There are a few misconceptions in the comments to my last post, so I thought I would clear them up. See, I used to believe that the homeowners were just as much at fault as the banks. Maybe some of them are, but I have come to believe that the majority of them were defrauded by the banks. Let me explain:

I bought a house in the early part of 2007, right at the center of the housing bubble, although I didn’t at the time know it was a bubble. I paid about $250,00 for a house. This was not outrageous, as I was making $85,000 a year at the time. I could easily afford the payments, so I was not being greedy, nor did I have any intent to defraud anyone. Later that year, the bubble burst. Within 2 years, my house was worth less than half of that amount.

At the same time, many other homes in the area saw declining value, meaning that the taxes paid on those homes decreased to the point where the Fire Department began closing stations for the day, rather than pay firefighters to staff them. This caused me to take a 25% cut in pay. I tried to work a deal with the bank, they refused.

Stuck with a depreciating asset and declining wages, I took the only viable option available: I filed bankruptcy. For those who are not familiar with it, Chapter 7 is not some painless process where you get to walk away from debts, no questions asked. There is a means test, where the court investigates your income. Then there are hearings where your creditors, the Trustee, and the Bankruptcy Judge try to liquidate your assets to pay your creditors. The Federally appointed Trustee gets a commission for any assets that he finds, so he is motivated. After all of this, you lose pretty much everything you own. Certainly nor painless.

It was during these hearings that my Original Mortgage holder lied and claimed that they still owned the mortgage and the note. THEY committed fraud, in that they lied IN COURT in order to make money. When I discovered that, I began doing research. I sued them, and they paid me nearly ten grand to drop the case.

Then they tried to foreclose. It turns out that they were not the owners of the note and mortgage. They tried to falsify the papers, and their lawyer was disbarred. He wound up fleeing the country with gobs of stolen cash. The foreclosure was dismissed.

This was all a scheme by the banks to get money using the government and a major fraud scheme. They lied and overvalued houses in order to make loans for FAR more than the homes were worth, to people who couldn’t afford, nor qualify for them. The sold those soon to fail loans to investors, most of whom were pension plans and 401k retirement funds. hundreds of billions of dollars in the form of retirement nest eggs disappeared overnight.

The conservative talking point is that all of this was caused by a requirement for banks to lend to low income recipients. That is false. It was a bipartisan payoff where key members of both parties were paid off to change key laws and help the banks rake in profits.

With all of that, don’t lecture me about moral obligations.

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