The crime is not really the foreclosure procedure

[SoCalDem]

It's document/lender/realtor fraud

Case in point:

A friend of our son got a brand new house for him and his wife. He had only been on his job for less than a year. They had NO savings, no down payment.

His wife was still on maternity leave, and had no income.

They were tired of living in a small 2-bedroom apartment, so they went looking for a house.

He made about $12 a hour with some occasional overtime.

They found a "deal" on a new house with a loan that was variable rate/interest only and they jumped at it. They "paid" only a little more than they had paid for rent and had a garage, a yard and a lot more room. His & her parents continued to supplement their incomes from time to time, and of course when the loan "re-set", they could not pay the cost so they ended up being foreclosed on.

Two years later they are still living with the in-laws and are finally saving because the parents are setting aside their "rent" for the time when they can start over.

They "played" house in a home they never should have been qualified for in the first place, and they "knew" it all a long. No crime was committed against them, but the cumulative crimes of the above-named entities have trashed the values of every home-buyer in every neighborhood where all these fraudulent home-sales happened.

That's the crime.

[JuniperLea]

1. Predatory lending is a crime...

I don't blame the people for wanting a better life. I bet they thought things would be different by the time the loan readjusted... the wife would be working, the husband making more money.

I don't blame the people... they were caught up in a predator's snare.

[PassingFair]

2. For people whose credit was already trashed, this was a win/win decision.

The house payments were less than rent,
they could live in the house without
PAYING the mortgage payments for 2 years,
setting the money aside. Then they could
take the money they saved and buy a house
outright with the money that they saved.

That's not counting any Home Equity loan
they were able to layer on top of the mortgage.

Even when the whole house of cards came down,
they were WAY ahead.

I feel sorry for the people who had good credit
going into the situation, like the young people
you describe, but I feel EVEN WORSE for those
that put down a sizable down payment, and have
lost their equity.

[dkf]

3. But the bank should have forgiven the loan and given them the house free and clear

And because they didn't the bankers deserve to be put in jail.

[alcibiades_mystery]

4. We can hardly call people who lend out to anybody "bankers"

I understand your sarcasm here, but the practices of these "bankers" are hardly worth a professional title. Traditionally, a banker evaluates a loan opportunity, measuring it against risks, working with borrowers, and performing similar professional tasks. These "bankers" just handed out loans to everybody, since they had already established a system that made their own professional tasks (weighing risk, especially) unimportant. So, they have the title, but not the set of professional tasks and requisite knowledge that goes with the title. All that's solid melts into air....

[FarCenter]

7. In southern CA, a mortgage of this sort was most likely not from a bank

Possibly it was from a thrift, but more likely from a mortgage lending company. There's a fair chance it was arranged by the realtor selling the house, or by someone intimately connected with the realtor or the realtors company.

There was probably no lawyer or financial advisor or anyone else paid by the buyer for impartial advice.

All the parties arranging this were being paid commissions and origination fees by the seller or by the mortgage lending company, who would not have held the mortgage on their books.

[alcibiades_mystery]

13. That's certainly true

But just nudge the practice up the line a bit and you find another level of supposed "banker" similarly shirking what would be a set of required professional tasks. Clearly, the low level lending got farmed out, since it no longer required the least bit of knowledge, operating purely as a sales operation.

[CJCRANE]

5. One of the problems is that the taxpayers paid the bill instead

and the bankers carried on as though nothing had happened.

I don't agree with rewarding catastrophic failure. The bankers should take the fall for their bad business decisions. That's how capitalism is supposed to work.

[Norrin Radd]

8. +1

[Pigheaded]

20. This is THE TRUTH

Why should my tax dollars support their bad loans.

PH

[SoCalDem]

15. That was hardly my point

They lost the house they never should have had..moot point

the "crime" started when a realtor showed them houses they were in NO way ready to buy
and then another crime when some mortgage company actually provided a mortgage to them

At every point on the process "someone" put money into their pocket..ill-deserved money

The young people who packed up their stuff and moved home had their credit trashed (deservedly so), and now are living with Mom & Dad, so they are not homeless, but they actually lost the least in the process.. they had no "skin in the game" to start with.

The people who lived in their development saw their homes' values plummet as eyt another foreclosure popped up

The loaners could have/should have stopped these loans from ever happening.

No one proposes that people get "free houses" for having been "done wrong".

[dkf]

18. I'm being sarcastic.

To me most people are in trouble because they overbought and yes they were probably being egged on by people who made money off them.

If something happened to their income then they get a pass, but overbuying is overbuying with your friend's son being one example.

[alcibiades_mystery]

22. There's no doubt people overbought

But overbuying was not merely a matter of being "egged on." It was a massive breakdown in responsibility at the lending level as well. Since blocks on overbuying were traditionally halted by responsible lending practices, which were themselves incentivized by the fact that irresponsible lending brought risk to the lender, and it is that very system of curtailing risk that was run over by deregulation and completely ludicrous financial vehicles, thinking about the entire system that produced overbuying at such levels seems necessary. The question would be: why wasn't there similar overbuying on a such a scale if it was simply the buyer's issue? Had buyers changed so dramatically since, say, the 1970's? Or was it, rather, a system of regulations, blocks, and enforced responsibilities that was suddenly dropped in favor of a system of freewheeling stupidity, greed, and irresponsibility at all levels (buyers, lenders, financial companies, etc.).

This is, of course, a matter of thinking through complex systems. If all we're about is saying "These people overbought," then by all means proceed.

[Johonny]

19. I agree

There were a lot of people in the game other than the home owner. Usually the person buying the house had the least experience in these type of loans. While I know house flippers that got burned and I don't feel sorry for them, a lot of people were simply people looking to do what was the American way of life. Grow up, move out of house, get married buy a house. So many of them got talked into houses that everyone in the process should have known (did know) they couldn't afford. Yet it still happened. It is why we should have regulations.

[dtexdem]

6. No, there are also plenty of crimes in the foreclosure procedure.

Including foreclosing on properties that were never mortgaged.

[louis-t]

9. I see, now it's the Realtors' fault.

Please explain to me how the Realtor committed fraud? And if your friend closed on the property knowing that the variable rate would go up and that there was no guarantee that there would be financing available at the time the rate changed (they would have had to sign a document at the closing stating that), largely due to the value shrinking, how is it the Realtor's fault? Their credit rating suffered but they had no equity in the home, so they weren't hurt financially. Chances are, they stayed in the home up to a year (depending on the state) without paying a payment. People took those loans based on historical data that showed the value would go up and they would refinance. Yes, there were some shady lenders and Realtors committing fraud, but that was a very small part. Most people were afraid to take a variable rate loan. It was more what was being done with the loans after they were given out, and people getting pay cuts and losing jobs that caused the values to crash. Your friend got qualified because of banks lobbying the government to relax standards for lending and investing because they knew they could make billions doing it. Remember Bush's "ownership society" speech? The lenders, for the most part, were writing legal loans. They were shaky, but they were legal. The fraud comes in when the loans were bundled and sold many times, leaving a confusing paper trail. The investment houses knew these securities were bad, but made a ton of money selling them and taking out insurance policies (credit default swaps) on them. Now comes the robo signers, who signed foreclosure docs where legal ownership of the debt was still unclear. So, your original statement is wrong. Part of the crime IS the foreclosure procedure. Part of the crime IS the way banks were allowed to manipulate the market. Part of the crime IS that investment houses knew what they were doing was risky. Part of the crime IS that the ones most responsible for this mess have been rewarded instead of being punished.

[county worker]

10. I have thought about this for a long time. I came to a conclusion.

At first I faulted the people who bought the house they could not afford. I figured they knew how much they brought home and how much it costs for their life style and how much the house payments would be and could figure whether or not they could afford the payments.

Now I realize three things. First, most people don't have a clue what they spend their money on and how much they spend on it. Second, most of those people use to rely on the loan company to tell them if they could afford the loan payments. There was a formula they used. It was something like your total monthly debt payments divided by your income. If the ratio was a certain amount you could afford the loan. If not you could not afford the loan.

Third during the housing bubble the lender stopped telling you whether you could afford the payments or not. There only interest was to get you a mortgage that they could sell to a bundler. They were not going to service the debt.

So people relied on the old way of doing business which went out the window. The lenders were looking for people like that.

I forgot to add that the buyer expected the house to increase in value each year (or so they were told) and there was the ability to refinance at the higher value using the paper equity as a down payment. Again the average person does not understand the economic cycles.

[onethatcares]

11. I thought about this for a long time to and came to another conclusion

alot of the folks that bought into the bullshit of no money down, intrest only loans were starting out and even if they made 14.50 an hour and some overtime, they thought that one of those mcmansions looked alot better than a one bedroom apartment so they filled out the loan application, got approved and promptly lost their jobs when the shit hit the fan.

Bye-bye house, bye-bye credit rating, bye=bye hopes and dreams.

I don't see many prosecutions for individual home transactions, but I do see some for folks that learned to game the system using friendly realtors, bankers, and mortgage brokers.

The gravy train done run out for the first folks.

[dkf]

12. Doesn't seem anyone lost their job. It was the reset that did the trick.

They didn't understand how the mortgage worked.

[county worker]

14. They could not have gamed the system without the misdeeds of the

realtors, bankers, and mortgage brokers. If things were done the old way they never could have gamed the system.

Those on Wall Street know the mortgages were going to fail. They bet against them through AIG. They even told Congress the bundled loans were junk securities. Yet the credit rating agencies said they were AAA!

Those people you say gamed the system were the beginning of a long chain of profits for everyone but the buyer. There was wealth created with no basis to support it.

You leave out a whole bunch of crooks in your scenario.

[SoCalDem]

16. Yep.. as the cascade started, realtors were desperate to get commissions as fast as they could

the mortgage brokers who popped up like post-rain toadstools were raking in fees as fast as they could with their hot-potato schemes & banks played real life Monopoly with mortgages they sliced & diced & sold off ASAP..

The real loser were people who were long time homeowners/buyers who had conventional loans & saw the values of their homes evaporate like a raindrop on hot asphalt.

[onethatcares]

17. oh yeah, I agree with all that

but the game of making loans, inflating values, bundling those loans and pushing the average person off the debt cliff weren't thought up by the average guy that wanted a piece of the pie.

Doesn't it seem strange to you that the moment the housing bubble broke, jobs disappeared by the mijillions. Not only in construction but in every facet of the economy except for those specialties that a lot of folks don't have.

you can't pay the note if you got no job.

[Pigheaded]

21. Bunk

You are not going to sign a $500,000 and not know what is going on.
A $50K salary won't cut it and everyone who did it knew it.

PH

[Texasgal]

23. Oh bullshit.

This very same thing happened to me.

My husband and I have decent paying jobs and pretty good credit.

We were approached by a money grubbing lender after owing our home for seven years. he told us our payments would go down several hundred a month, we thought we could SAVE some money. We signed up without being completely counseled on the ARM. Yes, it was our mistake for not asking more questions, I agree. We were novices. We had no idea how home loans worked. We trusted the lender.

Two years later we were sacked with an 150% increase on our loan. Could not "refinace" due to the 90% home to loan value.

We sold and got out. We are renting now. We have credit in the 600-700's and will never own again due to tougher home loan restrictions.

Our home was MODEST. 130,000.00. 1500 SQ FT. Not a mansion by any means. We are NOT poor we make well over 50K. We do not rely on any assitance. We pay our bills and our taxes.

It was a CRIME what happened to us. Thank goodness we were able to sell without being KICKED out.

You are truly mistaken. This can happen to anyone.