What is at the core of residential Foreclosure Defense in 2011?

A person’s shelter is connected to his core, its necessity for survival can be compared to the need to eat or sleep.  It represents a sense of security and independence in a world filled with challenges and danger.  Shelter is what is under attack when the bank is trying to foreclose on your primary residence. The good news is that the massive banking institutions that are paying big bucks to law firms to foreclose on the American homeowner are rotten to the core with ethical, legal, and often criminal taint.   

A very reasonable argument could be made that the massive securitization fraud run by the upper echelons of the banking institutions artificially inflated and then crashed the real estate markets, and the American economy with it. The securitization system allowed for the creation of easy money by offering debt without limit.  Everybody could get a mortgage, and even if you have no income, no problem!  It was a free for all, that brought with it massive greed, fraud, and criminal activity.  Often in that order.  Once the mortgages are signed, the banks now become the owners of the promissory note- which to them is just as good as cash. 

With millions of promissory notes created by the American peoples’ sweat and brow, commercial and investment banks created fancy securitization and financing products that allowed them to sell the aggregated promissory notes for exponentially greater values then on their face.  Thanks to convenient accommodations from the insurance companies (i.e. AIG) insuring these transactions and investment ratings agencies grading them AAA.

Because of the billions of dollars in sales being generated from the sale of these mortgage backed securities, word was put out on the street that they need as many of these mortgages as possible, and artificially created money flooded the system.  This was indeed aided by government laws, regulations and de-regulation going back to Clinton with the HUD, FANNIE and FREDDIE- which in time created spreadsheets filled with “exotic loans.”   Of course the only thing fancy about these loans was how fraudulent they were.

For example, homebuyers’ Earnest and Joy needed a 400k mortgage to buy a modest home. Since they were making 60k per year would have to pay ~$2,400 monthly in principle and interest (at 6%). When we compare that to Obama’s HAMP program, quite glaring in classic self-destructive form, fraud once again shoots itself in the foot. HAMP says that such an individual, under the Making Home Affordable should pay a monthly PITIA payment (principle+interest+insurance+taxes) of close to $1,500, which is what our couple budgeted as affordable.  Clearly there is this obstacle between Joy’s goal of owning this home:  however, the broker from SCAMS Mortgages saves the day.  He tells them about an exotic mortgage where they only pay $1,500 per month for five years.  They jump on it, Earnest is confident he will increase his salary, and Joy also has good prospects.

After five years of struggling to make payments, poor Earnest and Joy started defaulting because they could not afford $2,400. Especially since Joy is now living off of unemployment and Earnest’s company halted all raises and bonuses.  After 60 months of paying $1,500 interest only payments ($90,000 total), the bank files for foreclosure on them and they face the risk of losing their shelter, their down payment and all the improvements they made. The fanciness of the mortgage they signed induced them to give away equity in their property under the false pretense of stability, though temporary.

The only business model that would sanction such mortgage instruments is one that wants to collect as much money as possible from homeowners’ and then take their properties from them and sell them for full value. I would venture to say that this model may possibly be the main reason such mortgage fanciness ran rancid.  Throw in all the major players like Lehman Brothers, Bear Stearns, Washington Mutual, Merrill Lynch, IndyMac Bank, Countrywide, AIG, Fannee Mae, Freddie Mac, MERS, and on and on.  Add also the victors, Chase Bank, Citibank, Bank of America, Wells Fargo, and others.  As if things didn’t start rotting yet, give these foreclosures to lawyers to serve their interest by serving people with papers and take them to court.  What you get is a mess so bad and so deep that an attorney armed with the laws of this country should wreak a lot of havoc in court.  Foreclosure defense with these types of loans in its simplest form is letting the superwealthy crooks know that you know what skeletons they have in their closets.

By: Alexander Levkovich, Esq.