Tuesday, April 13, 2010

Banks have made every excuse not to help borrowers stay in their home

Four major banks have made every excuse not to help borrowers stay in their home, but this excuse will make your day.

First we need to understand the real problem!

Beginning around 2003 every bank began to make creative loans. Loans that they knew would never be repaid. They created ARM and option ARM loans, no doc loans and like the military, don’t ask and don’t tell loans, these were also no qualifying loans, stated loans, and if you were breathing you got a loan.

In fact one potential borrower actually had a heart attack while signing his mortgage papers, and the first question from the borrower when they were advised of the incident, “did he sign the loan docs”

In short it didn’t matter whether the borrower was even alive as long as the docs were signed the deal would be funded.

Washington Mutual even loaned money to an unlawful immigrant making $900.00 a month, he was financed for a $616,000 mortgage in southern California

But even better, New Century Mortgage actually loaned several million to a prison inmate in Colorado based on a no qualifying loan

All of these loans were sold up line to companies like JP Morgan, Citigroup, and Deutsch Bank. The loans were then securitized as mortgage backed securities and packaged into trusts where they were sold to anxious investors. However, since all these banks knew the loans were in reality NO good they opted to take out insurance. These policies came in two different formats, one was a derivative now known as a Credit Default Swap, the other was a standard form of default insurance.

Most borrowers were placed in ARM type of loans, ARM is an acronym for Adjustable Rate Mortgage.

By 2007 when these rates began to adjust upward, borrowers began a systematic default. That was when the banks began their ferocious bout of foreclosures.

Between 2007 and 2010 we can only speculate on the number of properties the banks have taken back. Why, because sufficient information to make a tally is being withheld. However we can approximate that number to have been realistically more than 7million. We do know that currently 7.9 million homes are seriously behind with their payments. And from information released recently another 15 million are right behind this group.

Ok now you have the picture.

The banks created the problem, and just about every bank was on the verge of collapse, they borrowed from the FED and they borrowed from us, the US taxpayer to stay afloat.

The Federal government came to the banks rescue, providing $787bn in funds, to bail out the entire financial community and the Federal Government failed to attach, as they usually do, any strings to these funds.

Who is suffering? All of America!

The banks used their own appraisers to establish the then current home Value, those appraisals were inflated because the banks wanted to loan as much as they could, the more they loaned the more they made.

The true value of the property was obscured by the appraisal, and without doubt most all properties were at least 30% to 40% over appraised.

As borrowers sought help from the banks, they found themselves speaking to deaf ears. No one was listening, and no one at the banks even cared, instead the Banks, began a systemic liquidation of the property through the foreclosure process. In short, the banks foreclosed on so many homes in such a short time that they actually ran down the values of these properties below their norm.

All the borrowers were asking for was some help and some decency and integrity, they found none. Instead borrowers were foreclosed, many were then sued for a deficiency and if there was a second mortgage, which there was in most cases, they sued for breach of contract. These punitive acts on the part of the banks forced hundreds of thousands of borrowers into bankruptcy, currently there are some 6,000 filings a day.

Now we understand what happened, we understand who created this financial disaster, and we would expect that after bailing out the major banks, that\ they would reciprocate. But alas, that is not their agenda.

Obama has come up with several plans, yet none have been a success. The banks don’t want to keep borrowers in their homes, they want those homes. Apparently it is more profitable for the bank to foreclose than to help the borrower. Evidence of this has become apparent when we look at the FDIC sales agreement with these banks that are now deemed “too big to fail”

Now for the part that you have been waiting for!

JP Morgan, Citibank, Wells Fargo and Bank of America feel that to reduce the mortgage amount on home loans for borrowers currently behind, or in fact to offer any help to borrowers, is not in the best interest of those who are making their payments. Consumers they say, who are paying their mortgages on time, are likely to see such reductions as unfair. In short, these illustrious banks would continue to take the homes away from the very people they defrauded. And they will continue to come up with excuse after excuse for not offering any real help. That is unless forced to help, and sadly the likelihood of that in this administration is a far fetched illusion.