During the early part of the housing boom I was living in a rowhouse in Philadelphia. Whenever I would venture into the suburbs, I would marvel at all the McMansions cropping up everywhere. Who were the people buying these monstrosities that cost more than a half a million dollars and what were they doing for a living? How could they afford the mortgages, let alone the heating bills? There couldn’t possibly be this many millionaires. I kept asking what was going on. I actually got to the point that I felt like a broken record and had to force myself to stifle my urge to talk about it. Well, it turns out that the whole mortgage industry had gone funky. People didn’t have to prove their income. Weird mortgages were created with balloon payments, allowing people to live in mansions for a few years and then just flip the property for a nice profit. It was every bit the mirage I thought it must be.
And the thing is, the whole thing was so criminal from top to bottom that it kind of defies accountability. Loan originators, assessors, underwriters, rating agencies, investment bankers, mortgage servicers, all engaged in knowing fraud. Some of it was technically legal, but shouldn’t have been legal. But a huge proportion of it was illegal. So many people belong in jail that we’d have to build dozens of prisons to house them.
It’s just astonishing how quickly the ethos of the Bush Crime Family infected this country. And now we’re infected with Palin Syndrome before we could even recover from our last malady.
you know, even though i’m current with my mortgage, maybe I’ll see if GMAC can show me the note.
because if indeed it is true that “Technically, there are millions of people who have the right to keep their home without paying for it because the real owners didn’t follow the law”, and if it’s also true that the banksters and the mortgage industry has been breaking the law without consequences (and they may never face a consequence), I honestly don’t see what playing by the rules is getting me, other than a monthly payment to a company that doesn’t have the right to it anymore.
I’ll tell you what: i could use that extra money. i could put it toward my even more expensive student loan.
Hmmmmm….
Someone is trying to discourage you. He’s a business editor, naturally.
As a strategy, this might be as risky as the “Sovereign Individual” movement.
What would be a good idea is to determine who actually holds your mortgage and if they have the correct documentation.
The more that individuals who are current with their payments can reduce the uncertainty of the mortgage holders, the easier it will be to deal with this issue.
Otherwise, the political pressure on Congress to do on this what they did to the bankruptcy law in 2005 will be overwhelming. And those guys have the bucks to buy Congress.
And coupled with the top-to-bottom rot of the system is many borrowers’ seemingly insatiable willingness to take on obscene amounts of debt. There is no/little thought given to having something on hand for leaner times. Hopefully we’ve seen the last of living on the edge of financial sustainability.
It had become clear by then that the way to succeed in America was precisely to live on money you don’t have. The banks and the rest of the corporate class set the example. It’s not mysterious that the “rest of us” would try to emulate the “smart money”. It wasn’t living on the edge of financial sustainability, it was being a “go-getter” in true American style.
There’s difference between what individuals were doing and what banks were doing. Individuals who live beyond their means eventually have to pay up or go bankrupt. So do most businesses. And financial gurus for half a century have been pushing real estate as everyman’s way to wealth.
For a lot of individuals, rotating debt was the only way to substitute for flat incomes and rising costs. Folks used inflated equity to buy an more expensive home and then used inflated equity from that to buy an even more expensive home, which keeping close to the same monthly payments — even if they had to risk an ARM, they tried to sell before it ballooned.
But the banks were in fact creating non-sovereign dollars (or currency equivalents) through a system of hedging that cross international boundaries and was beyond any single nation’s laws. And they were feeding it with bundles of good and bad mortgages mixed together to “blend” the risks of the entire package. And then they lied about the resulting risk. It was not bankruptcy, it was a bubble. The non-sovereign money quickly became worthless, but it was recognized as assets on the books. There was no way to remove it from the books without it turning into real sovereign money. Of course that was the whole idea. Turning it into real money and paying it out to shareholders and as bonuses to employees, leaving a little on the balance sheets to log a nice profit margin for the market to buck up the shares.
The difference is that the executives of the banks cashed out their bubble money free and clear. And left the bubble money for the greater fool.
Still waiting for someone other than Alan Greenspan to man up and say, “Yeah … all of my assumptions were wrong.” I’m looking at you, every B-School dean in the country.
With the Bush people followed by the Palin people, the United States is well on the way to becoming a third rate nation economically and financially. Collective stupidity has always been a disastrous policy.
I’ve been yapping about the same question for years, too, Boo. We’d drive down along Chicago’s lakefront and there would be these giant new or rehabbed condo buildings with big signs — Luxury lakeside living starting at $1.5/2/3/5 million. What woodwork did all these people crawl out of, we kept asking each other. Even most docs and lawyers couldn’t afford this stuff, yet there seemed to be thousands of them. And that was just in the city.
But the ethos was always here — it was called the American Dream as it evolved from having a home of your own to getting insanely rich doing nothing productive, like Bushes, Trump, Kochs, Scaife, etc etc etc. It’s been common wisdom probably long before Charlie Chaplain that if you steal a loaf of bread you’re risking everything. If you steal a few million bucks you get to be in Congress. The Bush/Palin maladies are only the boils resulting from a fever that probably came over on the Mayflower.
yes, “getting insanely rich doing absolutely nothing”. right now I’m researching the ranchers who raise grass fed beef. Their pioneer stated “grass fed beef (manegement intenstive farming) requires more work. So, work is bad?” how did we shift from a can=do natio to a “mark of success is doing nothing” nation”?
Boo:
What’s funny is that I was telling myself the same thing. So you weren’t the only one in the area saying the same thing. I think the Philly burbs haven’t crashed(as compared to a place like Florida or Nevada) is all the drug companies located here. I don’t know how you afford it here. I know I can’t. And rent is pretty damn expensive, too.
North Carolina’s real estate markets have not crashed as much as NV, CA, and FL, because they did not have the bubble mentality. And because folks who sold in NV, CA, and FL were able to buy housing in NC, pay it completely off, and bank the difference just from their equity.
But we have experience high unemployment and a state budget crisis. And there have been foreclosures here and there.
The inability of providing accountability on homeowners’ and borrowers’ documentation is a mess, largely as a consequence of MERS, but the securitised trusts which ‘own’ them are deficiently processed as well. Some technical background here.
It’s good to see the SEIU taking the initiative with this tool on behalf of homeowners here, whom are potentially at risk of ambiguity regarding their financing and title-holding.
But the underlying story raises questions of the very standing of MERS as note-holder for sixty-million mortgages and the validity of $1.34 trillion worth of now toxic Mortgage-Backed Securities. There are suggestions that the banks may face liabilities for a significant fraction of that amount from investors who might be entitled to sue for the original value. That’s a very different story which potentially raises issues impacting the fragile financial health of the whole nation. TARP II is not an option.
I couldn’t understand the Tech Bubble either — couldn’t see how people were able to sell a few cyperspace keystrokes for hundreds of thousands of dollars, as though there was an actual business there.
In the end, it just goes to prove that people like us, who ask “where’s the beef?”, are always going to talk ourselves out of making a million dollars in the next impossible bubble.
A few years ago, a young friend of my son said, put every penny you have into gold. Back then it was about $600 an ounce, which seemed too high to me. So we cleverly kept our retirement funds in the stock market….