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This is why we need Elizabeth Warren:  

There is only one serious federal remedy for predatory lending, and the Fed is now knowingly trying to gut that remedy in order to help banks avoid losses from their own fraud.

 

This is from Zach Carter's article over at Alternet.  

The federal remedy he is talking about is a rule called "the extended right of rescission," and it is the most potent protection that homeowners have against predatory lending.  

It works like this:

If a bank failed to make key consumer protection disclosures about a mortgage, the borrower can demand that all of the interest and closing costs on the loan be refunded. Equally important, the bank must also stop all foreclosure proceedings and give up its right to foreclose. Once the bank gives up its right to foreclose, the full amount of the mortgage, minus interest and closing costs, becomes due. This isn’t a free lunch for the borrower, especially when the value of her home has declined dramatically, but it’s better than nothing, and it does impose real costs on banks.

For this process to function at all, it is absolutely critical that the bank be barred from foreclosing before the borrower has to pay off the remainder of the loan.

 

Let's make sure we understand this:  Once the homeowner can prove that the bank failed to make disclosures required under the Truth-in-Lending-Act, the homeowner has the right to demand that all of the interest and closing costs be refunded, and the bank loses the right to foreclose, temporarily.  Once the bank refunds the wrongfully acquired interest and closing costs, the principal balance of the loan becomes due, in its' entirety, immediately.  If the homeowner is unable to refinance or otherwise pay off the principal balance of the loan, the bank can then proceed to foreclose.  

The teeth in this regulation is in the order in which the events happen.  The bank must first refund the wrongfully acquired interest and closing costs, which potentially gives the homeowner enough cash to refinance the principal, and keep their home, and the bank must give them the opportunity to do so.  

The new regulation requires that the homeowner must pay the fraudulent loan off, in full, before the foreclosure can be stopped.  

Let me say that again.  The entire fraudulent loan, including interest, late fees, and whatever other costs or fees the bank claims are owed, must be paid off, in full, by the already cash-strapped homeowner before the foreclosure can be stopped.  How many people in foreclosure do you think are going to be able to do that?  Not very fucking many, right?  

But wait, it gets better!  Assume for the moment that, after your house has been foreclosed and sold, it is finally determined that the bank did not have the right to foreclose on your home, and refunds you your money; do you still get your home back?  Not without financing litigation, against a subsequent purchaser for value, who may well not have had notice.  Think the courts are getting jammed with fraudulent foreclosure cases now, just wait . . . of course, that's a dispute between the two homeowners, to quiet title -- the bank doesn't have to participate in that litigation, or pay for it.  

So, why is the Fed doing this?  Because the whole system is now based on fraud, and only the continuation of fraud can keep the system from crashing.  

The Fed knows full well that it’s gutting the law here. The Board of Governors and their staff have met with key consumer lawyers no less than three times about this exact rule proposal, and the Fed is going ahead with it anyway.

Here’s what’s really going on. The largest banks don’t have enough capital to weather a bad housing market. And any process that sheds light on the documentation procedures at mortgage servicers will expose the big banks to investor lawsuits. But investors can’t sue without those documents. Rescission judgments create a paper trail for illegal loans. In addition to creating immediate losses for banks, rescission documents that banks sold illegal loans, giving investors who bought mortgage-backed securities ammunition for well-founded lawsuits. Those lawsuits, in turn, could sink some of the biggest names on Wall Street, something the Fed has been trying to prevent at all costs since 2008.

 

All those "toxic assets" didn't just disappear.  They are still on the books, often at 100% value, even though they are worthless.  Carter uses 2nd mortgages to make the case in point:  with collapse of the housing market, many of the 2nd or even 3rd mortgages, lines of credit, etc., that the banks were so eager to hand out, are completely valueless, but are still being carried on the books at full value.  If the banks are forced to write those loans off, it will bankrupt them.  It's that simple.  And that's not counting the potential investor lawsuits.  That's how deeply embedded the fraud is, and why it has to be covered up at any cost.  The banks have written checks they can't cash, and if they are forced to pay, the system will collapse, just the same as it would have two years ago.  EVerything that has been done since has been to delay the day of reckoning, and continue the fraud for as long as possible.  

This simple rule could well be the straw that breaks the camel's back.  Gut it, and the system can keep the fraud going for a little longer, and leave the taxpayers with that much more of the bill when collapse comes.  How effective is this rule?  It's been the primary weapon in homeowner's arsenal since the Truth-in-Lending-Act was passed in 1968.

I will leave you with a quote from a letter from Americans for Financial Reform, sent to the Fed's Board of Governor's two days ago:  

This order of obligations is the essence of the protection provided by TILA’s extended right of rescission. The cancelling of the security interest
means that the homeowner has a defense to a foreclosure. It also means that the homeowner has the means to obtain refinancing so as to be able to tender the amount due. The extended right of rescission does not mean that the homeowner does not have to repay the loan. While the amount due is reduced by the finance charges, fees and amounts the homeowner has already paid, the balance is still due the creditor.
 
Despite the clear order of these events set out in the Act passed by Congress, the Board’s proposed regulations would make the extended right of rescission useless by requiring that the homeowner must pay the entire amount demanded by the creditor before the creditor is required to cancel the security interest in the home. This proposed changed order will undermine the primary purpose and power of TILA’s extended right of rescission – the mandatory cancellation of the security interest by the creditor upon receipt of the homeowner’s notice. It is the order of events which has meant that the extended right of rescission under TILA has been the primary home-saving legal tool against predatory loans and foreclosures for the past forty-two years. This proposal would make it completely useless to all but the wealthiest homeowners.

Calling Keith, Rachel, Ed:  somebody, raise a ruckus about this, willya?  And we'll see whether the administration and/or the lame ducks will actually do anything about this.  

Update No. 1:  Not that it is likely to do any good, but, here's a link to the Fed's comment board regarding the proposed rule, R-1390.  
Fed's electronic comment form.

And this is a link to
the Federal Register, where you can review the entire proposed rule (warning, it's long and technical).  

You can submit a formal comment to the Federal Register until December 23, 2010, using this form on the Federal Register's website.

Update 2:  Looks like this has scrolled off, haven't had any new comments in a while, so, thanks to those who stopped by.  

Originally posted to Jbearlaw on Thu Nov 18, 2010 at 10:24 AM PST.

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Comment Preferences

  •  Tips/falmes (40+ / 0-)

    This is one of the best indicators of just how badly our government has been captured by Wall Street.  The entire article is worth a read; according to Carter, Bank of America, Citibank, all the usual too-big-to-fail criminals are behind this.  

    Will there be anything left, when this all collapses?  

    We are the first to look up and know, with absolute certainty, that the sword we ourselves have forged, is real.

    by Jbearlaw on Thu Nov 18, 2010 at 10:24:35 AM PST

  •  How will someone get a mortgage on a house (3+ / 0-)
    Recommended by:
    semiot, Jbearlaw, FishOutofWater

    that's underwater?  Even with the interest and closing money refunded, isn't it unlikely that a owner of a underwater house will find another lender to cover the bad loan?

    •  That's why the rule has real teeth. (10+ / 0-)

      If the first lender wants to get anything out of the deal, they have a real incentive to re-negotiate the loan.  Otherwise, they only lose money on the deal.  They cannot make a profit if they have to refund all the interest, and more importantly, the mortgage backed security that the loan has been bundled into takes a hit because of the loss of the profit, thus opening the bank up to lawsuits from investors.  That's a powerful incentive to work out a modification.  

      We are the first to look up and know, with absolute certainty, that the sword we ourselves have forged, is real.

      by Jbearlaw on Thu Nov 18, 2010 at 10:45:08 AM PST

      [ Parent ]

      •  Not if the paperwork is not in order. A servicer (6+ / 0-)

        or bank cannot work out a modification if no one has standing to do so.  It is a major problem and why so few modifications have been done.  In order to modify something, you have to have the original documentation to modify.  

        "When fascism comes to America, it'll be wrapped in a flag and carrying a cross." Sinclair Lewis

        by lakehillsliberal on Thu Nov 18, 2010 at 10:52:42 AM PST

        [ Parent ]

        •  Well, historically, that was a major incentive. (4+ / 0-)

          That's why the rule worked so well for so many years, and it's still the best protection for the homeowner, and one of the best tools available to create a paper trail, and expose the actual extent of the fraud.  But yes, I take your point.  

          We are the first to look up and know, with absolute certainty, that the sword we ourselves have forged, is real.

          by Jbearlaw on Thu Nov 18, 2010 at 10:59:06 AM PST

          [ Parent ]

          •  The problem is that because everyone assumed that (5+ / 0-)

            it worked liked that(paperwork being properly recorded and transfered) nobody checked. Foreclosures were the rare exception and everyone worked to avoid it.  Not the case today, in fact as I understand it, servicers are working against the interest of the banks and actually causing foreclosures(telling homeowners not to pay their mortgages so they can qualify for HAMP).  It is a mess out there.

            "When fascism comes to America, it'll be wrapped in a flag and carrying a cross." Sinclair Lewis

            by lakehillsliberal on Thu Nov 18, 2010 at 11:42:40 AM PST

            [ Parent ]

            •  The casino wins either way. (4+ / 0-)

              I can't remember the details, but as with everything else, there are "instruments" that are essentially bets that a given mortgage will default, and so the holders of those instruments want to force the foreclosure, so they can collect on their "instrument."  That's why Goldman-Sachs is being sued, because they were selling securities that they were also betting would fail/default.  

              We are the first to look up and know, with absolute certainty, that the sword we ourselves have forged, is real.

              by Jbearlaw on Thu Nov 18, 2010 at 11:53:44 AM PST

              [ Parent ]

              •  They are called Credit Default Swaps(CDS). (3+ / 0-)
                Recommended by:
                lotlizard, Jbearlaw, phonegery

                There are two kinds one you make to hedge a risk on something you actually own(bond) and one you make when you have no underlying interest(naked CDS).  In the naked CDS, you take out insurance something you don't have an underlying interest in, like taking insurance on my house burning down and I guess as in the case of GS you light the match to be sure it does.  

                "When fascism comes to America, it'll be wrapped in a flag and carrying a cross." Sinclair Lewis

                by lakehillsliberal on Thu Nov 18, 2010 at 12:17:36 PM PST

                [ Parent ]

        •  Not really. (1+ / 0-)
          Recommended by:
          Jbearlaw

          Who's going to contest it? Not the homeowner who is getting the modification, and not the bank who is offering it. The investor might squawk, but without proof of fraud, they probably have no standing to object.

          "If we amplify everything, we hear nothing" - Jon Stewart @ the Rally to Restore Sanity

          by davewill on Thu Nov 18, 2010 at 11:11:29 AM PST

          [ Parent ]

          •  Then why are they not modifying loans. Banks are (1+ / 0-)
            Recommended by:
            Jbearlaw

            not in the real estate business.  They are not set up to handle the volume of foreclosed properties they are generating.  As far as whose going to contest it, they are not sure and since they are not sure, they are not going down that rabbit hole.

            "When fascism comes to America, it'll be wrapped in a flag and carrying a cross." Sinclair Lewis

            by lakehillsliberal on Thu Nov 18, 2010 at 11:38:50 AM PST

            [ Parent ]

            •  They don't want to write down the asset. (4+ / 0-)

              If they foreclose, they take the house and keep it on their books at an inflated value, and can pretend for a while longer.

              "If we amplify everything, we hear nothing" - Jon Stewart @ the Rally to Restore Sanity

              by davewill on Thu Nov 18, 2010 at 11:46:24 AM PST

              [ Parent ]

              •  What a mess these banks are? When you foreclose (2+ / 0-)
                Recommended by:
                Jbearlaw, davewill

                ,the property ends up deteriorating further unless you put a substantial amount of money into the upkeep.  When this finally blows it is going to crater the entire economy.

                "When fascism comes to America, it'll be wrapped in a flag and carrying a cross." Sinclair Lewis

                by lakehillsliberal on Thu Nov 18, 2010 at 12:20:58 PM PST

                [ Parent ]

                •  None of it makes REAL financial sense. (1+ / 0-)
                  Recommended by:
                  Jbearlaw

                  If they were truly trying to mitigate their losses, they would write these down by the truckload, avoiding foreclosure as much as possible. They also wouldn't be resisting so many short sale offers.

                  But our financial emperors still think we can't see through the invisible "clothing" their books have become.

                  "If we amplify everything, we hear nothing" - Jon Stewart @ the Rally to Restore Sanity

                  by davewill on Thu Nov 18, 2010 at 12:31:15 PM PST

                  [ Parent ]

        •  Lakehillsliberal... (2+ / 0-)
          Recommended by:
          lakehillsliberal, Actbriniel

          That's right, without the original promissory note, or a proper affidavit certifying the actual loss of a pre-existing promissory note, the person or entity seeking the foreclosure is not the "Real Party in Interest;" furthermore, if the Real Party in Interest is not part of the legal proceeding, then the court MUST dismiss the case based upon a "Lack of Subject Matter Jurisdiction." Again, the court has no discretion here.

  •  Fed enables fraud to save banks (6+ / 0-)

    and screw home buyers.

    The class war continues and the little guy will get screwed again if we don't fight back harder. This kind of crap is one reason many confused voters didn't think Democrats were on their side.

    Why is this happening while Obama is president?

    look for my DK Greenroots diary series Thursday evening. "It's the planet, stupid."

    by FishOutofWater on Thu Nov 18, 2010 at 10:42:24 AM PST

  •  Good diary -- no *falmes* for you :) (5+ / 0-)

    This is the line that stays with me:

    " . . . the whole system is based on fraud, and only the continuation of fraud can keep the system from crashing."

    What if it did crash, tho?  Is this a case of the cure being worse than the disease?

    I remember back in Oct. 2008 when everything was going down, one guy (a financial analyst?) was being interviewed on MSNBC and he said none of the firms the Cheney/Bush WH and Congress were trying to rescue was worth it.  He said, "Let 'em fail."  In hindsight, maybe he was right -- ?

    •  asdf (3+ / 0-)
      Recommended by:
      Catte Nappe, Jbearlaw, phonegery

      What if it did crash, tho?  Is this a case of the cure being worse than the disease?

      Then we'd have to build a new system- which sounds great as a soundbite, but a lot of innocents will suffer while we figure out how we're going to allocate and distribute resources.

      I wouldn't want to be in an urban environment for that transition- and it won't be a quick one.

      •  I get that. It just seems like (3+ / 0-)
        Recommended by:
        Jbearlaw, phonegery, nippersdad

        the system we've got is so rotten, tho -- it doesn't seem to work for anyone other than those at the very top or those who prey on the rest of us, at the bottom.

        I think we might have blown the only chance we had for real change, when the change we voted for in 2008 didn't materialize -- not enuf of it, anyway, to be noticeable.

    •  They lied when they said "too big to fail." (8+ / 0-)

      It's odd, considering the heavy involvement of the banks in wild speculation and the lack of lending after the bailout, that the argument seemed persuasive at the time.  You are absolutely correct though, I think we might have been better off letting them fail.

      It's very hard to see banks as a productive industry.

      But I think the real sources of our current woes were: deregulation, free trade, government corruption (buy a congressman . . . rent a senator).

      "With all the wit of a stunned trout, prodigal stumbled clumsily into the midst of a discussion . . . " -- droogie6655321

      by prodigal on Thu Nov 18, 2010 at 10:47:18 AM PST

      [ Parent ]

      •  That's why they are hoarding cash. (6+ / 0-)

        And why the Fed has been handing out interest free loans like candy to these guys.  Their balance sheets are completely fraudulent, which is why they suspended the mark-to-market rule, so the fraud can be covered up.  The Fed is desparately feeding the big banks cash in the hopes that if they keep them propped up long enough, values will recover and their toxic assets won't be quite as toxic anymore.  Problem is, that could take decades, like Japan in the 90's.  

        We are the first to look up and know, with absolute certainty, that the sword we ourselves have forged, is real.

        by Jbearlaw on Thu Nov 18, 2010 at 10:55:27 AM PST

        [ Parent ]

        •  So America goes bankrupt, (2+ / 0-)
          Recommended by:
          lotlizard, Jbearlaw

          rather than the banks. Shortly before the fan is impacted,  the  disgustingly rich take their money and leave.

          Switzerland has attracted millionaires like pop star Tina Turner and racing driver Michael Schumacher with special tax deals.

          Switzerland votes in a referendum on Nov. 28 on a proposal by the centre-left Social Democrats (SP) to levy a minimum tax of 22 percent on income above 250,000 Swiss francs ($254,000) and 0.5 percent on assets above 2 million francs.

          The argument against raising the taxes on the wealthy seems to be taken straight out of Republican electioneering.  

          "This initiative would be damaging for Switzerland," said Ursula Fraefel of business lobby economiesuisse, which is leading the campaign against the initiative.

          "If a company owner is taxed on his wealth, he will invest less in his company which could affect jobs and it could influence his decision on whether to be based in Switzerland."

          http://www.reuters.com/...

    •  It will crash. It's only a matter of when. (8+ / 0-)

      Look what's going on in Greece and now Ireland.  Until the underlying debt is either paid, or written off, there is no way to stop the losses.  It's a game of musical chairs, and everybody's scrambling for a seat now that the music has stopped.  

      We are the first to look up and know, with absolute certainty, that the sword we ourselves have forged, is real.

      by Jbearlaw on Thu Nov 18, 2010 at 10:50:03 AM PST

      [ Parent ]

      •  It's just one gianormous gambling racket. (6+ / 0-)

        I caught TDS from Tues. night and there were two authors on who had written a book on the financial meltdown and both of them said that the only "industry" in the US right now, is basically gambling -- not investing in companies that produce things that benefit the country or citizens -- they're just gamblers (using taxpayer-funded money from the Treasury Dept.) for the same risky credit default swaps that got us into this mess in the first place and saying fuhk you! to the American consumer/taxpayer.

        It really is obscene that there's (apparently) nothing that can be done -- or no one with the balls to do it, whatever the case may be.

  •  "... the whole system is now based on fraud" (7+ / 0-)

    True of more than just the housing market, but still a very, very salient point.

    Wealth = Justice.  The new American formula.

    "With all the wit of a stunned trout, prodigal stumbled clumsily into the midst of a discussion . . . " -- droogie6655321

    by prodigal on Thu Nov 18, 2010 at 10:43:54 AM PST

  •  The FED has a serious situation with BofA. (15+ / 0-)

    The bondholders are suing them for $47 billion for fraudulent securities.  The homeowners are winning in court and the FED has to stop that from happening, otherwise the entire house of cards comes down.  Where is our Consumer Protection champion in all of this.  I have not heard anything from Elizabeth Warren in weeks.

    "When fascism comes to America, it'll be wrapped in a flag and carrying a cross." Sinclair Lewis

    by lakehillsliberal on Thu Nov 18, 2010 at 10:49:08 AM PST

  •  A system that will crash without fraud. (6+ / 0-)

    This is the key point:

    Because the whole system is now based on fraud, and only the continuation of fraud can keep the system from crashing.  

    This is Late Stage Capitalism.  All the Ben's horses and all Tim's men can't put it back together again.

    Instead of having a serious conversation in this country about, "What's next?," we're spending the last of our resources propping up a dying system.

  •  Please feel free to flame these fraudsters (2+ / 0-)
    Recommended by:
    Jbearlaw, yoduuuh do or do not

    even more severely. This mortgage scandal gets bigger and bigger. Goldman Sachs, AIG, Blackstone and others certainly blew up this mortgage bubble and then they popped it.

    Bernanke and the Fed want immunity and they want secrecy and they want taxpayers money to keep doing this. If the Federal government would release the truth and reveal who is profiting, the President would become popular again.

    •  "Pres. would become popular again." Really? (1+ / 0-)
      Recommended by:
      Frank33

      I mean, he's pretty popular now, regardless.  But yes, I think you are right, the country is begging for some good old fashioned law and order, and Obama would gain quite a bit if he would expose this mess, and actually deal with the problem rather than papering it over.  

      Conversely, the fact that he's been in office, and hasn't done much about it yet, suggests that if he were to go after AIG, et al, it would be just another toothless side-show, which would actually only hurt him in the long-run.  

      I just have a hard time with his credibility in this area.  HAMP has been an abject failure, even by his own standards, and the White House has been trumpeting it as a success, because it's helped the banks, not the homeowners.

      We are the first to look up and know, with absolute certainty, that the sword we ourselves have forged, is real.

      by Jbearlaw on Thu Nov 18, 2010 at 11:47:50 AM PST

      [ Parent ]

  •  I know that this is a wierd question, (1+ / 0-)
    Recommended by:
    Jbearlaw

    but if one has nearly paid off the loan, what would prevent the homeowner from using this process to regain interest accrued, dumping the house and buying another one outright? By the time one gets to making real inroads on principal, one has paid vastly more in interest.

    Doesn't this set up a rather perverse incentive for those who want to get out from underwater in their housing situation?

    •  It can only be done if the loan was fraudulent (1+ / 0-)
      Recommended by:
      nippersdad

      to start with.  So, I guess in some sense, yes, it could happen, but the whole point is that the banks make enormous amounts of money on the mortgage market, and all that the law requires is that they disclose properly.  If they don't protect themselves, that's their problem.  Unless they all quit protecting themselves, then it's everybody's problem.  

      We are the first to look up and know, with absolute certainty, that the sword we ourselves have forged, is real.

      by Jbearlaw on Thu Nov 18, 2010 at 12:00:01 PM PST

      [ Parent ]

      •  I have been seeing a lot of stuff on (1+ / 0-)
        Recommended by:
        Jbearlaw

        a "where's the note" movement in which people who are not in financial difficulties, as yet, demand to see who own's the note on their home. Your diary just reminded me of it and I wondered if they were connected in some way. Should banks be unable to come up with the goods, this just seemed like an alternative that I had yet to hear about.

        Just trying to connect the dots on an issue that is far more complex than I had ever imagined. Thanks! This was very illuminating.

        •  MERS and recording of Deeds (3+ / 0-)
          Recommended by:
          lotlizard, nippersdad, Actbriniel

          Is another piece of the puzzle.  Every state has laws regarding the recordation of the lien against the property, typically a "Deed of Trust" which gives the lienholder the right to foreclose in the event of default.  Problem is, whenever you convey the Deed, you have to re-record it, and there's usually a state/county fee charged each time.  Banks didn't want to pay those fees, so they invented the MERS, a computerized system to take the place of recording, so they could slice and dice the mortgages into securities quicker.  So, the banks would "convey" the mortgage to MERS, which would then create the security, giving multiple investors an "interest" in the property, and of course, those securities were re-sold, re-packaged, etc.  Bank of America may have been your original lender, but they don't really have the right to the mortgage anymore, because they sold it, but the subsequent purchasers may very well not have ever recorded any further deeds, and the actual title to the property may be indeterminable because of the way the note was sold, re-packaged, re-sold, etc.  

          We are the first to look up and know, with absolute certainty, that the sword we ourselves have forged, is real.

          by Jbearlaw on Thu Nov 18, 2010 at 12:16:57 PM PST

          [ Parent ]

          •  Meaning, (1+ / 0-)
            Recommended by:
            nippersdad

            When you go into Court to foreclose, you have to demonstrate that you have the right to foreclose, i.e., that you are the legal holder of the Deed.  How do you prove that you are the legal holder of the Deed? Provide the note.  

            But in their rush to re-package and re-sell, many, many notes have been "lost" or not conveyed along with the security, making determining who actually "owns" the mortgage impossible to determine.  In which case, nobody has the right to foreclose on the loan, and you can keep your home.  Hence, "show me the note."

            We are the first to look up and know, with absolute certainty, that the sword we ourselves have forged, is real.

            by Jbearlaw on Thu Nov 18, 2010 at 12:19:43 PM PST

            [ Parent ]

            •  ...and all of the subsequent moves in Congress (1+ / 0-)
              Recommended by:
              Jbearlaw

              to legalize what MERS has done ex post facto, right? Maybe this is a sign of a criminal mind, but this really looks like a good deal for those underwater in their mortgages who have nearly paid off the note. For those who were never particularly personally invested in the property itself, those who have always just viewed it as shelter, this sounds like a gold mine with a limited window of opportunity.

              They would essentially reap the profit that they can no longer get due to market depreciation! Rent for a few years and then make a killing when the bottom falls out.

              (Nota bene: I can't do this because my note with BoA has never been securitized to my knowledge. This is just an intellectual exercise for me.)

              •  How can you be underwater and have paid off? (3+ / 0-)
                Recommended by:
                lotlizard, nippersdad, Actbriniel

                If you've nearly paid off the note, your bound to have substantial equity, and hence not be "underwater."  And most of this fraudulent lending has occurred within the last 6-8 years, which means most of the borrowers haven't had anywhere near enough time to pay down the notes to any substantial degree.  

                We are the first to look up and know, with absolute certainty, that the sword we ourselves have forged, is real.

                by Jbearlaw on Thu Nov 18, 2010 at 12:35:33 PM PST

                [ Parent ]

                •  I guess I put that badly. (1+ / 0-)
                  Recommended by:
                  Jbearlaw

                  What I was suggesting was that people who have been paying on a note for, say, $300,000 for twenty five years have paid a substantial amount of interest to date. The property, however, is no longer worth the three hundred thousand dollars you have nearly paid off. So, if one is willing to lose the three hundred thousand in order to get the million....

                  See what I mean? There is a reason why I am not in this business. :)

                  •  I am just remembering when I was looking for (1+ / 0-)
                    Recommended by:
                    Jbearlaw

                    a house twenty years ago and one couldn't touch anything in the intown Atlanta market (that you would care to live in) for less than 150 at high interest. We more than halved that by moving into the exurbs. Now we are looking intown and seeing those same properties going for firesale prices that we would have jumped at twenty years ago.

                    I'm thinking that I would be pretty pissed right about now had we paid what they were asking then, and wondering what those who did are thinking about right now.

                    •  well, twenty years ago . . . (2+ / 0-)
                      Recommended by:
                      nippersdad, Actbriniel

                      They weren't bundling mortgages into securities, and re-selling and re-packaging them. People who bought back then probably didn't have any problems with the documentation, because banks were a lot more diligent when they knew they were going to be holding the note until it was paid off.  Once they could turn it into a hot potato, they only cared about getting enough documentation to be able to pass it off on to someone else.

                      We are the first to look up and know, with absolute certainty, that the sword we ourselves have forged, is real.

                      by Jbearlaw on Thu Nov 18, 2010 at 01:01:34 PM PST

                      [ Parent ]

        •  Perhaps a visual will help. (1+ / 0-)
          Recommended by:
          nippersdad

          CHART

          We are the first to look up and know, with absolute certainty, that the sword we ourselves have forged, is real.

          by Jbearlaw on Thu Nov 18, 2010 at 12:45:08 PM PST

          [ Parent ]

  •  Please define "fraudulent loan". (1+ / 0-)
    Recommended by:
    Jbearlaw

    You use the term throughout the body of this diary but no one else does.

    (and I don't mean an illegal robo-foreclosure)

    "The way to see by faith is to shut the eye of reason." - Thomas Paine

    by shrike on Thu Nov 18, 2010 at 12:34:55 PM PST

    •  Perhaps not the best term, but . . . (1+ / 0-)
      Recommended by:
      shrike

      I would define it the way the TILA defines it, as a loan made without the proper disclosures.  The hallmark of fraud, from a legal standpoint, is the willful withholding of information pertinent to the transaction, with the intent that the counter-party will enter the transaction without knowing what all they are really getting into.  TILA codified the failure to properly disclose as ipso facto fraud, subjecting the bank to the extended right of rescission.  

      We are the first to look up and know, with absolute certainty, that the sword we ourselves have forged, is real.

      by Jbearlaw on Thu Nov 18, 2010 at 12:40:37 PM PST

      [ Parent ]

      •  I agree with you. (1+ / 0-)
        Recommended by:
        Jbearlaw

        I know predatory loans existed although that is not a legal term.

        "Fraud" is.  I suspect the reason this issue is going nowhere is the banks and originators covered their asses with fine print disclosing "fees, costs, and interest rate changes".

        So it went something like this - "Hey Borrower, you can save $450 a month for three years if you go with this Option ARM!  Then refi in 2009!  Doesn't that sound great?".

        Then Borrower is screwed and originator collects fat fees.

        Fraud?  Very tough call.

        "The way to see by faith is to shut the eye of reason." - Thomas Paine

        by shrike on Thu Nov 18, 2010 at 12:49:35 PM PST

        [ Parent ]

        •  It is going somewhere. (0+ / 0-)

          That's why they are desparately trying to retroactively change the documentation requirements, why courts are throwing out cases based on "fraud upon the court" (because of robo-signers and false affidavits), and that threatens to undermine the whole image that "all is well."  That's why they want to change this rule, too.  They're getting eaten from both ends.  They're losing a significant number of cases in court, which means they're losing money on the improperly documented loan, and then they're getting sued by the investors who bought securities based on the improperly documented loan.  They're caught between a rock and a hard place of their own creation, and their trying to pass the losses on to their customers and the taxpayers.  

          We are the first to look up and know, with absolute certainty, that the sword we ourselves have forged, is real.

          by Jbearlaw on Thu Nov 18, 2010 at 12:57:55 PM PST

          [ Parent ]

  •  How is it that (1+ / 0-)
    Recommended by:
    Jbearlaw

    congressional legislation can be changed after the fact by an administrative body (i.e. the Fed)?  What am I missing here?

    Scientific Materialism debunked here

    by wilderness voice on Thu Nov 18, 2010 at 02:40:00 PM PST

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