Guest Post: Don't Worry - They'll Just Change The Rules

Tyler Durden's picture

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Bearster's picture

Umm, Chris?  People did not lose their houses due to fraud.  They moved into houses with little or no money down and a big mortgage.  And a year or two after they stopped paying the mortgage (and taxes and insurance and maintenance) a bank took the houses back.  Whether or not it was the right bank with the right to take it is one issue, and that is playing out in the courts now.

But can there be any question about:

1) if you don't pay your mortgage the house is not "yours"?

2) no one forced or tricked them into taking the mortgage

3) while foreclosees may be angry, their anger is not as righteous as the retiree who keeps his money in cash and watches daily as Bernanke devalues that cash into scrap paper


gwar5's picture

Yes, agree to some of that sentiment. And the note holders should either get the houses back and try to make good or go bankrupt.  But they want it all, and are getting it.

They should not get to profit from fees, leveraging the derivatives, the taxpayer bailouts, Free Fed money, racketeering in the markets (with protection from the SEC and CFTC) --- and get to fraudulently take back possession of foreclosed homes if they didn't follow the rules from the start.

Bearster's picture

Well, there are two ways to try to fix the problem:

1) let those who aren't paying for the house to keep it, out of some sense of "social justice"

2) stop bailing out the banks.  Their bailouts have nothing to do with foreclosure.  As I said, if a bank who lacks standing tries to foreclose, that's one thing.  But it does not give a defaulted home "owner" a right to squat.



P.S.  I see "junk" has degenerated into "I disagree with you, but I am too lazy to try to explain why"

faustian bargain's picture

I didn't junk you, but I would argue that if the banks knew there would be any reasonable level of anti-fraud enforcement, they would have been a whole lot more careful about knowing who has title, and about charging headlong into foreclosure proceedings. I'm guessing they were confident there wouldn't be such enforcement.

The delinquent mortgagees may deserve to be foreclosed upon (and if evidence comes out that banks were encouraged by gov't policy to grant loans to those who can't afford them, this is even in question), but the banks -- especially the bailed-out and backstopped ones -- also deserve to be forced to go through proper due process, and punished if they don't.

MachoMan's picture

Part of the issue is that it is a pretty intricate issue in some of the securities realm...  My guess is that they thought what they were doing was plausibly legal, which was a risk they were willing to take.  It wasn't that they thought it was fraudulent from the start...  it was that they thought the legal framework was sufficient for them to operate...  this is the difference between how the big fish and the little fish operate.

Further, once they started down this path, the initial movers were simply too successful to keep a lid on it.  As more and more people figured out what was going on, everyone parroted the first movers, on down the line.  Eventually, so many people were engaged in the act that it literally sunk the world's economy.  The difference being, the folks late to the party didn't do their due diligence and didn't have the top attorneys in the world riding shotgun...  I'm guessing a few strayed from the formula...

Wynn's picture

perfect definition of *junk*

moot point however, apparently management enjoys giving the anonymous cowards a voice, albeit a valueless one

RockyRacoon's picture

My reason for junking you was not due to disagreement.  It was because your "analysis" is one-sided and rather shallow since you only addressed one culprit.  There were many, including the homeowner as you mention.   It's too simplistic to put it the way you did.  Your laziness, which you admit, is the reason for the multi-junks I'm sure.

CrashisOptimistic's picture

This is a good post.  But it did not go far enough.

People bought houses with nothing down and waited for it to go up in price.  THEN THEY CASH OUT REFI-ed and used the cash to buy toys.

This behavior may have been encouraged by banks and made "normal" by banks in order to collect loan origination fees, but no one forced these people to sign on the line which is dotted.  No guns were in the office that day pointed at their heads.

People lose their houses (that were never "theirs") because they didn't pay the mortgage.


Chuck Yeager's picture


But the banks should also lose the right to claim the failed loan as an asset.  They have not.  And that is unafair in a very fundamental way that harks back to France in 1789.


HarryWanger's picture

Apparently, you missed this part:

"The worst that might have happened - a systemic financial breakdown - did not happen, and we can be thankful for that."

So why didn't the "worst happen"? Because the Fed was aggressive and stopped the catastrophe. So Chris can bitch and moan, as he's prone to do, about the Fed and QE2, etc. but he just basically thanked the exact same entity for saving the financial system. Can't have it both ways, Chris.

SheepDog-One's picture

Reality only kicked down the road a bit, the ignored collapse which cost us too many trillions to count will only be far worse now.

barkster's picture

"the fed stopped the catastrophe"!!??  Are you kidding? Look a little further back and you will see the fed started the catastrophe.

Crummy's picture

Why have a simple financial breakdown or social collapse when you can combine the two, right?

While we're at it, let's move Christmas to New Years Eve.

SheepDog-One's picture

Lets just have Christmas declared a 365 day event, where Black Friday mob-a-thons can be declared weekly! Be great for 'retail sales' hyping!

alpha60's picture

the soviets did that, still working pretty well. you chill with the family the the early evening, then get beyond hammered with your friends till the breaka breaka dawn.

SubjectivObject's picture

Does it matter at all if the save effect is a real benefit for the long term, or only beneficial for the short term?

Does it matter that the save effect is funded by taxpayers without an explict mandate by Congress, without a full and comprehesive briefing given the voter?

Does it matter the the direct benefits of the save effect accrue most significantly to the already uber wealthy?

Does the execution of the save effect have any real, existential, moral basis?

HarryWanger's picture

Ask Chris. I'm just quoting an oxymoronic statement from said blogger.

faustian bargain's picture

No you're not. You're quoting what he said and then calling it an oxymoron, which it's not. This says much more about you than it does about the author of the piece. I think the rest of us can read what he wrote and understand it, why can't you?

RockyRacoon's picture

Mr. Wanger is intellectually lazy and disconnected from reality.  It would be a fertile study in sociology to examine his living standards and social interactions.  I'll bet he is ensconced behind a gated community and drives/rides behind tinted windows.  He certainly does not shop for groceries or visit unsavory parts of whatever town in which he lives.  It's a social ivory tower existence in which there are black/white decisions and opinions.  Shades of gray do not exist for Mr. Wanger.

That's why I can usually find it necessary to junk his raggedy ass.

Overpowered By Funk's picture

You've just described what the final nail in the coffin of Capitalism was. There may be hope for you yet Harry.

TruthInSunshine's picture

Robo has NOTHING on Hairy Wang's troll capacity.




LFMayor's picture

People bought houses with nothing down and waited for it to go up in price.  THEN THEY CASH OUT REFI-ed and used the cash to buy toys.

Isn't that essentially what all you horses asses do on the NYSE?  Just sayin...

Slipmeanother's picture

Spot on LF, its what we do every day lol

1223pm's picture

"People bought houses with nothing down and waited for it to go up in price."

We should have started argument with

" People were sold houses with

nothing down and waited for it to go down in price."

now it looks convincing.


greyghost's picture

bearster what a complete ass. who the fuck ran up the economy to extreme heights...THE HOMEOWNER or THE BANKER FUCKS?????? the average joe is along for the ride....NOT MAKING THE RULES. get your head out of your ass. fraud with trusts.....foreclosure fraud...oh fuck me, every single one of those has only about a dozen banks involved...yet millions of average joes....well i wonder who's in control of the fraud? i guess there is an ass born every minute

Spalding_Smailes's picture

Who signed said paper ? Who refinanced every year or so pulling money out of said home and blowing said cash on another " house/bet/investment "....

Well my brother did and he is a business owner. I spent hours telling him about the credit bubble ahead and he spent hours telling me they are giving away money for free and the housing market was booming !!! My brother and friends all played the game.

Its called greed getting something for nothing. Sure the credit was lax NINJA loans and all but someone still had to sign the papers and roll the dice, many people blowtorched ....

Richard Head's picture

You really love that term "blowtorched" huh Spalding?

Spalding_Smailes's picture

 .... and Tyler's, "monkey hammered"

barkster's picture

uh, did you say "blow"? huh-huh, hee, hee, huh. he said "blow".

greyghost's picture

are you trying to tell me that millions of peoples played this game......or is it a handfull of scamsters that did it. these policies have hurt millions of americans by fraudclosure...millions unemployed...hundreds of millions world wide NOW paying the price for a desperate scheme to keep the system afloat thru higher inflation for things that mean the most FOOD ENERGY BASE METALS for everyday people with no jobs. I CALL BULLSHIT ON THE WEAK EXCUSES OF IT'S ALL THE HOMEOWNERS FAULT....BULLSHIT BULLSHIT BULLSHIT!!!!! handfulls of people in any region of the country playing refi games or what ever....all the while the average joe gets sucked into a vortex of fraud coming and going to work everyday...until there is now job.....MILLIONS

Spalding_Smailes's picture

Just my circle.


My Brother - Bought house in 2002 for $300. Purchased 3 more rental properties & who knows how many refinanced. All of this is going down ( w/ divorce also ...)

My best friend owns a manufacturing company ( 40 million in sales per year ) He purchased 2 lots with his brother-in-law and built 1 house and sold at the top ( 4,000sf - $700 K) he is still sitting on an empty lot & has another empty lot 4 miles away.

His brother-in-law the plummer became a builder now sitting on 3 empty lots hes getting monkey hammered. ( 250k each )

Another pair of friends tried building condos borrowed 2 million the project fell apart within 2 years, everything gone !!!!

How many people refinanced since 2001 & pulled money out of the piggy bank ???? Fucking millions ( stupid, stupid, stupid) (Without the refinancing over and over and over -  many would be o.k. today !!!!!!!!! Lets take money out of our piggy bank LOL' )


MiddleMeThis's picture

And how many people bought a house they COULD afford and DID live responsibly, but now have to worry about making the mortgage payment because of a job loss;  A job loss that is directly related to the bust the MotherF-ing banks and Wall Street created?  I'll bet there are just as many responsible owners losing their shirts.  But it's so much more fun for MSM to hype up the stories of the overextenders while the responsible suffer in silence.

Spalding_Smailes's picture

But you still signed the paper. Did you buy in 94' or 2004' ? Did you refi ? 


Leverage kills. Many people in Europe purchase a home and live in that house for many years passing this house throughout the family. Not a huge mortgage market in Slovenia ... You buy what you can with what money you have.

I have rented since 2004. Every time you leverage yourself you must think about the risk, nothing is free or easy. No guarantees on anything.

Sure you can be pissed the bankers are rats & many stupid people made moves that hurt you but when your house was going up every year 10-15% at the time I bet you were very happy.

MiddleMeThis's picture

I absolutely signed and have no regrets doing so.  I paid a fair price and have never refi'd.  I do not live in an area that was as subject to the extreme rise in property values.  Personally for me, the only thing a modest rise in property values gave me was higher property taxes.

My argument is simply that for every person who overextended and is now trying to shirk their responsibility, there are just as many responsible home owners silently making sacrifices to adhere to their commitment. And while the responsible (like me) paid their dues (and continue to pay their dues), Wallstreet filled their pockets and continues to do so at my expense.  I'm out of a job due to our declining economy (created by Wall Street) - and while I sacrifice and worry about next months bills, they fatten their pockets with record profits.

Spalding_Smailes's picture

100 % correct. I'm with you on all of this.

waterhorse's picture

"It's outrageous the way subprime borrowers swarmed and solicited unsuspecting lenders and camped out in the offices of investment banks to push them to find ways to finance their insatiable need for capital to purchase homes. It's a scandal the way they got in bed with appraisers to get the home values stated at three to five times market value. It's criminal the way they falsified income to push through the mortgage loans. Oh wait... they didn't. [Hat tip to Nomi Prins, author of It Takes a Pillage.]"

Strider52's picture

Some friends of mine did exactly the same thing - they REFI'd every 12 months, and cashed out any equity that had materialized. They bought expensive cars, LOTS of toys, nothing of real value, all made in China. They are lucky that they got a loan mod AFTER the bank foreclosed on both of their properties. They are lucky they still have a place to live, and are living hand-to-mouth, paycheck-to-paycheck.

 Me? I sold the house and bought gold. Then silver. Now I rent, and I'm happy.

scaleindependent's picture

You gotta read The Best Way To Rob a Bank is To Own One, by William Black.

An interview:

fearsomepirate's picture

Financial transactions and extramarital affairs have something in common:  They require two people.  Never forget that.

malikai's picture

...or in some cases people and farm animals.

faustian bargain's picture

Is it really an affair when it's with a different species?

MachoMan's picture

Just depends on if the animal has been branded as one that doesn't kick and whether the animal is the top or bottom.

Now, in the case of Mr. Hands' horse, I'm inclined to think there was certainly the possibility of an affair, but no animal cruelty...  quite the contrary...   my guess is in its little peon brain, it still fondly reminisces about the time it was balls deep in that strange man's bottom.

pan-the-ist's picture

You don't believe there was any incentive for fraud in the loan origination business?  Who cares about foreclosures.

LauraB's picture

Exactly!  The issue isn't whether or not the borrowers owe the money.  They clearly do.  The issue is to whom the money is owed.  No one should or will get a free house.  The banks need to work out between themselves who is entitled to foreclose.  What needs to be done are pushbacks.  The improper transactions (e.g. MBS sales) need to be unwound until you get to a proper transaction -- even if that means going all the way back to the original transaction between the borrower and the bank. 

E.g. -- Buyer/borrower buys a house and gets a loan from Bank A.  Bank A sells the loan to Bank B, but the paperwork is not filed correctly.  Bank B sells the loan to Bank C, and the paperwork is again not filed properly.

The transaction between Bank B and Bank C is unwound because Bank C didn't get that for which it paid.  Next, the transaction between Bank B and Bank A is unwound because Bank B didn't get that for which it paid.  Once these transactions are completed, Bank A can clearly foreclose on the house.  The buyer was not the wronged party.  Bank C was wronged by Bank B and Bank B was wronged by Bank A.  The borrower was never relieved of his obligation to pay by the sales of the loan.

MachoMan's picture

This is what is currently in the process of happening and what will ultimately happen...  although, I disagree somewhat with the way you have stated your proposition, given the banks have already determined who the proper party to foreclose is, generally...  (the last to pay and/or its appointee/servicer, aka the bank foreclosing...).  What the banks need to do is go to the jurisdiction where the collateral is located and obtain declaratory relief amongst themselves as to what their respective rights are to the collateral...  then, just turn around and foreclose.  No big whoop and the homeowner will be barred from contesting whether the parties to the suit are proper. 

scaleindependent's picture

You gotta read The Best Way To Rob a Bank is To Own One, by William Black.

An interview:

Clampit's picture

"2) no one forced or tricked them into taking the mortgage"

I disagree. Housing prices were rising at a rate that far exceeded income. Citing the economic rational that this isn't sustainable and you should have known to wait it out ignores the fact that most people (then) aspired to someday own a home and have seen the effect of fiat games over their lifetime. It was a ponzi scheme, which last I checked, unless you're a central banker, is a fraudulent trick.

bonddude's picture

Forget TBTF for one moment. what about all the purposeful commercial loan fraud

at small and mid size banks. These mini-Madoffs are all over the country but you

don't hear shit about it. Right now it's all homes. I think it will change soon.

funny short about one.-