Tuesday, October 19, 2010

Just Another Brick In The Wall

I have not been a home buyer for many years and will likely never be one again, at least as a borrower.  Furthermore, as an expatriate  I no longer reside in the U.S.  So why should I be so interested in the unfolding drama of "Foreclosure-Gate" and the massive number of fraudulent and defective property titles throughout the country that are being brought to light and are fueling this scandal?  There are two reasons. One is my own negative experience with a real estate loan. The other is a reaction of horror and fascination regarding the unfolding crisis similar to that one experiences when witnessing an imminent train wreck:  It's a terrible thing to behold, but I'm powerless to stop it.  Yet at the same time the crash is inevitable, given the faulty signals and incompetent crew.

I have read several articles about how such exotic financial innovations as securitizations created an incentive for the defective titles and lender-forged or missing documents that led to the scandal.  I had intended to try to analyze the issue further and write a lengthy post about my own conclusions.  But why bother? Many experts—and I am certainly not one myself—have already examined and reported on the matter six ways from Sunday. (For a beautifully concise background on the matter, see "Foreclosure Moratorium:  Cracking Down on Liar Liens".)  Suffice to say that in my opinion  if the financial institution regulations for governing mortgage loans that were in place 30 years ago had been left intact along with strict accounting standards for businesses and if banking safeguards such as  the Glass-Steagall Act not removed, the prospect of homeownership and decent wages  would still  be opportunities available to the middle class (or what's left of it) any and not just for the wealthy few who have hijacked the economy.

During the 1980's when my wife and I bought a home in California, we wound up on the receiving end of the real estate lending irregularities that were a dress rehearsal for the current real estate crash and its attendant deceitful practices, one of which was our being saddled with an adjustable rate mortgage.  At the time the ARM was a fairly new type of loan innovation, and for many borrowers it turned out be a disaster by creating the phenomenon of negative amortization.   This was around the time of the Glendale Savings and Loan collapse and the indictment of Charles Keating--a harbinger for the depredations of deregulation that were to be unleashed on the American public in the following years.

In our case, we were able to refinance our mortgage into a conventional fixed rate loan.  Nevertheless, we were soon under water on our note  as the neighborhood  deteriorated due to the near collapse of property values in our locale.  It took 16 miserable years for their worth to recover such that we could finally sell our home just a little above the break even point. During those years, our mortgage changed hands a couple times. In the course of these transactions, some of our original documents and  payments went missing. (Does that sequence of events sound familiar?)   Fortunately, they were eventually recovered.

Yet for all the grief caused by deregulation, the current real estate bust, the futile bailouts, and the collapse of the economy all of which had their roots in the Reagan years and which came to a head during the Bush Administration, as we approach the mid-term elections, indications are that that the majority of voters want to return the Republicans to power in Congress as well as to some state and local offices.  It's true that the President Obama has blown many opportunities and failed to deliver on most of his stated goals.  But much of this has been the result of Republicans', the party of "No", refusal to co-operate in the attempts at  bipartisanship that Obama has repeatedly extended to the point of self-debasement.  

In other words,  "Foreclosure-Gate" is the result of a warped economic system. that could not have happened without deregulation and the resulting fraudulent real estate transactions especially during the Bush years. And if the Republicans win the mid-terms elections, the voters who make this possible evidently want more of the same which makes them suckers at best and co-conspirators at worst.  In either case, when the next great Republican-generated swindle comes down the pike that once again privatizes the profits and socializes the costs,  they will have no one to blame but themselves.  However, given the way Republican politicians love to dodge taxes and social responsibility, the rest of us will be the ones to pick up the tab for their followers' gullibility.

So back to the defective title / missing document story, if you have a real estate mortgage on your home that was sold by So back to the defective title / missing document story, if you have a real estate mortgage on your home that was sold by the original issuer to another lender who in turn did likewise with your note, I will bet that the more companies that your loan has gone through, the greater the chances are that the current holder can't prove ownership of that mortgage.  So if you are faced with foreclosure or even if you're loan is current , I suggest that you demand proof that the current payee is in fact the legitimate holder in due course of your mortgage and can produce the title and all supporting documents.  If they can't or won't do so, seek legal advice. They may have no business accepting your money and may never had that authority to begin with.