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Playing With House Money
Posted By James R. Gorrie On February 14, 2012 @ 5:00 am In Articles,News,The Gorrie Details | No Comments
The experts say that the law will help drive housing prices even lower…
Which is what needs to happen.
But how it happens is important, too.
Unfortunately, but not too surprisingly, this new law goes about it the wrong way.
As noted in various editions of The Gorrie Details, it is housing prices that need to fall before a recovery can begin, because even though housing prices have collapsed by 40%...
Income levels have fallen as well.
And credit standards?
They are still way too tight for most borrowers to qualify.
But is lowering housing prices the main goal of the law?
No, it isn’t.
The natural question then, is, “What is the main goal of the law?”
To answer that, we need simply to see who the law benefits the most.
First and foremost, the Foreclosure Settlement law ends the numerous investigations into the top 5 banks’ roles in the housing crisis.
You know the ones: Citibank, Bank of America, JP Morgan Chase, Well Fargo, and GMAC…
Which were the targets of criminal law suits by several states like California, Nevada, New York, and others…
But the new law gets all of these banks off the hook.
Sure, it cost them $26 billion collectively, but trillions of dollars of bad loans were made by these banks...
And many of the loans they are adjusting or modifying in the settlement have already been written off.
So is the Foreclosure Settlement law a good deal?
It is if you are a bank…
Or their co-conspirators in our government.
Many if not most of the lending guidelines for those bad loans were created by Fannie Mae and Freddie Mac, and supported by our good friends, the democrats, in congress.
The Freddie and Fannie loan agencies dropped lending standards down to zero…
And enriched the CEO’s running them and giving members of Congress below market rates loans.
But hey, the good news is that the Foreclosure Settlement law lets us all get over it…
We don’t have to worry about punishing banks and criminal government sponsored entities like Freddie and Fannie…
And we don’t have to worry ourselves with bad people in congress…
The new law solves all of these problems.
Doesn’t this make you wonder about the law, even in the slightest?
Do you think that this Foreclosure Settlement is really designed to rescue the housing market?
Or is it slamming the door on identifying and punishing those responsible for the crisis?
Just Another Bailout
Another way to look at it is just another bank bailout by the federal government.
Well, it certainly has capped their costs, hasn’t it?
They made hundreds of billions of dollars writing bad loans and over charging borrowers for years…
Made a ton of money selling the loans to Wall Street brokerage arms…
Who then packaged them into mutual funds and sold them back to those very banks’ brokerage clients…
Then, in the crisis, received hundreds of billions more in Federal Reserve bailouts…
And now, collectively, they are on the hook for a mere $26 billion to be paid over time…from reserve funds already in place.
So it’s another example of the complete and utter collusion of the banks with the government.
Unfortunately, it’s the homeowner who gets screwed—again.
Why do I say this?
Due Process Attacked
Because, another by-product of this law is that it speeds up the process for banks to seize homes from borrowers that are way over due on their mortgages.
What does this do?
It gives more power for banks and financial institutions working with the federal government to seize property.
In the supposed interest of helping the housing market recover, the Obama Administration is again running roughshod over the Constitution…
Short cutting the due process for taking the property for some…
And rewarding other delinquent borrowers with modified-that is, lower—mortgages.
This has two other negative aspects to it.
On the one hand, streamlining the process to seize property tramples upon the right to due process…
This is an attack on private property rights.
It’s a case of expediency and getting the crisis gone already...and maybe rewarding your business partners.
The banks get favored, the little guys gets railroaded.
And on the other hand, by giving all kinds of breaks to a delinquent borrower who in many cases, put nothing down on the house, hasn’t paid the mortgage, and now gets a modified loan with reduced principle and payment…
The government is really sticking it to the delinquent borrower’s neighbor who, say, put down 20% on his house and has made the effort to pay his mortgage on time…
The value of his house drops, and of course, the effort and money he has spent to pay for his house has been for naught…
The hard working homeowner is punished, and the delinquent home owner is rewarded.
But what do the borrowers get in the deal?
This will compensate those who were over charged by their bank in the loan process.
And if the damages were much greater, then the borrower must pursue relief through other channels…
And good luck with that…
But what about those millions of Americans who have lost hundreds of thousands of dollars by seeing their home values crater?
They aren’t covered by this law. just screwed by it.
And those are…The Gorrie Details.
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