I am a real estate broker, and as you can guess from my handle, in the (truly) great state of Texas. I watched this whole mortgage house of cards get built and I've watched it come crashing down. Here we didn't get the skyrocketing prices experienced in CA, NV, FL, NY, AZ, et al. Instead, we got sprawl. And a lot of people who should not have been able to buy houses were able to buy houses, and it made the village idiot George W. Bush very very happy.
You know who else it made happy? Everyone collecting fees who were invited to the party, from mortgage lenders to home builders (to build a home here was to print money). That "giant sucking sound"? That was from Wall Street as it sucked up every and any mortgage that any mortgage broker or bank could originate, as the Wall Street banks stuffed these "bundles" of mortgages into their balance sheets, knowing full well that the risk of default was driven by a systemic problem: an economic downturn, which was inevitable at some point. In this I am positive that Wall Street knew damn well what they were doing with these exotic debt instruments and derivatives. They were loading every mortgage they could onto their books in a bid to become "too big to fail." It's not a conspiracy theory, it's Occam's Razor.
Now I have several clients -- prime buyers, responsible people, not living in their first home -- being harassed by Bank of America (servicer of Freddie/Fannie loans) and others as BOA et al try to compound their client's financial problems and lure them into foreclosure. Here's why...
Remember the OTHER side of the Wall Street crash, not just the toxic mortgages, but the "Collateralized Debt Obligations" and "Mortgage Backed Securities" and "Credit Default Swaps" that were derived from the toxic mortgages and really applied to ALL mortgages? The CDS's were especially pernicious -- this was black market insurance by any other name, a gambling ring with no bookie, exempt from all regulation made legal by a Republican congress (and Clinton administration) in 1998 with the repeal of Glass-Steagall, and then again in 2000 with the Commodities Futures Modernization Act, and of course fully implemented for 8 years with no oversight by Alan "House Prices Have Never Declined Before So We Didn't Think They Ever Would" Greenspan and the Bush administration. This is a mad-made disaster.
Bottom line: the banks that were busy loading mortgages -- toxic AND NOT TOXIC -- onto their books had become effectively hedge funds, usually reserved for only the most wealthy of clients and also exempt from regulation. How? Banks "hedged" their risk of foreclosure not only by packaging mortgages and securitizing them, but by buying insurance policies on mortgages without even telling the homeowner. And therein lies the rub.
So now banks had every incentive to get their borrowers into trouble, most especially by getting them behind on their loans with screwed up escrow accounts, then jacking with their payments to 80% or 100% more than what they were to cover the escrow shenanigans, then jacking borrowers around who want to work with the lender in good faith... all the while the bank WANTS TO FORECLOSE because their insurance policies will pay them out on foreclosures. Or they feed client like mine total b**lshit about their houses being worth 50% more than it's truly worth and so they tell them a) sell their house for enough to pay off the loan AND FEES AND ESCROW DEFICITS (impossible) and tap any and all savings, or b) let the bank foreclose.
Either way, the bank is getting paid back.
What's sick is that unlike in the subprime debacle, the banks are having to work now at getting people into default. They're preying on their PRIME borrowers by jacking with their accounts and racking up fees, then stringing them along with their "workout" departments for months on end while the problems and distress compounds for the borrower. My clients tell the same story -- on the phone for literally hours at a time, being transferred from department to department and ending up back at the same department and nobody on the phone knows anything about the entire situation, and nobody is paid to help them.
Here's an example of just how perverted this is. Banks are telling homeowners -- and legitimate brokers like me who know the damn area cold -- what the market value of their homes are. BUT they are doing this with non-licensed appraisers, and instead using brokers who've made a deal with the devil in exchange for providing the bank with a spiked appraisal precisely so that the bank can tell the homeowner that their house is worth more than would be required to sell and pay off the loan, the escrow deficits (that the banks helped cause), and the fees that are racked up. I've regularly seen banks (BOA, I'm talking to you), use this tactic to inflate people's true market value by 50% or more.
Mind you, lenders required licensed appraisals to get into the loan, but they're using shills to spike the loan. I'm seeing it happen to responsible people, families, in their 30's through their 60's. These people have savings for their kids' futures and savings for their retirement. And the banks are literally telling them all on the phone that they, the borrowers, caused the problem and have a responsibility to pay off the loan, further appealing to the social stigma of being in financial distress.
And many many thousands of Americans are going through the exact same situation, and they suffer in silence, months on end on the phone trying to work with a bank that does not want to work with them, but the bank won't just come out and say it (why ruin a good 9 months of racking up more deficits and fees and compounding the borrower's problems thereby making foreclosure more likely).
In the end, the bank doesn't care. Because a) the borrower will find a way to sell the house and tap savings to pay off the loan, the escrow fraud, and the fees, or b) the bank will turn to AIG et al for a payout on the mortgage insurance policy the bank holds on its own loan. Banks have nothing to lose.
So where's Chris Dodd? Where is the Democratic majority on this? Where is The White House on this? Don't talk about "Obama's Making Homes Affordable" plan as my clients tell it (these are centrist or progressive people, no tea baggers). It's turned into another run-around that nobody qualifies for or that makes no difference for these people. Calling Elizabeth Warren!! Clean up in aisle America!!
And FYI, I am talking about homes that were purchased a few years ago on average for $200,000 - $400,000, with down payments and excellent credit.
THIS is why the country is disillusioned and angry. Then health care on top of that? Yeah, I checked the mail yesterday and my Aetna junk insurance premium has gone up 10% again.
And the State of New York sent me a 2-page letter claiming, with no evidence attached, that I owe them $1,000 from when I worked there at the age of 23 and my employers did all my withholdings and I filed my taxes by phone they were so easy. Not ONCE in 10 YEARS has the state notified me they thought there was a problem. But now they're threatening my credit over something I have no idea even what it is. So instead of further defending my small business today from this awful market that originated in the State of New York on Wall Street, I also have to spend time trying to figure out what to do about $1,000 tax bill from 10 years ago being alleged by the State of New York.
Attorney General Cuomo! Really? Patterson, suck it! Why don't you go after the criminals on Wall Street to get your g*ddamn money.
It's 4:30am in TX. I've been up an hour, unable to sleep. This shit just doesn't end. And congress sure as hell isn't working for me. We all know who owns the joint. Will Obama stand up? It's not just jobs, folks, it's everyone getting screwed in their daily lives, too. To lose one's job or have it in jeopardy is one phenomenon, but then to get screwed day in and day out by everyone with an ounce of power to do it... that's adding injury to injury. And the Democrats need to wake up to it. This shit has to end.