Do Public/Private Partnerships Bail Out Homeowners, or Compensate Criminals?
If a mortgage loan servicing representative were honest when speaking to an alleged borrower seeking mortgage loan assistance, he or she might say this:
“If protecting my company’s best financial self-interest helps you out, fine. If it doesn’t, that’s fine, too. To us, you are a cash cow. You see, we get paid whether you make your payments or not. In fact, we get paid more when your loan is delinquent, in default or in foreclosure. If by foreclosing and kicking you out of your home our profit increases by a dollar more than if we allowed you to keep your home, you had better start thinking about packing. But before we kick you to the curb, and in order for me to earn a quarterly bonus, you and your family are gonna ride an emotional and financial roller coaster to hell until I’ve squeezed every dollar from your pocket, and every dime in fees I can outta this. Then we’ll foreclose. Even if my company has no legal right to do so.”
But such honesty would result in that employee’s immediate termination. Under capitalism, profit-first corporations are duty-bound to preserve, protect and expand upon their own best financial self-interest.
Based upon my own 30-plus years working in the foreclosure realm (the last 20 advocating for at-risk homeowners), it is my understanding, experience and belief that any so-called “relief” offered to financially distressed homeowners by their alleged lenders is overwhelmingly incidental to and irrespective of the greater benefit derived by the financial institution offering the relief.
With increased public demand that foreclosing banks obey the laws, many foreclosure lawsuits are being withdrawn, or thrown out of court because Plaintiffs & Alleged Lenders have submitted (later discredited) manufactured documents shown to have been retroactively faked as proofs required by Section 3 of the Uniform Commercial Code. Or the litigants appear with no proof and are scolded, then walk away empty-handed with their tail between their legs. Unless and until homeowners challenge the validity of foreclosure actions, the banks’ lawyers can bluff their way in court and win a judgment in foreclosure followed by the keys to the house.
Recently, many communities have responded favorably to media-reported proposals from venture/vulture capitalists (including Mortgage Resolution Partners) who seek public/private partnerships promoted as a strategy to mitigate past, present and future damages (to all interested parties) arising from unrelenting mortgage foreclosures–legitimate or not.
Don’t get me wrong. I am all for using The People’s power of Eminent Domain to seize toxic mortgage loans and other bank-owned real estate (OREO) and to have those properties banished to foreclosure limbo; and then to have an independent community non-profit authority implement strategies to preserve continued affordable home ownership for the members of the community.
Some would argue that the “people’s power” of eminent domain is in fact a police power. But police power and whom the police men and woman actually work for is content for another blog essay.
But I AM NOT for using public funds to unjustly enrich the same gangster bankers who crashed the economy, stole your retirement funds and then bailed themselves out with your very own tax dollars. They lie, cheat, steal and offer courts of competent jurisdiction fraudulent documents as “proofs” that were used to justify the wrongful terrorizing of homeowners and then wrongly force them from their homes via 1) self-serving loan modifications, 2) coerced short sales, 3) accepting deeds in lieu of foreclosure, or 4) court- ordered physical evictions
The proposals (hereafter The Plan) call for using the (public) police power of eminent domain and (private) equity financial capital to seize certain, qualified toxic mortgage loans for the dual purpose of 1) compensating the “alleged” owners of possibly worthless mortgage notes, and 2) restructuring loan repayments to be more affordable to the alleged borrowers.
At first blush this idea sounds great, but could this be yet another backdoor bailout? Wolf in Sheep’s Clothing? Wolf as predator. Or Sheep, as in We the Sheeple?
But The Plan doesn’t call for the seizure and payment for all toxic mortgage notes. No, only the notes whose payment would directly benefit the private equity capitalists’ clientele, the private-label mortgage securities which do not carry a government (FNMA or FHLMC) guarantee.
The morally bankrupt profit-before-people investment cartel and its lapdog US Congress, including the current sock puppet (fill in the blank) Occupant of the White House, got us into this mess. What makes any of us believe these same slick charlatans can fix it? We cannot hope to solve the problems we face today with the same level of thinking which created them.
Does The Plan fix the problem in such a way as to yield maximum widespread public benefit? Or is this yet another public bailout of the investment class disguised as a community benefit?
Based upon the well documented predatory and illegal practices employed by these “too big to fail” Ponzi scammers, we must ask ourselves, “Is there a catch?” Because there is always a catch. What’s the catch? What are we missing?
If we believe that lenders only offer solutions which are in their own best financial self-interest, then what is their best financial self-interest and in what way(s) will it screw us?
As I see it, the “catch” is this: The very “alleged” lenders who would be paid for the “toxic” loans they allegedly own may not be entitled to payment, because they cannot lawfully establish the right to enforce the notes they claim as theirs.
Mere possession of a note does not in itself prove the right to enforce the note. The Uniform Commercial Code, as adopted by states across the USA, is the law of the land when deciding who or what has that right.
Some analysts claim that as many as 75% of mortgage loans written since 2002 are UNSECURED and UNENFORCEABLE as mortgage loans, and point to mortgage loan securitization and cost-saving shortcuts which, along with industry sanctioned predatory loan origination schemes, have resulted in millions of mortgage foreclosures and the theft of trillions of dollars in (monetized) home equity.
I’ve read a widely accepted version of “The Plan” which proposes the use of Eminent Domain to 1) compel alleged lenders to sell notes they may possess (but do not necessarily own the rights required by law to enforce), or 2) seize the notes, under the police power of eminent domain, and, by law, provide compensation to their alleged owners.
In my opinion, the people’s real power in using the rights of Eminent Domain is that it forces the alleged lenders to prove the right to receive compensation from the community. It goes something like this: “Step forward and identify yourself to claim your compensation. What? No ID? Sorry, the Law says that before the Community can pay out a nickel in compensation, you’ve gotta show valid ID. Not some fake ID you bought from a Document-producing and then Robo-Signing outfit… but real ID. If you give us some fake crap, I’ll see to it that you are arrested and charged with a crime. If you don’t have valid ID your claim for compensation is denied. Good bye.”
If that proof is not forthcoming, as articulated in Section 3 of the Uniform Commercial Code, acquisition of the mortgage note by the use of Eminent Domain is unnecessary.
Each “program” homeowner whose alleged lender cannot prove a valid claim can petition the court to legally extinguish the false lien. Dedicated proceeds from subsequent refinancing could then be used to reimburse the “program” for its costs and contribute to an independently administered community fund for the continued re-mortgaging of at-risk residences.
The People’s use of Eminent Domain to preserve continued home ownership within their community is great. Relying upon profit-first partners with a self-serving agenda may not be so great.
One company, Mortgage Resolution Partners, is proposing its own variation of The Plan it will control. The plan circumvents the likely disclosure that the company’s private label securities hold either no value, or less value than what was represented to investors.
Wouldn’t it be more in the public’s interest to demand that an independent community non-profit entity implement The Plan? That would ensure maximum public benefit. If The Plan calls for MRP to be paid a $4,500 fee plus costs for each mortgage loan it restructures, and additional vigs, perhaps we should look this gift horse in the mouth. OK, we pay them for the use of their short- term money, but they can’t decide who sits in the bus, or who drives the bus. They need to back off. Their self-serving expertise is easily replaced by those within the housing community who are dedicated to helping save communities, and are not so much party to unlawful foreclosures and evictions.
Or do we once again accept a fox as guard of the hen house?
According to marketing documents, Mortgage Resolution Partners have publically unnamed investors who are willing to finance the cost for communities to seize some mortgage loans: specific mortgage loans that are now part of private-label securities and do not come with federal loan guarantees.
Are these guys likely holders of possibly worthless securities who are now looking for a quick public bailout?
Let’s instead bail out Main Street. In addition to establishing independent community nonprofit organizations to administer the use of eminent domain to seize mortgages and then facilitate individual homeowners’ quiet title actions, I also advocate the immediate creation of a state/publically owned, nonprofit banking system. Our Money for our Communities.
Dave Petrovich is Executive Director of the Society For Preservation of Continued Homeownership (SPOCH), a 501(c)(3) Consumer Advocacy.