosure? Look at the default numbers. So we have 1.5 million foreclosures that have already completed and look at the state of our economy.

Well, what do you think another 16 million foreclosures will do?

October 15, 2010
Month-over-month change in foreclosure presale inventory rate: 1.1%
Year-over-year change in foreclosure presale inventory rate: 3.6%
Number of properties that are 30 or more days past due, but not in foreclosure: (A) 4,963,000
Number of properties that are 90 or more days delinquent, but not in foreclosure: 2,319,000
Number of properties in foreclosure pre-sale inventory: (B) 2,055,000

Number of properties that are 30 or more days delinquent or in foreclosure: (A+B) 7,018,000

Source

reply to post by Julie Washington


predatory lending... to anyone that could fog a mirror...was just one of the tools that the bankers/
mortgage initiators/wall street casino gamers had in their bag of Greedy Tricks.

the administrations leveraged the lender banks to go whole-hog in providing home (overpriced at that)
to the desired 'Ownership Society' ---only because the multi-cultural experiment and the various
affirmative action programs were running out of steam--- therefore the Bush era 'Ownership' crud
where banks were forced to make a certain % of loans to the 'disadvantaged'


the buyers. the sellers.. the builders... the insurance co's... were all in for the action & profits
the wall street investment houses in turn created the derivatives that bet that builders and the
packaged MBSs would default...
who suffers... well its the 85% of the population that didn't buy McMansions that were 150%
overpriced, or get into the mania of home-condo-town house 'Flippers'...
the conservatives in the world, held their noses and paid their taxes...but did not speak up
about the nonsense all around them...or even prepare to be a survivalist...thats who suffers most

all the others are in the basket of 'give the devils' his due reward...in my book
they all deserve the collapse of their world..

then commenced

There are a whole lot of bad guys in this whole scenario including the bankers, the US government, activist protesters, and the home owners themselves. When a bank is forced by the government to make a loan to someone who has no hope of repaying, why is that the bank's fault? When a home owner takes on debt stupidly, why is that not the home owner's fault. Let me tell you a little story:

My son-in-law has a good job in commercial construction, a job he still has. It is very lucrative. A few years ago he bought a house for something like $180K in a good neighborhood in a good city. It was a perfectly adequate house for his family, but he wanted more than anything to live "on the lake" because he had a buddy who lived "on the lake" and he just couldn't take it that he didn't as well.

In a couple of years his house had appreciated to about $300K, so he re-mortgaged it for as much as he could get, took that money and made a down payment on a house on the lake that cost just shy of $1 million. It was kind of a crappy house, frankly, but it was "on the lake." He rented his old house out for less than the now higher mortgage payment, and complained about it.

A year or so later the real estate market was still hot and the lake house had grown in value to about $1.2 million, so he re-financed for a million dollars, took THAT money and fixed up the kithcen, bought a $100K speed boat, a fancy car, etc.

Everything tanked. Now he had a million dollar mortgage at a fairly high interest rate for a house worth, on a good day, half a million. He can't refinance to a lower interest rate because the house is nowhere near worth the million dollar loan.

Then the septic tank failed. It seems the previous owner lied about its condition. He could sue, of course, but that would be expensive and the previous owner doesn't have a ton of money. Recovery is unliklely.

This is a story of greed, of living beyond your means. This guy was stupid to have put himself into this situation, and the banks were stupid to have allowed him to do it, but he looks good on paper and all the ratios were technically correct. Now his only option is to simply walk away from the lake house. If he loses his high-paying job, he'll have to. And, no, I'm not bailing him out.

reply to post by schuyler


Yes, this sad story could be told a million times for sure.

I remember several years ago all the credit commericals on tv. Imagine the things you could do with your home equity. Brilliant seduction made by the bankers.






Look what you can have for only $128.00 a month!

The fun part of the housing bubble and subsequent meltdown is that the banks come out of it (or are trying to) looking like victims.

Even though the banks aren't out a penny (due to fractional reserve banking) and received payments upon investments they never really made (through mortgage payments before default) - they now own the properties in question and have the ability to resell those properties for pure profit. And even though the banks got bailed out by the tax payers here... They still come out owning the properties with the ability to resell them at their whim and leisure.

All while almost no banks can even produce paperwork to prove that the own the mortgages...

This entire thing was a well thought out and orchestrated wealth grab, IMO. And, in the end, all that's happened is that we've financed another set of multimillion dollar bonuses and another stock market bubble in the future.

Until property values are brought down to rational levels and lending practices are regulated these problems will continue and the banks will still hold all the cards and, increasingly, all of the wealth and assets.

Reform HAS to happen, though I doubt it will anytime soon - unless we get laws forbidding the lobbying of Congress.

~Heff

I couldn't resist to post this commercial.

"I'm up to my eyeballs in debt"




Yeah bud, get another loan that'll help!

Great info here. Thought I would add to the poor homeowner's nightmares by alerting them to the fact that this is really just the nightmare, before the nightmare.

Predatory lenders, in partnership with our miserable government, have conspired to really slam it "home" with the supposed mortgage "modification" programs. As millions find themselves on their knees, our masters are now ready to swoop in for the kill, all the while, fooling us into thinking they are about to give us a hand.

Are you in the "Making Home Affordable" program, HAMP funds galore, your "bank" seemingly ready to let you live in your home, now that you have been "approved"??

You have been duped. It's all part of the whole big fraud, a "long-con", involving everyone, right up to the President, who dares to go before the cameras, and pretend there is help for Americans caught up in the mess.

The fact is, Obama is a mere spokesman for his masters, and he has done a fabulous job of fooling the majority. Many imagine that their government is going to help them, thanks to his oh-so "sincere" BS. In fact, they are helping the banks seal our doom.

Look into it. People are NOT being given modifications, in spite of qualifying for them, because "people" qualifying was never the issue to begin with. It was their LOAN that was what "qualified" them. 95% of people who imagine they are going to get a modification are going to get foreclosed on instead. Hundreds of thousands have been jerked around, meekly making their "trial payments" (supposedly three payments), but the nightmare has turned into 6 months, 12 months, 16 months.

And then! BAM! They get the news, they're being foreclosed on, after they made every payment, in good faith, while all along the bank went about locating their previously lost Notes. Meanwhile, if the people actually read the document they had to sign in order to enter the Making Home Affordable Program, they would have found that the whole reason for the program had to do with nullifying the MERS problem the bank had. Bait, and switch. And "our government" right in the middle, lending credibility to the mega-scam!!

A bigger scam, to fix the big scam. It seemingly never ends!

This is about to get very ugly. I seldom say things like this, but when the full extent of this mess becomes known, there will be no other solution but "revolution". The existing radically corrupt government must be replaced.

I wish to encourage anyone who finds themselves in this situation to immediately stop "trusting" the people you talk to on the phone. You are being strung along, and they really must foreclose, rather than bear the burden of proof, for legal documents they simply can not produce in most cases.

If you can afford payments now, and want to keep your home, get an attorney ASAP. The banks are moving fast to seal-off the few exits remaining, and will get Congress to do what ever they want very soon. While criminal judges have sided with the banks time and again, some are now finally seeing the vastness of the fraud, the conspiracy, and some homeowners may still get favorable judgements.

Don't give up just yet!

JR

Predatory lending was a symptom, not a cause. Banks were giving out mortgages to those who could qualify, but the hurdles to qualify were seen as too high and discriminatory. Multiple presidents and congress pushed for 'affordable homes'. GSEs were created to make housing obtainable to the unqualified. Somehow GSE loans for the unqualified were made available to anyone, so demand rose and the bubble was born.

It was only after the private real estate bubble was created, that banks (really individual greedy mortgage brokers) took advantage of people who not only didn't qualify, but couldn't think for themselves, couldn't reason, couldn't read, or used hope of one-way equity to ignore their personal financial reality.

Today no bank will own a mortgage, it will quickly sell new mortgages to a GSE. All GSEs have been nationalized, all mortgages processed today are through GSEs, no private investors would be stupid enough to buy securitized mortgages, so homes have effectively been nationalized.

Like Yellowstone Elk, humans have a tendency to try and protect the sick and weak in the herd, and end up creating a large, weak, sick and overwhelming herd that consumes the environment. In this case the financial system was consumed.

reply to post by JR MacBeth


just an fyi, you cant get foreclosed on if you pay

reply to post by Julie Washington


I orginally made this quote that I need to correct:

To better understand the Foreclosure mess, you have to start at the beginning. Since we now have 15 Million people currently in default of their mortgages and struggling to keep their homes, we must cut through all the BS and get to the heart of the matter.

We don’t have 15 million irresponsible families. We have 15 Million victims of predatory lending.


The number is 10 million, not 15.

Currently there are 7 million homeowners in default and in some stage of foreclosure. There are 2.3 million more that are late on the mortgage payments.

Defaults are rising 200,000 per month.

Shortly we will have 10 million homeowners in foreclosure.

reply to post by aew14

just an fyi, you cant get foreclosed on if you pay

Better do some more homework. Yes, they can "foreclose" on property that has been paid for, in full, in cash!

The real thing to focus on isn't the borrowers, it's the fraud, on top of fraud, on top of fraud, that is threatening to bring the entire system down.

So much paperwork is "lost", that even the "good" borrowers are being messed with, having their credit trashed, etc. The system is badly broken, and the proposed "fix" is to turn a blind-eye to the massive fraud. From what I've read, the coming lame-duck session is going to be ripe for just about anything the banksters want to pass. If you lost your seat in Congress, you have nothing to lose, and lots of money (payola) to gain by voting the way they tell you to, on your way out.

Banks are bad news, immersed in organized crime, this was actually their heritage.

Any wonder why Bank of "America" came out on top? Originally named "Bank of Italy"! Almost thirty years ago I was part of another big scandalous clean-up, B of A right in the middle. In my position, I saw some crazy things, and everywhere, the big mafiosos (not all "Italian" by the way!), in pin-stripe suits, laughing, and actually bragging about the immense sums they were making, as I would come around a corner, and over-hear their chatter. Meanwhile, the taxpayer taking it in the shorts, big time.

Things may have changed, but I would submit that they actually got worse, not better. "Organized" crime is one of the keys to understanding how things really work in our (their) world. From JFK's assassination, to why small Humbolt county bank branches process more cash than the biggest branches in New York City. Drugs, CIA, Mossad. Yeah, it's a "conspiracy", and while there are higher levels beyond the criminals we may occasionally hear about, focusing on the the little borrowers in their schemes, their dupes, is just willful blindness.

Here's an example of something else that might "rhyme" with this current mortgage mess. Drug addicts are so guilty, they threaten to overwhelm the prison system. And yet, are they really the "problem", or are they victims, who are easy targets? Who is selling them drugs to begin with? Why is the CIA deeply involved in this activity? Why aren't THEY in prison too?

I think the OP is right on, let's continue to focus on the banksters, not their victims.

JR

Of course if they're going to screw the consumer - they're going to screw their investors.

This is where we fall off the cliff.

Bank of American is being forced to buy back $47 Billion in bad mortgages bundled and sold as MBS's (mortgage backed securities).


NY FED NOTIFIES COUNTRYWIDE OF FAILURES:

"The procedural problems include errors such as failed assignments, broken title chain, lost notes, etc. I believe in many instances these can be cured by throwing money (i.e., staff, lawyers, etc.) at the problem. But there will be some cases where it becomes more challenging to get the toothpaste back in the tube.

The structural issues are primarily problems of how the structured product was described by its underwriters. If they warrantied to the buyer that only 15% of the notes were subprime, and the average Loan-to-Value (LTV) was 82%, and in reality its was 40% subprime and 96% LTV, then the underwriters have a big problem on their hands.

The contracts are typically fairly specific as to what the structured product is composed of, and the warranties typically detail what the buyers rights are in the event that the warranties are not met.

I would bet that there is a notice requirement, and the letter from PIMCO and NY Fed is likely beginning that notice process.

Things are going to get very very interesting here . . "

Source

Predatory lending - LOL

Yeah, it's the banks fault for lending money to people.

Peter Schiff makes some hilarious jokes about that very premise as he explains the real cause of the crisis:

reply to post by JR MacBeth


I would love to see how a bank could foreclose on a
1. home that has a current mortgage
2. is paid for and owned by a private citizen.

Lets not let the conspiracy nonsense take us out of reality

reply to post by aew14


Your post makes you sound like either you are a bank shill or grossly misinformed:

Bank of America Forecloses on Paid off House.

Source

And another one:

Bank of America Forecloses On, Then Auctions Off, Home With Paid-Up Mortgage

I could go on all day, but it would be a waste of my time and I have much better things to do.

I take it you dont read your own links do you?

Both were mistakes that were being rectified.

My point still stands....thank you for trying

Originally posted by aew14
reply to post by JR MacBeth

 

I would love to see how a bank could foreclose on a
1. home that has a current mortgage
2. is paid for and owned by a private citizen.

Lets not let the conspiracy nonsense take us out of reality

edit on 21-10-2010 by aew14 because: (no reason given)

I believe I answered the your questions quite pointedly.

Both links establish "how a bank could forclose on a home that has a current mortgage" and "how a back can foreclose on a home owned by a private citizen".

Regardless of the bank coming in "AFTER THE FACT" to rectify the problem.