I was in a local gas station store a few weeks back. There was a fellow in there, probably in his early eighties. He was describing how he handled his finances to much more youthful listeners, a group common to any small town store anywhere in the country. His words were meant to sting and shame.
"I never spend money I don't have. I live within my means. And if I start to run short of money, I do without."
Everyone is hearing and reading about the subprime lending problems. Many are tortuously predicting the collapse of the American economy based upon what has occurred in this banking swindle. I'm less convinced about the impact of the subprime debacle, less convinced than I am about its occurrence being just another sordid affirmation of human nature and the American way.
I've always lived like the old guy in the store. I know, if you cannot afford something without the bank getting involved, you're a fool to think those guys at the bank work for nothing.
But, I'm also not sure anyone is aware what in fact has occurred. And if they are mildly informed, they're certainly not aware of the fact that the swindle is continuing and accelerating even as the subprimes are going bust. Human nature is human nature.
I have little sympathy for those whose lives are being turned upside down because they bought into mortgage swindles to purchase real estate that was so over-valued as to make anyone gag upon the credulity of the easily suckered. The price of residential real estate over the past ten years, longer in some areas, has been driven into the stratosphere of ridiculousness. What fed this price increase is the liquidity in the mortgage industry, and not any real value in the American dream these fools were being sold. The rise in price was simply unsustainable, and housing had to come down. But everyone got in on the act, an act that can best be described as how to make real estate unaffordable for an ever larger segment of American society.
Municipalities loved it. These financial swindles drove up property tax receipts. And the municipalities spent the windfall as if there was no tomorrow. They wrote new building and zoning codes to effectively lock out any more reasonably cost effective housing.
Snob zoning took on a new respectability as property values escalated only slightly slower than property taxes that were increased by local governments in part because the long time residents who controlled local government resented the moneyed interests moving into their towns and their neighborhoods.
A building converted into condominiums yielded not one tax bill receipt, but instead a tax bill receipt for however many condos were built into an existing building that formerly only paid a single tax bill. And, time share owners in resort areas each got their own property tax bill for their week in July, or, August. Property tax bills have likely even gone out for parking spaces, which have begun to fetch a premium price in some inner city areas. So, now you can buy an eight by fifteen-foot piece of ground to park your car on, and, you can pay property taxes on it too. That's the American dream.
The banks, the mortgage brokers, and real estate brokers all made fast money as prices continued to rise beyond anything reasonable. The phenomenon can be likened to the stock market Ponzi scheme, because no one ever really planned on owning any of this property. Property for the most part went so high it seemed it could only be bought on credit with interest accruing, and swindles assured. Prices continued to rise. And every sucker was assured their signature would be a good investment even if they were never are able to pay off a penny of the principal of the loan, contracted, and, signed.
Gentrification of whole neighborhoods was made complete by rising property taxes that forced out long time residents. Rents went up too. Previously cost effective and dependable service industries like grocery stores, gas stations, carpenters, plumbers, electricians, mechanics, and trash collection services all increased their prices and fees. They did this to accommodate what they perceived as a bunch of worthless rich bastards moving into their town and wrecking everything everyone who once lived there worked for all their lives for, which turned out to be essentially, for someone else's American dream. Neighbors sold out. They took the money, and ran. No one knew any of their neighbors anymore, except by what color SUV they were driving hundreds of miles in their daily commute, and to Wal-Mart, and, to soccer games on the weekends. And most of the SUVs were a plebeian silver assuring the anonymity of the debt ridden fools who teetered precariously between bankruptcy, divorce, suicide and murder. Is that the American dream?
Those were the go-go prosperous days of increasing property values. And, now we have decreasing property values all across the country. We have rising interest rates on all those variable-rate mortgages that got signed too. And, of course, we still have even faster rising property taxes because municipalities spend money whether or not it's a good idea. Hey! If the plow truck breaks down, you've got to buy a new one don't ya? And, if the town's water gets fouled by septic system problems in that new subdivision, what're ya gonna do? And, they've got to maintain that new $250,000.oo emergency response vehicle the town bought with that HomeLand Security money, right? And, there's always a need for a better trained town manager, fire department and police department, all of which, once better trained, are due a good-sized raise to pay for their new found skills. And every municipal employee needs medical insurance and a new computer!
A good case can be made for our perception of how the banking, real estate brokerage and mortgage brokerage industries pillaged American real estate stocks by selling the idea that rising property values benefited everyone. In fact we now know it generally only benefited those employed in those industries. And now that property values are decreasing, some will gleefully lament that it is going to be a good thing when the banks get stuck owning a lot of over-priced real estate no one really wants for that kind of money, and, the taxes on that place! But not so fast.
We've all heard and read how 2.5 million homeowners are going to lose their homes during the downturn. But where are those homes? Why aren't they coming onto the market? Yes, they have accounted for rising home sales of existing housing stocks in previous months, home sales that have risen because banks are "auctioning" foreclosed properties. But for the most part banks are only selling properties with a reserve price equal to what they have into these foreclosed homes as well as their fees, charges and auction commissions that are built into their reserve price.
In other words, they are moving from their books homes that were repossessed from unfortunate homeowners who had paid down part of the principal, and for which the banks can still realize a break-even-on-their-swindled profit. At the same time the banks are lobbying the federal government to step in and guarantee the profits from their swindle for the homes that cannot be auctioned for all the well-padded costs mentioned above.
I have yet to read or hear of a single one of the bankers, realtors or mortgage brokers headed to jail for fraud and swindling their victims and a myriad of lending agencies that are insured by the federal government. You can count yourself among the victims of these frauds.
Many home loans are already guaranteed by the federal government. These are from federal programs like HUD loans, VA loans and FHA loans. So, those properties are being handled within the burdensome constraints of these programs designed to first-come certain segments of our society, veterans, teachers, and municipal employees like firemen, policemen, and EMTs. They are in effect being used to placate, and almost as graft. But the banks want the rest of their swindled profit to be backed up with a federal guarantee too.
Now, it's true. Anyone can search the web and find foreclosure property listings and the even more common come-on website offering foreclosure lists for a fee. Let me give you all two such first hand lists with no fee necessary. The first is IndyMac and the second is REO. There are indeed some pretty spectacular deals listed. I also provide to links to two current inner-city Detroit properties that'll make your eyes pop out.
IndyMac Real Estate For SaleBut don't get too excited. These listings you see are generally impossible to buy. I know. I tried to contact the listing agents. But, I got no response. I tried contacting each them several times, and still I got absolutely no response.
So, if 2.5 million homes will be foreclosed upon, and foreclosures are at record high rates, what is going on here?
It's all part of the intricate and evolving swindle.
The banks, their mortgage brokers, and real estate brokers all made fast money as home prices continued to rise. And, they're going to make the fast money as prices continue to fall too.
What's going on here is, as deals start to come on the market they are wholly controlled by the same thieves who put these properties in distress to begin with. The banks, their mortgage brokers, and real estate brokers have sole control of this foreclosed housing stock, and, it didn't cost them a penny to put their greedy hands on the many-billions-of-dollars-worth of it either. And, they know a good thing when they see it.
Furthermore, there's still hope they are going to get the federal government to step in and hand them even more money by insuring the defaulted loans of the bank-realtor-and-mortgage-broker-swindled-and-suckered homebuyer.
But everyone is to blame here. Those of you who own a home who are reading the real estate classifieds and considering selling... The mortgage broker is going to clear a couple of thousand dollars or more to arrange the financing. The realtor is going to skim 6% of the selling price. And the bank that writes the 30 year mortgage is actually selling your home for more than twice what you are. And, if and when the buyer of your home goes into foreclosure, they'll make all that and then some more too.
Every American of course pays for every bit of it in the end. The homelessness, the enfeebled communities, the destruction of American family values are all part and parcel of this swindle. And any prospective homebuyer or investor who thinks they're going to find a deal in foreclosure real estate, they're only going to get a thorough run-around, while these properties are held up and snatched up by holding companies run by realtors, bankers and mortgage brokers working the other end of the Grand Theft Realty game.
Don Robertson, The American Philosopher
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