FedUpUSA

Archive for November 1st, 2010

This pretty much sums it all up…..

It’s good to see this becoming more understood.  We’ve been preaching this for three years here.

Disgusting disclosures that our financial services industry and our foreclosure courts are corrupt and have perpetrated fraud on the American populace are everywhere.

In an October 17th article, David Dayen responds to Housing and Urban Development Secretary Shaun Donovan who, supporting the Obama Administration, opposes putting a national moratorium on foreclosures until fraud can be weeded out of the process.

Dayen says “it’s really interesting that he” (Secretary Donovan) “picks out the Cleveland area as his example of how we can’t stop what’s working in the housing market.” Dayen then provides examples of how the housing market doesn’t work in Cleveland:

“Michael and Pamella Negrea have never been late on a mortgage payment in the 15 years they’ve owned their home in Eastlake. But they’ve been foreclosed on three times.

“Martin and Kirsten Davis, meanwhile, lost their home in Cleveland to foreclosure two years ago. The reason: A mess that started when they accidentally paid 14 cents too little on their monthly payment.

“And Michael Rendes of Berea had his mortgage sold last year to Bank of America. The bank foreclosed on him in November, after insisting for months that it didn’t hold his loan and wouldn’t accept his payments.

“Tales like these portray the ugly side of the world of mortgage finance, a world embroiled in controversy amid claims of fraudulently signed foreclosure documents.”

In the examples given above, the lender charged Mr. and Mrs. Davis a $2,200 fee when the monthly payment was 14 cents short. As for the Bereas, no one notified them that their loan had been sold to Bank of America. They kept sending their payments to the original lender who never forwarded them.

Finally, a senior federal bank regulator directed major offenders (the too big to jail bunch strikes again) – J.P. Morgan Chase, Bank of America, HSBC, PNC Bank, U.S. Bank and Wells Fargo – to review their foreclosure procedures.

The word “lien” is used often in this article. To be clear: A lien is a legal claim on someone’s property and brings with it the legal right to keep or sell that property. It is security for a debt. Regarding mortgage loans, a lien is placed against the Deed of Trust to the property being purchased until the borrower pays the loan in full. The lien serves as the lender’s loan collateral – if the borrower doesn’t pay as agreed, the lender gets the property to offset any losses.

On November 22, 2009, I advised readers who might lose their homes to “get the foreclosing party into court and into discovery” to make them prove they were the lien holder. Make them provide evidence of lawful ownership of the property. In many instances, those doing the foreclosing cannot provide evidence.

If a little old lady knew this a year ago, where have the high-paid mainstream media business experts been hiding? Where are Bloomberg and Fox Business News when you need them? This potential mortgage fraud involves (as I calculate it) at least 62 million American mortgages. If the average mortgage loan outstanding is $150,000, multiply 62,000,000 by 150,000 to find the total dollars involved.

A major part of the foreclosure nightmare starts with a software program that registers property liens to a computer system called Mortgage Electronic Registration System (MERS). MERS serves as a document custodian. Thus, if ABC Mortgage Company makes the loan and takes the house as collateral against the loan, ABC’s lien against the house is registered to MERS, not to ABC Mortgage Company.

When ABC tells MERS it wants to foreclose on a property, the property is foreclosed in the MERS name, not that of ABC. MERS registers the lien in its own system naming itself lien holder, but it holds no financial interest in the property and uses outside “legal resources.” It was created by mortgage bankers to simplify the transferring of mortgage liens. It will ease your mind to know that Freddie and Fannie are part owners of the MERS system. MERS’s Legal services companies produce documents needed for foreclosure. It appears those documents often have forged signatures. One guy at a foreclosure mill “legal service” admitted to forging over 10,000 documents.

MERS forecloses on properties when a certifying officer registered with (not employed by) MERS tells it to foreclose – and MERS turns the request over to a “foreclosure mill.” Like magic, signatures appear on documents the lender didn’t sign. The legal services company kindly signed for the “certifying officer” who says “I hold the lien” – which may or may not be true.

By recording property liens in the MERS name, it is supposed to create a Trust – but does it? Courts now question whether this process of “securitization” creates legal ownership of anything. It asks the question: How can a legal Trust exist when the homeowner, a primary party responsible for payment to the Trust for property in the Trust (the home), is unaware the Trust exists?

Because of the MERS process, lawyers and property owners are no longer able to turn to the public recording system at your local County Clerk’s office to find the name of the property’s lien holder. Why? Because the name “MERS” appears on the document, not the name of the lender who made the mortgage loan.

MERS now forecloses nationally in its own name on liens belonging to mortgage lenders – even though it has no financial interest in the transaction. Because it’s just a computer system, MERS provides no customer service so consumers can’t call and ask why MERS is foreclosing on a property. You can’t work out payment arrangements with a computer system. Maybe you’re the beneficiary of a large inheritance, but won’t get it until next month. A sane lender would wait for you to get the inheritance and let you pay the past due loan payments. Until now, MERS, in theory if not in law, has remained an innocent proxy functioning on behalf of realtors and mortgage bankers.

Read your mortgage loan papers. Loan documents have for years given the loan originator the right to sell your loan. If they choose, they can sell your loan to Freddie or Fannie who can sell it to J.P. Morgan Chase or Citigroup or Bank of America or Goldman Sachs to be placed in a mortgage-backed derivative. At each sales point (when it’s sold to Freddie or Fannie, then to a brokerage firm to create a derivative), the lien holder of your mortgage may be registered as MERS. Your lender’s name may appear nowhere on the documentation as the real lien holder.

What does it mean to you?

First, here are two links that report glowing things about MERS – fair and balanced reporting. You need to read them, too. Article one (for homeowners).

Article two, from Mortgage Daily News

However, regardless of what “they” say:

WARNING: If you are thinking of buying a home that was financed between 2004 and the current time, BE VERY CAREFUL. It may be a home whose legal ownership is yet to be determined by the Courts. If the word MERS appears on the property lien… well, I don’t give investment advice – but I’d walk away from it. It wouldn’t be fun to buy a new home and be evicted six months later because the Courts decide that the MERS securitization process is illegal and the original owners (two owners ago, maybe) still own the property.

Investigate your existing property’s chain of ownership evidence. Start by going here. Once you get the data, sleep with a copy under your pillow in case your local Sheriff shows up some night with eviction papers in his hand.

If your mortgage loan originated between 2004 and the current time, the lien filed against your home (and unless your mortgage loan is paid in full, there is a lien against it) may well be in MERS’ name, not your lender’s. Over half of all new residential mortgage loans in America are registered with MERS and are recorded in that name. And, if your home doesn’t have a mortgage, don’t feel too safe. Some people with no mortgage — some who never even had a mortgage — have been evicted from their homes.

Let’s say you financed a house in 2005. Your mortgage loan may have been sold by the lender to Freddie or Fannie who may have sold it to J.P. Morgan Chase or Citigroup or Bank of America or Goldman Sachs. Your mortgage may have been placed into a mortgage-backed derivative investment product sold by one of the too big to jail brokerage houses.

Investors all over the world are trying to reclaim their losses from mortgage-backed derivatives gone bad. They file suit against the brokerage house that sold the worthless derivative. The brokerage house (or insurance company) files suit against companies that sold them the mortgages in the worthless derivatives. Thus, your home on which the payments are current, may be foreclosed because foreign investors are suing brokers who created derivatives that got fried – and your mortgage was part of the package.

How did mortgage fraud of such national proportion happen – and why?

It was the early 1990s, after the U.S. Congress passed the Depository Institutions Deregulation and Monetary Control Act that helped America’s former mortgage lenders fail – you remember the savings and loans industry.

The mortgage lenders that replaced savings and loans wanted to evade title costs. They sought ways to bypass state and county registrations that normally identify and assign property title ownership.

There’s more to this story than Freddie and Fannie investing in a company called Mortgage Electronic Registration System (MERS) to speed things up and, for a fee, reduce land title costs. As stated in Part I, mortgage lenders and realtors decided they could profit greatly if a computer system operated a database to track ownership – and, as part of that process, have that computer system become the “mortgagee of record.” Foreclosure by proxy was born.

Why did it take so long to uncover all of this foreclosure corruption and fraud? Why did it take so long for us to hear the words ‘Mortgage Electronic Registration System’ (MERS)? Why did it take an entire industry so long to ask “Is securitization by proxy legal?”

MERS stands behind two or three giant corporate walls and people don’t know how to penetrate those walls to protect their property. They know they can’t afford to stay in court longer than their mortgage bank and possibly several other big, involved corporations with lawyers on staff. Because of the walls of lawyers ready to defend clients against whom it is difficult to prove criminal intent, MERS has successfully foreclosed without even producing original notes. It’s very difficult to defeat a faceless enemy.

To make things worse, under the MERS program almost any “certifying officer” can come to court, claim ownership of a lien, and proceed to foreclose. There are so many “certifying officers” at MERS, the courts have difficulty verifying whether the entity that shows up in court and claims ownership actually owns the lien on the property. Since MERS by-passes filing the actual name of the lien holder in public records, normal research sources are useless. I repeat: The “certifying officers” don’t work for MERS, they are merely registered on the computer system as “certifying officers.” Crazy, I know.

The actual holder of the mortgage (or a certifying officer that isn’t, but wants to become, the legally recognized lien holder) pays a fee and records the mortgage in the name of MERS. And, when asked, MERS forecloses, acting as proxy document custodian for the stated lien holder. But when mortgage loans have been leveraged so many times in the mortgage-backed derivative process, who knows who the actual lien holder is? Often, the courts do not. Even more often, innocent victims cannot fight their way through the mortgage industry’s walls of lawyers to protect themselves against unlawful foreclosure.

It’s important to understand this process because in its custodial/proxy status, MERS has been viewed as an investment trust. It has no customer service personnel. So if you or your lawyer ask MERS about “the trustee” – if it can be identified – you will likely be referred to the legal servicer, who will then direct you or your counsel back to MERS. Non-responsiveness, then, is used as leverage to intimidate and force homeowners out of their property.

This system appears to make the theft of private property acceptable. If it works with mortgages, it can be used for anything – maybe your pension fund. Nothing will be safe from the personal property mafia. Are mortgages merely a test case?

Another Massive Mortgage Fraud? Judge Reverses Himself After Hot Tub Meeting.

An interesting story published on October 9th by Washington Post Staff Writer Tom Jackman illustrates the breadth and depth of another kind of mortgage fraud.

Earlier in the year, District Judge Gerald Bruce Lee dismissed Bank of America as a defendant in a potential Northern Virginia real estate fraud case – and in November 2010, Judge Lee reversed his own decision.

In Virginia, 129 investors filed against Bank of America, and in North Carolina, 285 investors filed. Both filings were about the same fraudulent act – Bank of America, again. All shouted “foul” on lots they said had been over-valued by the appraiser. Here, mortgage fraud becomes an issue of unrealistic, overstated loan appraisals sanctioned – even encouraged – by mortgage lenders.

In 2006, the 414 investors claim they purchased overpriced vacant lots in North Carolina. They didn’t know they were overpriced because appraisals supported the $400,000 price. Appraisal fraud has become another major financial services industry problem. Investors were assured they could buy the lots with no money down, make no payment for two years, and in the meantime flip the properties for certain profit.

I’m not a fan of real estate flipping speculators. This case is a bit different because of the appraisals. Investors say the seller was buying the lots for $150,000, then reselling them for $300,000 or more. It somehow escapes the “victims’” notice that they planned to buy the lots and then do to another buyer what was done to them. Each of us deals with conscience in our own way.

The investors say their loss could not have occurred without the help of, in this case, Bank of America (notice how often that name comes up?). They charge that the seller of the lots and the bank colluded to inflate appraised property values.

“That’s where the hot tub comes in,” says the Washington Post, explaining the Judge’s decision to reverse his Decision. “In March 2010, after Lee’s ruling, a lawyer in the North Carolina case obtained more than 700 pages of e-mails that hadn’t been turned over in the Virginia case.”

The court records say a meeting was held to discuss the issue. The meeting took place in a hot tub so, with everyone presumably naked, no one could wear a wire. The e-mails showed a Bank of America loan officer discussing ‘recovery appraisals’ with the sellers of the property.

After the hot tub meeting, the emails were made available to the Court and Judge Lee reversed his earlier decision. The emails proved the seller, who wanted $380,000 for a lot, got a first appraisal via Bank of America for $210,000, then a second appraisal of $220,000. Suddenly, a third appraisal of $385,000 for the same lot appeared. Investors were unaware of the first two appraisals. After the real estate market tanked in 2008, the lots plunged to a value of $20,000 each.

“Lee also noted that Bank of America had obtained mortgage insurance for the loans, which could have provided the bank with a safety net – except that the insurance company later canceled many of the policies because of ‘misrepresentation’ by the bank,” the Washington Post article said.

Insurance, huh? Hmmmm… does anyone remember AIG? The Washington Post says “the insurance company later canceled many of the policies,” but that case is currently being litigated. It is yet to be decided. Maybe taxpayers will be bailing out another insurance company?

Judge Lee gave the Virginia plaintiffs permission to re-file their case against Bank of America with the new evidence, though he said “the issue of plausibility still remains. What did the bank have to gain by entering into fraudulent loans?”

Banks used to loan their deposits. Today, the concept of fractional reserve banking rules, not deposits. The more a bank loans, the more money it creates to lend. Deduct 10 percent (the reserve) from a loan, and the remainder is new money the bank can loan. A $385,000 loan minus $38,500 (10%) gives the bank $346,500 per loan at the almost zero Federal Reserve rate. Times 414 people borrowing for North Carolina lots, the bank lends $143.5 million at an interest rate of, say, 8 percent. That’s $11.5 million in loan interest per year. If the individual loans are only $150,000, the bank earns only $4.5 million (on $56 million, total). That’s why, Judge Lee.

How will the foreclosure fraud story end?

Many people think those who have faced unlawful foreclosure will get their homes back free and clear. After all, fraud was perpetrated. Though there is no doubt damage has been done to victims of unlawful foreclosures, the owners signed a mortgage loan. The loan is still a valid contract. When one signs a loan document, one is obligated to repay the loan. An unlawful foreclosure proceeding doesn’t change that hard, cold fact. Suing for damages is a different issue – a different lawsuit.

In MERS cases, evidence of the chain of ownership may have been broken. Because of the way property liens were handled, the courts may remove homes from the mortgage loan as collateral. The mortgage lender still has a valid loan, but may have lost the house as loan collateral.

If the home as collateral is removed from the loan, the FDIC’s auditors won’t give the lender much choice. Bank auditors will likely require the mortgage lender to call the loan, demanding payment in full.

Every loan agreement stipulates that lenders can call loans in full if conditions change that increase the lender’s risk. So, a new mortgage will be written and the collateral (the house) will be properly perfected this time. Because property values have fallen so drastically, the homeowner may be required to provide more collateral than just the house. And, if the borrower cannot so provide – it is legitimate grounds for foreclosure by the lender.

Could this be a sneaky way for banks to get those loans on which lien ownership cannot be determined because of the MERS and the mortgage-backed, over-leveraged derivatives mess properly re-assigned as collateral on mortgage loans?

For more in-depth information on MERS, written by Christopher Lewis Peterson, Quinney College of Law, University of Utah.

Has America’s financial services industry been totally and criminally corrupted?

I think the best description of how America’s economy is structured and how such a structure might allow fraudulent activities is contained in a series of three relatively short videos done by Damon Vrabel. He explains how the economy works in such understandable terms, I highly recommend viewing the videos. Here are links. Video one, Video two, and Video three. If you want to understand our economy, they are well worth your time! Bio.

The Obama Administration refused this week to support a national halt to foreclosures until the fraud can be identified, isolated, and dealt with in a lawful manner. Politicians aren’t interested in “Constitutional” and “Lawful.” Those cards – and several others – have been left out of the political deck, it appears.

President Obama’s spokesman, Housing and Urban Development (HUD) Secretary Shaun Donovan, said last week that mortgage fraud problems do not pose a “systemic” threat to the financial system.

What do his words really mean? What he is saying is that there is so much evidence the financial system accepts fraudulent acts as its norm, no threat is posed to the system by the fraud. HUD reviewed the “paperwork” problem to see if it posed a threat to banks. Excuse me, Mr. Donovan, but the threat posed is to Americans who have been victims of the foreclosure frauds. The banks that caused the problems be damned!

“We will not tolerate business as usual,” Secretary Donovan said. That sounds very much like a confession that “business as usual” is so unlawful, it has finally become intolerable.

On October 23rd, an expert I hold in high esteem, Professor William Black, University of Missouri, the senior regulator investigating the savings and loan crisis of the 1980s, declared that despite massive fraud by bankers, no one is being charged. He estimates the foreclosure crisis will cost about $10 trillion – yes, trillion with a “t.”

Black said “This is a crisis that we know empirically involved millions of fraudulent mortgages being made. We know that the losses are out there. We know that the industry extorted FASB to gimmick the accounting rules, so they didn’t have to recognize the losses. We know that the Fed has huge positions as collateral in these fraudulent mortgages. We’ve seen the Fed, Ambac, Fannie, Freddie, Pimco, Blackrock – all putting back after investigating tens of billions of dollars of mortgages and saying, these were sold under false representations and warranties – frauds and absolutely no one has gone to jail for it.” (Note: FASB means Financial Accounting Standards Board.)

Professor Black points out that in the savings and loan debacle (which he notes is perhaps 1/40th the size of current mortgage fraud), they got over a thousand priority felony convictions of the elites – not bank tellers, “elites.”

The Mortgage Bankers Association defines mortgage fraud thus:

“Mortgage fraud is defined as material misrepresentation – intentionally providing false information to deceive or mislead a lender into extending credit beyond the limits of what would normally be extended if the facts were known. Information or documentation is considered false if there is clear and convincing data that the information or documentation lacks truth or accuracy.”

According to this definition, lenders, not people unlawfully foreclosed on, are the victims! This says mortgage fraud occurs when consumers who want mortgages lie to lenders on loan applications. That’s true – but it’s only about 1/10th of the story. How many of the examples given in Parts I and II of this article involve liar loans? None. The MBA definition of mortgage fraud covers the backsides of those companies who made liar loans to sell to Wall Street brokers so they could create worthless derivatives that have bankrupted the world.

This is the government your tax dollars supports.

Professor Black states that “the FBI formed a partnership with the Mortgage Bankers Association, the trade association of the perps.”

Could that be true? Is the FBI in bed with the MBA?

The FBI Web site in March 2007 said “Today the FBI and the Mortgage Bankers Association (MBA) entered into an agreement to combat Mortgage Fraud. The FBI and the MBA will make available a Mortgage Fraud Warning Notice as a proactive means of educating consumers and mortgage-lending professionals of the penalties and consequences of this criminal activity.” As I read those words, The Mortgage Fraud Warning Notice told borrowers they would be guilty of mortgage fraud if they lied when applying for a loan — as people did (and were encouraged to do) when applying for liar loans.

Question to the FBI: Where is your Warning Notice to mortgage lenders who create a computer system that acts as a lien holder by proxy and destroys the reliability of our property registration recording system – and unlawfully forecloses against homeowners?

It is impossible that the MBA and the FBI did not know about MERS. It is impossible the reports of consumer foreclosure abuse did not reach desks at both organizations. It is impossible that complaints about unlawful foreclosures did not reach the desks of Congressmen and Senators from those unlawfully foreclosed. So much for the law and “representation.”

Many readers will recall the articles I wrote about how the State of Wisconsin filed fraudulent charges against Ambassador Lee/Leo Emil Wanta for a civil income tax assessment. I have written about the abuses heaped on the head of this American Patriot by the FBI and other intelligence agencies for which Lee Wanta once worked. He won’t play their dirty games. He won’t compromise his beliefs to get $4.5 trillion of his own money that in 2006 was wired to him by the People’s Bank of China when he sold personal business interests overseas. The funds were wired – in compliance with a Decision made by Judge Gerald Bruce Lee – to Bank of America in Richmond, Virginia. Yes, that’s the same Judge named in Article II of this series whose court records involve a hot tub meeting. Yes, it’s the same Bank of America against which investors have filed charges for loan appraisal collusion.

It is 2010 and Ambassador Wanta is still fighting to gain access to the $4.5 trillion that was wired to him. This isn’t the place for his story. If you want more information, it’s at the blog address provided above. The point is, this has been a “story” for a long time, but Wanta fights his battle for justice alone.

Lee Wanta’s tie to this particular article? In 1995, Wanta’s home was unlawfully foreclosed by Wisconsin authorities. There was no mortgage on the home. Charges had been filed against him – unlawful charges for a civil income tax assessment. That’s all it takes: Not proof of guilt, just “an assessment.”

How different things might be today if, when the funds one man transferred into the United States were unlawfully withheld from him, every citizen in the country had written to their Senator and Congressman, demanding this one person be treated lawfully. That’s how they do things, you know? They fly one false flag to see if the public will allow it. When we do, they fly a bigger false flag, next time. Finally, as the greedy always do, they fly a flag so big it kills the goose that lays the golden eggs. This time around, the goose happens to be named “America’s economy.”

The mortgage mess makes it very clear how the intelligence agencies have been compromised. If they were not compromised, this kind of fraud could not be carried out with impunity on such a broad scale. As Professor Black suggests, over a thousand arrests were made during the savings and loan scandal and this is 40 times greater. Why have no arrests been made of mortgage fraudsters? Maybe it’s their Wall Street addresses – or, connections to that address?

It reminds me of the popular email story about when the Nazis came for Jews who were strangers. Jews and others, including Christians, who didn’t know them ignored the cries for help. Then they came for Jews who were acquaintances, then those who were friends. Still cries for help were ignored. “Then the Nazis came for me… but there was no one left to cry out to for help.”

We need to pay more attention to individual government abuse. When things are small, they can be stopped. When fraud gains volume and momentum, it’s too late to stop things without causing a major crisis.

So many innocent people get hurt because we don’t confront those we elect to office. So many innocent people could be spared if we cared enough to act rather than sit back and watch and wait for the next headline.

People who think they can avoid confrontation with evil need a good dose of reality. Evil tends to seek out the non-confrontational.

Will someone be there when you cry out for help?

Marilyn M. Barnewall for NewsWithViews

At some point in time, I’m going to sit down and write the full story on the tragedy that is the Foreclosure Wars.  The press is doing an excellent job of pulling the pieces together, but there are so many details and important facts that are being missed.  When I write the book, it’s going to start like this:

The collapse of the American economy didn’t begin in the First Great Financial Collapse in 2008, or in the Second Great Collapse that’s coming in 2011, it began in 2004 when New Century Mortgage extended a loan on a home in a rough section of town in St. Petersburg, Florida to a couple who had no chance of ever repaying it…and no real incentive to repay it.

I had a front row seat to this collapse when I was hired to foreclose on the second mortgage my client had placed on the home.  My client was the typical American entrepreneur.  He worked eight hours a day at his full time job, then he’d spend another 8 hours building by hand, often by himself, a series of homes in this troubled part of town.  As he neared completion of his one off, solidly built American dreams, he would stick a sign in the yard and in a few days the home would be under contract to a family ready to claim their piece of the American dream with no money down, no real ability to pay for the home and no chance of ever climbing out from under the massive mortgage debt they would sign up for.

In this particular case, New Century Mortgage gave the borrowers a $150,000 mortgage and my client gave a $25,000 second mortgage, a figure that represented the entire profit my builder client hoped to make after breaking his back for six months. This was just a few years before the subprimes would loan any amount of money to anyone.  At this point in time, no lender was willing to pony up the full $175,000 that would have allowed my client to immediately take his profit off the top.  My client’s only hope to take his profit was the hope was some other lender would come along in a few months to offer the hopeless homeowners a bigger loan and pay him off in full.  The new homeowners moved in to their brand new, shining example of The American Dream and all was well….for a few short months.  It didn’t take long before payments were late and the homeowners were in default. (Remember they had no hope of ever making the income they would need to support this home in even the short run.)  First came the foreclosure lawsuit filed by something that claimed it actually owned the $150,000 first mortgage, Deutshe Bank Trust, filed by one of Florida’s now infamous Foreclosure Mills.  Next came the foreclosure lawsuit I filed on behalf of my client, seeking to recover the $25,000 he claimed he was due on the second mortgage.

A most interesting thing happened when the foreclosure mill called into the judge’s chambers to try and foreclose the First Mortgage.  I was at the hearing on behalf of my client the second mortgage holder and I raised some objection to the Affidavit that was submitted by the foreclosure mill. The judge agreed that my objection was valid and then a most curious exchange occurred.  The Foreclosure Mill replied over the speaker phone, “that’s no problem judge, I can just correct the Affidavit and have it faxed right over to you.”  The judge and I both questioned how this were possible when the lender was a corporation based in California. “Well”, the Foreclosure Mill Replied, “That’s because we actually produce and sign the affidavits right here in the law office”

BOMBSHELL–The hearing and exchange described above occurred in 2006, long before Jeffrey Stephan and the robo signer controversy of 2010.  So here we were in a hearing and the attorneys on one side of the case admitted that they were producing and entering the evidence they needed to win their case.  This would seem to be a clear cut and blatant violation of all rule of evidence and ethics, but it was apparently a widespread practice….when the judge raised objections to the fact that attorneys were entering evidence, the Foreclosure Mill helpfully replied, “It’s not a problem for us to file these affidavits, we do it all over the state.”  Hmmmmm…. “We do it all over the state.”

If we looked back at all the foreclosure cases that have been “won” by the banks since 2006, my mind struggles to comprehend how many of these cases should not have been “won” by the banks at all if a) we all realized the long tern consequences of allowing such flawed and faulty procedures to occur and; b) we had all been paying closer attention to the manipulations of the foreclosure mills, the subprime lenders and the Wall Street Fat Cats that caused all this mess.

Subprime Loans Were Never Intended To Be Repaid

A key fact, and one that people (understandably) have a hard time wrapping their heads around, is the fact that this family never had any hope of repaying this loan.  The vast majority of subprime loans were never going to be repaid, even if the US economy kept chugging right along.  So what company in their right mind would ever write a $150.000 check when they knew there was no hope of repaying that loan and what other incentives were at play in the orgy to write billions in dollars in loans that were not going to be repaid….that’s where the real (phantom) money comes in.

Matt Weidner’s Law Blog

Do you want to see something truly frightening?  Just check out the 3 charts posted further down in this article.  These charts prove that we are now in the biggest debt bubble in the history of the world.  As Americans have enjoyed an incredibly wonderful standard of living over the past three decades, most of them have believed that it was because we are the wealthiest, most prosperous nation on the planet with economic and financial systems that are second to none.  But that is not even close to accurate.  The reason why we have had an almost unbelievably high standard of living over the past three decades is because we have piled up the biggest mountains of debt in the history of the world.  Once upon a time the United States was the wealthiest country on the planet, but all of that prosperity was not good enough for us.  So we started borrowing and borrowing and borrowing and we have now been living beyond our means for so long that we consider it to be completely normal. 

We have been robbing future generations blind for so long that it doesn’t even seem to bother most people anymore.  We have become accustomed to living in debt.  We go into massive amounts of debt to get an education, we go into massive amounts of debt to buy a home, we go into massive amounts of debt to buy our cars, and we even pile up debt to buy holiday gifts and to purchase groceries.

Just check out the chart posted below.  It shows the total credit market debt owed in the United States.  In other words, it is a measure of what everyone owes (government, businesses and consumers). 

30 years ago, total credit market debt owed was less than 5 trillion dollars.  Today, it is over 50 trillion dollars.  Total credit market debt is now at a level equivalent to about 360 percent of GDP.  This is what has been fueling the great era of ”economic prosperity” that we have been experiencing….        

So what is the answer to this problem? 

The truth is that there is not an easy answer under our current system.  The only way that the U.S. economy continues to “grow” is if the debt bubble continues to “expand”. 

If our leaders allowed the debt bubble to “pop” and the U.S. economy went into a deleveraging cycle, it would mean that we would start living far below our means for an extended period of time and it would spawn a deflationary depression that would make the Great Depression look like a Sunday picnic.

Most Americans are in no mood to take that kind of hard medicine.

Do you really think that the American people are going to vote in politicians who tell them that it is time to live below our means and that we are going to have to experience a standard of living far below what our parents experienced in order to pay for all the debt that they racked up?

No, that is clearly a dog that isn’t going to hunt. 

The American people want to hear that better times are ahead.

One way to give the American people “better times”, for the short-term at least, is to crank the debt spiral back up.

By introducing another huge flood of paper money into the economy, the Federal Reserve and the U.S. government are hoping that banks will start lending again and that U.S. consumers will start going into more debt again.  Already, as you can see from the chart below, U.S. household debt has started to sink just a little bit.  But considering the fact that approximately 70 percent of our GDP is generated by U.S. consumer spending, that is not good news for “economic growth” statistics.

Three decades of “economic expansion” have been fueled by consumer debt that has spiralled completely out of control.  Over the past 30 years, total U.S. household debt has gone from less than 2 trillion dollars to almost 14 trillion dollars….

So where did the housing bubble come from?  It came from Americans going into insane amounts of debt that they could not afford.  The truth is that only the top 5 percent of all U.S. households have earned enough additional income to match the rise in housing costs since 1975.

Not only that, but Americans are going into staggering amounts of debt in order to pay for their educations.  Total student loan debt in the United States is climbing at a rate of approximately $2,853.88 per second, and today Americans owe an all-time record of more than $849 billion on student loans, which is actually more than the total amount that Americans owe on their credit cards.

The truth is that American families are stretched thinner financially than they ever have been in the post-World War 2 era.  According to a poll taken last year, 61 percent of Americans ”always or usually” live paycheck to paycheck.  That was up significantly from 49 percent in 2008 and 43 percent in 2007.

Many Americans have come to the absolute breaking point.  1.41 million Americans filed for personal bankruptcy in 2009 – a 32 percent increase over 2008.

But remember, approximately 70 percent of our GDP is generated by U.S. consumer spending, so without more consumer spending there won’t be more economic growth.

So, instead of Obama and the Federal Reserve encouraging Americans to get out of debt and to save money, they are trying to get the American people to spend even more money and to go into even more debt because they desperately need positive “economic growth” figures. 

The worst offender of all when it comes to debt, of course, is the U.S. federal government.  Over the last 30 years, the U.S. national debt has gone from about 1 trillion dollars to almost 14 trillion dollars….

This is the largest single debt in the history of the world.

So just how big is one trillion dollars?

If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars. 

Yet somehow the U.S. government has accumulated a debt that is well over 13 trillion dollars.

Unfortunately, it keeps getting worse month after month after month.

According to the U.S. Treasury Department, the U.S. national debt is rapidly closing in on 14 trillion dollars and and will climb to an estimated $19.6 trillion by 2015.

Should we all throw a big party when it crosses the 20 trillion dollar mark?

I can just hear the theme song now….

“I’m going to party like I’m 19.99 trillion in debt!”

But the cold, hard reality is that we are in far, far more trouble than what the official government numbers tell us.

In a recent article, Boston University economics professor Laurence J. Kotlikoff analyzed the financial condition of the U.S. government, and he summarized the horror we are facing by making the following statement….

“Let’s get real. The U.S. is bankrupt.”

After carefully going over Congressional Budget Office data, Kotlikoff came to the conclusion that the U.S. government is now facing a “fiscal gap” of $202 trillion dollars.

Now how in the world did that happen?

Well, it turns out that we have made promises to future generations that we cannot possibly even come close to keeping.

Social Security and Medicare are fiscal nightmares that are far more immense than anything that U.S. government has ever faced before.

According to an official U.S. government report, rapidly growing interest costs on the U.S. national debt together with spending on major entitlement programs such as Social Security and Medicare will absorb approximately 92 cents of every dollar of federal revenue by the year 2019.  That is before a single penny is spent on anything else.

That is just 9 years away.

When people speak of the financial situation of the U.S. government being “unsustainable”, they aren’t kidding around.

The truth is that the U.S. government has been running gigantic Ponzi schemes which are about to collapse.

Take the Social Security shell game for example.  Back in 1950, each retiree’s Social Security benefit was paid for by approximately 16 workers.  Today, each retiree’s Social Security benefit is paid for by approximately 3.3 workers.  By 2025, it is projected that there will be approximately two workers for each retiree.

So exactly how is that supposed to work?

For much more on the coming Social Security nightmare, please see an article that I posted earlier this year: 22 Statistics About America’s Coming Pension Crisis That Will Make You Lose Sleep At Night.

Sadly, Professor Kotlikoff is not exaggerating in the least when he proclaims that the U.S. government is bankrupt.

At our current pace, the Congressional Budget Office is projecting that U.S. government public debt will hit 716 percent of GDP by the year 2080.

Public debt at a level of 100 percent of GDP is supposed to be an absolute nightmare scenario.

Needless to say, the whole thing is going to come crashing down long, long before we ever get to 2080.

We have been living far, far beyond our means for decades, and it has been the greatest party in the history of the world.

But it is time to turn out the lights because the party is over.

The Economic Collapse

On Tuesday, when the Republican Party and its Tea Party chump-proxies re-conquer the sin-drenched bizarro universe of the US congress, they’ll have to re-assume ownership of the stickiest web of frauds and swindles ever run in human history – and chances are the victory will blow up in their supernaturally suntanned, Botox-smoothed faces.

But don’t cry for John Boehner, Barack Obama.

The President and his Democrats may have inherited this clusterfuck from the feckless George Bush but they flubbed every chance to mitigate any part of it, ranging from their failure to restore the rule of law in banking (by prosecuting the executives of major banks who oversaw the systematic swindle), to mis-directing our dwindling resources toward ends (such as “shovel-ready” new super-highways) that won’t promote a credible future for this society, to misleading the public in the fantasy that alt-energy will offset the disruptions of peak oil (and allow us to keep running suburbia, the US Military, and WalMart by other means).

It’s really too late for both parties. They’re unreformable. They’ve squandered their legitimacy just as the US enters the fat heart of the long emergency. Neither of them have a plan, or even a single idea that isn’t a dodge or a grift. Both parties tout a “recovery” that is just a cover story for accounting chicanery and statistical lies aimed at concealing the criminally-engineered national bankruptcy that they presided over in split shifts. Both parties are overwhelmingly made up of bagmen for the companies that looted America.

Alas, the damage is now so pervasive in money matters that the federal government could be toast as a viable enterprise, even if a new party or two spontaneously rose up out of the ruins of a plundered democracy. Anyway, one of them will not be the Tea Party, with its incoherent agenda and moron cadres who seek to put Jesus back in the US constitution, where he never was in the first place – though they don’t know that.

Nor is there any party on the left or even in the center with a clue or a moral compass. Its just one of those tragic moments in history – like 1850s America, when a strange vacuum of thought occupied the heart of political life, and the scene was cluttered up with mere place-holders like Millard Fillmore, Franklin Pierce, and James Buchanan. (Can you state a single idea or position, these political ciphers advanced?)

Where we stand now is on the cusp of another giant step into the abyss, since the latest storm of Foreclosure-Gate suggests pretty strongly that mega-tons of mortgage-backed securities are assured of blowing up, as well as the sundry derivatives of these things (CDOs, CDOs-squared, plus the massive fetid matter infesting the alternative cosmos of credit default swaps). If you follow the media-of-record like The New York Times and the Wall Street Journal, you would have to conclude that there is no extant plausible notion among financial leaders as to how the fiasco of botched mortgage-and-title documentation can be resolved. After three weeks of emerging events around this debacle, the consensus among the power brokers is to pretend that there’s no problem, that the issue of missing, forged, post-dated, trashed, or non-existent paper related to claims on property can just be put aside, brushed under the rug, glossed over, ignored.

Let me tell you something: this problem is not going away. At the very least it is going to paralyze the real estate industry for as far ahead as anyone can see. For another thing, it could force the disclosure of what the banks are holding in their vaults in the way of worthless paper and expose their insolvency. For still another thing, it could lead to rafts of lawsuits that would additionally shove the banks toward collapse, demolish the claims that underlie our currency, call into question the meaning of property ownership per se that is the basis of Anglo-American law, and tie up the court system until kingdom come. In any case, every pension fund, state government, and insurance operation would be crippled. I could go on but you get the picture…. This might all sound extreme, but I repeat: nobody with any authority in this land has proposed a plausible way out.

By the way, I haven’t even touched on the totally insane but now accepted practices of the Federal Reserve attempting to stage manage the velocity of money by so-called quantitative easing – a.k.a. the US writing checks to itself – because even that nonsense assumes that everything else remains more or less stable.

This is what the two major parties can look forward to as we swing around into the Yuletide season and then into 2011. The proud winners of seats in congress and the senate might as well put on clown suits and little pointed hats on Wednesday morning and drive around the Washington monument in toy cars. There will be a desperate need for a new politics in this country, for people unafraid to tell the truth and act in the genuine public interest. If we can’t generate it from the saner quarters of this country where people think thoughts that comport with reality, I’m afraid we could see some generals step into the picture.

I write literally over the middle of the Pacific Ocean, en route from Australia where I spent the past week – not on vacation. It’s a reminder that there are a lot of other players in the wide world – not all of them nations on the verge of a nervous breakdown.

James Howard Kunstler