Mother Jones has a must read article. In it they not only detail what I have been telling you about foreclosure mills using phony documents to swindle courts and homeowners into allowing foreclosures, but they also blow the lid off of the origins of these practices. MY brain exploded when I read the following (we are still scraping bits of my medulla off the ceiling):
FORECLOSURE MILLS OWE their existence to Fannie Mae and Freddie Mac, the federally guaranteed entities that essentially created, beginning in 1968, the vast marketplace where loans are traded. Their mandate was to promote property ownership by making a large pool of credit available at affordable rates. They accomplished this by buying mortgage debt from banks and packaging it into bonds, which allowed investors to get in on the action. The banks responded to the demand by lending more money to their customers, and Fannie and Freddie’s combined mortgage portfolio exploded from $61 billion in 1980 to $1.2 trillion two decades later, according to the Government Accountability Office. Their dominance gave them the clout to rewrite rules for the mortgage industry—standardizing underwriting guidelines, loan documents, and the like.
Fannie and Freddie also reshaped the foreclosure industry. Their huge holdings meant they had to deal with thousands of foreclosures annually—even during periods when only a small percentage of loans were going bad. In the 1990s, the market expanded into subprime territory to feed the securitization beast, and borrowers began defaulting at increasingly higher rates. Hiring lawyers on a case-by-case basis was burdensome, so Fannie and Freddie put together a stable of law firms, prime contractors prepared to litigate large bundles of foreclosures quickly and cheaply. They urged these handpicked firms to bring in-house all of the related services—inspections, eviction notices, sales of repossessed properties, and so forth—or at least to retain a suitable subcontractor to handle the tasks. Thus emerged the foreclosure supermarket.
[emphasis in original]
Get this, the government entities, which are currently wringing their hands and saying they can’t persuade banks to write down principal amounts in mortgage modification , had absolutely zero qualms about setting up mortgage securitizations and creating foreclosure mills. If I were an congressional oversight or banking committee, I sure as hell would be hauling in the people who ran Freddie and Fannie in the period before the housing collapse and demanding some details. I would also be hauling in the people currently running Fannie and Freddie and demanding some new explanations in the face of this information which appears to impeach prior testimony on the Hill.
Really, go read the Mother Jones article, then email it to your congresscritter.
You know who funds Fannie and Freddie and has the US taxpayer on the hook for unlimited liability for their screw ups? Geithner. Yep, he can bail out bank CEO’s bonuses, but somehow can’t manage to convince those banks to permit write downs of principal in underwater mortgages. He can bailout Bonnie and Clyde Fannie and Freddie to an unlimited amount of taxpayer dollars, but can’t seem to stop them from organizing criminal frauds on the courts. He’s so powerless, you see.
In the meantime, "According to industry projections, millions of homes spiraling toward foreclosure are putting homeownership in jeopardy of its lowest level in 50 years, reports USA Today.”
Yes, Firepups, the brilliant Bush era policies, such as eliminating down payments, which he claimed would increase the number of families who owned their own homes, made millions in bonuses for bank executives, but had the net effect of DECREASING homeownership not only among the poor and disadvantaged, but also among regular middle class Americans. Those who work for a living have been swindled, and then have been unfairly maligned and blamed for the crisis by those same banks. And who was there for pretty much every minute of it? Geithner.
So, where do all these foreclosed houses go? You’d think a middle income family with a decent amount of down payment money saved up could get themselves a real estate bargain in this situation, right? Wrong.
There are well financed speculators buying up foreclosed properties, FOR CASH. They are able to outmaneuver individual buyers because they don’t have to arrange financing.
"Cash-happy investors have been scooping up these bargain basement deals at a fast clip, often before middle-income buyers can get financing," according to the Herald. The nest egg can’t compare to the deep pockets of developers, speculators and investors who can self-finance, especially in the wary world of mortgage lending.
The real mystery is what the investors will do with the homes. Buyers tend to be more patient, willing to wait decades to see their home values appreciate, whereas investors prefer to see a quick return on investment.
I’ve got a few questions about that. Where is the money coming from to buy foreclosed homes in bulk? Even at the ridiculously low prices at a foreclosure auction, buying houses in batches take a lot of moolah.
Who are these speculators?
What do they plan to do with all these vacant houses?
Nobody commits that kind of money just for fun, somebody has a plan to score a big profit off the misery of evicted former homeowners. Any informed speculations you care to leave in the comments would be helpful in forming a hypothesis.
[Earlier posts in this series and related links at FDL's Foreclosure Fraud Resources]