I read articles about the housing crisis, and the heartbreaking tales of foreclosure with depressing regularity.
Indeed, I am in the middle of a big fight with Bank of America myself. We won the first round and are awaiting the second, but it isn't looking good for the Bank.
Bank of America, in common with many others of that ilk, flatly refused to work with us to modify our loan. The funds are available, as are the guarantees. Like many others we fit the criteria. In just about every aspect we, as a family, are the very poster children for all of the hamphemphump schemes that were devised, yet we apparently can not benefit.
Why?
Lets jump to find out
The answer to that question can be boiled down to a few very simple factors.
The first is that the banks have the foreclosure processes available to them. Without the possibility of foreclosure, the bank would have either to work with homeowners, or suffer a total loss on the loan.
As it currently stands, the banks do not own the underlying asset at all. Those were sold long ago, to whom no one quite knows. The banks do not have standing to foreclose in most actions, yet District Courts are allowing them still to bring foreclosure actions. I rather feel that the District Court Judges feel obliged to do this, because to actually follow the law would cause instant, utter and nationwide panic among the lenders.
So they are re-possessing homes they do not own, mostly un-opposed, and are failing completely to actually use the available facilities to help anyone.
The second reason is that most of the large banks, having sold the assets, act as Mortgage Service Companies for the Pooling Agreement they sold the Note to. These Pooling Agreements are pieces of paper in a filing cabinet in Wells and Fargo, or Deutsche Bank, or somewhere. The actual assets have long been disbursed as securities to governments, pension fund, unit investments ... etc.
So the Pooling Agreements do not have "standing" either. None of these end recipients has any paperwork that would provide a forensic trail back to you home, so no one knows who you owe money to ... no one! And they can't actually find out. If you bank with a small regional bank who doesn't re-sell, then they can walk into their vault and produce your Note. Easy, isn't it?
The Mortgage Service Companies (BoA, etc) make more money from servicing the loan, and vastly more from foreclosing, than they can by keeping homeowners in their property. It is a system that was designed by the banks to inflate bank profits, and allowing modifications to loans hurts the bottom line .... Of course they won't do it, and they will lie and cheat, forge paperwork and perjure themselves in court all to avoid behaving responsibly.
It is really very easy to end this:
Stop foreclosures!
If you do that one thing, there are a number of immediate consequences. First, the housing market would stabilise and property values would level out. Your home would not be blighted by all the foreclosures in the neighborhood.
The banks would bleat like a stuck pig, then get on with working with families to get some revenue. They would absolutely have to make equitable arrangements or face the loss of their income. They would not lose the property because they don't actually own it ... remember, they sold that long ago.
Next up would be a concentration of the minds of bankers around the idea of responsible lending. They have not done this for many years, so we need to be gentle with them. Banks have long forgotten how to lend money, and they need to relearn the skill. Responsible lending does more than reduce the level of default. It also is a big driver towards a stable market because it removes the whole element of speculative lending that caused the housing bubble in the first place.
I know ... What about the deadbeats?? I wish Americans would simply stop describing their fellow citizens like this. There are very few deadbeats. No one really wants to live in poverty. They do not choose that, they find themselves trapped in poverty with little idea how to get out of it, and even less help.
People do not want to lose their homes, nor would they much like having to comply with whatever replaced foreclosure, and there are a great many things that could be put in place to discourage defaulting. However, were the original loans properly made, and the market stable, then it really would be a tiny problem rather than the overwhelming crisis that has been forced upon millions of hard working families.
A crisis borne of greed and power, with profit as the motive and profit that disincentives the banks from helping. Help that is available and they are refusing to use.
What we do about the few who do not pay their loans is another conversation. This Diary aims simply to point out that the banks are working against their mortgagors, and they built that.
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2:33 PM PT: The comments surprised me in the vehemence against all the American Deadbeats!!
I have this to say about that:
What surprises me is how narrow is the view, that everyone will suddenly become a deadbeat, regardless of their current and previous behaviour.
That we would remove the security without considering that it might cause a few problems, and put in place protocols for dealing with that.
If even liberals on this site cannot think beyond the absolute need to protect the banks, then why do we criticize the President for doing the same?