CBS Airs House of Cards: Closer to the Truth But Not Quite There — Line up the story of the borrower and the story of the investor and they are the same

CBS News HOUSE OF CARDS

CBS aired a 2 hour news special on the mortgage meltdown. For a change, the facts in it were entirely correct although some important facts were left out. There still remains a bias against the borrowers. While the case was made that the investors were defrauded and didn’t know what they were investing in, those investors were characterized as completely duped by the Triple AAA rating from Moody’s, Standard and Poor’s, and Fitch.Virtually no “blame” was assessed against them for not knowing what they were buying. These were huge “qualified” investors who didn’t read the fine print and of course, as Alan Greenspan said in his interview, “even if they had read it they would not have understood it.” He admitted he didn’t understand it either. My thesis is not that the investors shoud have been blamed but that the borrowers were in exactly the same position as the investors and were duped and deceived in exactly the same way using the same tools of deception.

On CNBC the argument was advanced that the fact that the investors didn’t and couldn’t know what they were actually buying was the fault of Wall Street. The quote “nobody put a gun to their head” was used against the borrowers and not the investors. The argument that the borrowers didn’t and couldn’t know what they were signing was never mentioned. The fact that both investor and borrower were treated identically in terms of withholding information and giving false information was never mentioned.

Missing from the otherwise excellent and moving news piece was the fact that just as investors were duped by a fraudulent appraisal of the security they were buying as “investment grade” when in fact it was junk, the borrowers were duped by a fraudulent appraisal of the value of the property when in fact the value was far lower, is now far lower, and will for years be far lower than what was represented by the appraiser and the lender at closing. Remember it is up to the Lender, by law, to verify the appraisal. The “lenders” in this case were merely conduits or mortgage brokers, whose insitutional charters were rented by Wall Street. So they dropped verification of value, they dropped verification of income and they dropped underwriting standards to determine viability of the loan.

In 2005, 8,000 appraisers petitioned the Federal government to stop illegal, fraudulent and improper appraisal practices that were inflating the “value” of home. Nothing was done. What is the difference between the inflated appraisal of the property and the inflated appraisal of the securities? None. What is the same is that neither was regulated and both were allowed to run wild.

• The so called Stated Income or “Liar’s Loans” were lies of the mortgage broker and the Lender not of the borrower.
  
• Only the mortgage broker and lender knew what income had to be “stated” to qualify for the loan.
  
• Only the mortgage broker and lender had the access to the application to change the numbers on the application to “justify” the “underwriting” (a process that never actually occurred, unknown to the Borrower and well-known to Wall Street).
  
• And only the mortgage broker and lender were in a position to gain the confidence and trust of the borrower, such that their assurances that this loan would work were willingly (and legally) accepted and relied upon by borrowers.
• Line up the story of the borrower and the story of the investor and they are the same.
  

Let’s remember that this was a con game from one end to the other. The borrowers were not “in on it” any more than the investors were. And in states like Florida an army of con men (10,000 convicted felons were licensed as mortgage brokers) descended upon a public that had never seen this kind of behavior because until the securitization of loans the bank’s money was at risk, the loan officer’s job was at risk, and the stockholders were at risk. Reliance on the lender, which is what the Federal Truth in Lending Law provides, is both reasonable and legally binding. Everything else is politics and obfuscation.

Everyone who took a loan from 2001-2008 probably has a good claim against the pretender lender at closing and the people who made the closing possible — appraiser, mortgage broker, title agent, closing agent, escrow agent, title insurance company, property insurance company, property insurance agent, mortgage aggregator, CDO manager, Trustees, and salesmen who were selling worthless paper at both ends — “loans” to borrowers and “investments” to investors.

Tags: borrower, disclosure, foreclosure defense, foreclosure offense, fraud, Lender Liability, mortgage meltdown, predatory lending, rescission, securitization, TILA audit, trustee
Posted in Corruption, Eviction, Modification, securities fraud |