The disapproval of this settlement ranks highest among those in the throws of research and who understand the mathematics (or lack of) bantered about by various news stories.
The real statistics are staggering. Look at a home like a media Household (HH) and the multiplier is 2.8* per HH. This mis-perception of who is a “responsible” homeowner and the idea of only helping those that are “current” with their payments stems from an uneducated, mentally biased thought process … and sometimes becomes ignorant political rhetoric – “ignorant” because the voice behind the curtain doesn’t comprehend the actualities – and is merely trying to garner votes.
These mis-perceptions essentially bury the 7 million homes (effectively 19,600,000 humans) that were on the ground floor when the towers of the economy collapsed – and they incurred the worst injuries. And before you ask is this a comparison to 911 – this financial force majeure is a man-made disaster affecting many millions of Americans across the country with psychological damage, the loss of the homes, personal belongings, savings and security… divorce, and in some cases death (a lot more than has been reported) and is a full blown tragedy of epic proportions that in a lot of ways was/is as much or more destructive than 911 and from which many people many never recover.
People in Piedmont, Missouri and other remote parts of
America may never have seen anything but television coverage of 911 – but they’ve personally witnessed, felt and feared the devastation of foreclosure.
The majority of these ‘ground floor folks’ were not irresponsible or “bought homes that they could not afford.” They were in construction, construction-related, housing, tourism and Fortune 500 employees (Merck, Chrysler, Pratt & Whitney, Yahoo, Xerox, Alcoa and Coca-Cola, etc.) that got laid off, many as a result of bad securities investments of their companies. They bought homes that unknown to them were inflated by fraudulent appraisals and when they lost their jobs (because of the economic collapse caused by the Wall Street bank fraud), hours and wages were cut – they had to reorganize their lives… But the majority of these folks all tell the same story… “I called the bank before I missed a payment and asked for help,” or, “when I heard about HAMP I called the bank and they told me to miss 3-4 payments and then the next thing I know I was in foreclosure…”…and there is the, “I made all the trial payments they asked and on time and at the end they said no modification and foreclosed on me…”
These folks also have a lot of skin in the game. They were manic about their credit and if these ARMs were 2, 3, 5, 7 years – most made their payments until the “option” ran out or until that point the bank could not longer perform or refinance as they had promised when they sold the loans (aka securities). These homeowners have downpayments, huge closing costs, years of on-time monthly payments, taxes, insurance and asset improvements – and in some cases prepayment penalties that they weren’t even advised about – all part of the targeted sales pitch.
Marjorie and her husband both work. They bought their home in Hawaii in 2005 about the time the market hit the peak of a wave that everyone thought would last forever. The appraisal for the home was, unknown to Marjorie, inflated at over $1 million. Marjorie wanted to keep the payments down so she sank the family savings of $319,000 into the home because they considered this a good stable investment. She had closing costs of $17,940. The home had rental property which helped to offset the monthly payment (part of the mortgage broker’s sales pitch).
All went well for over 3 years and then the Wall Street banks’ securities fraud scheme collapsed the economy. By this time Marjorie had faithfully made $149,799 in monthly payments and monitored her credit religiously to make sure it was spotless. But with the collapse she got laid off from her job and so did her tenant and Marjorie called Bank of America before she missed a payment and asked for some help. Of course, at that time Bank of America and every other bank told their customers that they would have to become delinquent before they could apply for HAMP. Marjorie was terribly distraught but given the state of the economy she had no other choice but to miss payments so she could apply for modification. Yes, Marjorie was, of course, denied modification and foreclosure proceeded. This was the HAMP scam.
Marjorie’s original appraisal was inflated. The sales’ price was $897,000. The realistic value is about $600,000. Her mortgage is $595,000. She has $486,739 invested in this home and was the victim of the bank inflated appraisal scheme (almost every investor has sued for the banks for inflated appraisals). And this figure is before taxes, insurance and asset improvements.
To top it off, Marjorie’s loan was sold to a Trust but was never timely assigned – like so many other loans that never made it before the Trust closed, causing the REMICs to fail.
It is highly unfair to snuff-out these ‘ground floor folks’ and use the Big Obama Sweeper or some political rhetoric to ignore and shovel them under the rug – because they need significant help first. The $2000 AG Settlement payment (for only 750,000 homeowners) is an insult since most of these families, like Marjorie, have 100+ times more than that invested in their homes. The psychological damage to these families, and especially the children, is well known by those in the infantry of foreclosure defense.
The only reason we can’t get lawmakers and the general public to recognized this is because no one is taking the time to do the math and the banks sacrificed the borrowers and the mortgage brokers to save their image in the very beginning. “Liars loan” was just the start of the bank CYA campaign. The banks didn’t need documentation – they have MindBox – the keys to the back door of everything about you… so there is no way you could lie to them… they told their sales people just to fill in the blanks and get loans – it was okay for their sales people to lie on the forms – nobody was going to get in trouble. Green light – get signatures.
It is also ridiculous for anyone to hold that negative image against the majority of ground floor victims or the upcoming tsunami of foreclosures promised to follow (another 4-7 million homes – they are not “current” either).
Look at Marjorie – she’s the norm rather than the exception. She was scammed – the bank knew these mortgage appraisals were inflated. Her loan got securitized and never timely transferred to the Trust – all part of what caused the collapse of the economy. At the very least we should be willing to void the defective contracts and mediate the monies paid by both parties. The banks need to take some responsibility for allowing and accepting inflated appraisals, failing to follow contractual agreements and forging paperwork.
We just can’t be willing to bury and ignore the first 7 million households or the 4-7 million households in the pipeline (about 36 million people) who have had their lives turned upside down, had to worry that the Gestapo-squad is going to drag the family out into the street in a raid at dawn, scare the shit out of their kids and throw their life’s belongings into the dump. And that’s just for starters.
Frankly, those “current” folks are nowhere near as damaged – yet. Oh, but they will be and it’s not helping them by giving them an “early option” to adjust just to make the politicians look good… because just like the HAMP guys, when they do get laid off, hours cut back or they retire and maybe their pension isn’t there; and when these “current” early “fixers” can’t make their payments and they need an adjustment – they are going to hear the same thing that the early HAMP guys hear as the economy continues to tank… “I’m sorry, your honor, but we modified their loan 2 years ago and how many times does the court think we should continue to do this?” Foreclosure granted. And that one is not fixable. Buyer Beware. A leopard doesn’t change it’s spots.