For those of you who are not familiar with the story of my mortgage, here is the tl;dr version:
I had a house that lost two thirds of its value in the real estate crash. With no other way to stop the bleeding, I declared bankruptcy and was going to turn the house over to the bank. The bank testified to the bankruptcy court that they were the owner of the note and the mortgage, but were lying. They had sold the note and mortgage to Fannie Mae two years earlier.
I sued them for fraud and we settled out of court for almost $10,000. The mortgage holder that wasn't then sold the note and mortgage again, this time to Nationstar mortgage. They recorded the sale in the county clerk's office. At this point, there were at least four different entities that had claims to this mortgage: MERS, Nationstar, Fannie Mae, and the originating bank.
Then the originating bank tried to foreclose. The foreclosure was dismissed, and Nationstar claimed to not have any record of owning the mortgage.
The feds stepped in and sued the banks. I got another $4,000 in THAT lawsuit.
The originating bank continued to send me demands for payment, even though prohibited from doing so by the bankruptcy court, and the fact that they no longer own the note and mortgage. So after a few years of this, I got tired of it and sued several more times over the next few years. I wound up getting another $25,000 in damages from those suits.
Then, with only a month left until the statute of limitations was to kick in, the original bank filed papers transferring the mortgage from NationStar and Fannie Mae back to themselves. The only problem was that I had letters from both of them saying that they had no knowledge of these transfers.
The original bank then filed for foreclosure, claiming that they had lost the original note and mortgage, but (trust us, they said) we are entitled to foreclose.
I was all set to fight them in court. I had proof that they were lying, and I was going to keep the house. If I won, the statute of limitations would have passed, and the house would have been mine to keep.
They got a federal judge to rule that the bank's lying was immaterial, because I had declared bankruptcy. A person who has declared bankruptcy, he wrote, cannot fight lawsuits from creditors, even ones who were only creditors because of their own fraudulent activity and statements, without undoing the bankruptcy. I was told by the judge's staff that he wasn't about to give away free houses. This would have exposed me to my old debts, along with 5 years of interest and penalties. I had to give in, and they got the house.
At least they have finally left me alone, paid me a total of about $50,0000, and I got to live in that house for five years, rent free. Still, they committed fraud and got away with it.
Don't feel sorry for the banks. They made hundreds of billions of dollars.
That's an interesting story but I think you made it up. It seems to be a conglomeration of headlines from that period. Indeed some courts tried to go above and beyond the law and did the kind of things you described but it was the exception. The thing is you owed the money and because you bailed on it and didn't pay someone else was on the hook. And you somehow think that is good. No it is fraud and you committed fraud and if if it is true (which I doubt) than a judge was complicit in defrauding the bank. Shame on him. Then as you claim you lived in it for five years while paying nothing. IMHO people like you should be horse whipped. So there it is you are either a liar or a no good fraudster and squatter.
ReplyDeleteI am a different anonymous.
ReplyDeleteAnonymous at 7:11, you're blaming the victim. You didn't account for the politicians causing the bubble+crash in the first place. It may have been the root cause of his problems, and courts did nothing to fix it. This guy has no more "moral duty" to pay his debts than any other business does.
Guess what China: your US Treasury bonds are worthless paper, they'll never be redeemed. Stupid you to trust a government.
The politicians clearly caused the problem. In the 90's congress and the president mandated that banks sell to "poor" people and approve mortgages with no or little money down. They also required Fannie mae and Freddie to buy up these questionable mortgages. It was a mistake and it blew up in 2008.
ReplyDeleteYes indeed you can declare bankruptcy and walk away from your responsibilites. Whoop de do. I don't see anything about that worth celebrating. BUT that wasn't what I was complaining about. Everyone who had money in the banks was placed at risk by the way the courts treated the banks holding the mortgages. Every tax payer had to bail out the banks because of the home owners walking away from their mortgage. Again hardly something to celebrate. The entire 2008 recession was made worse by the courts and the complicity of the government. What should have been allowed to happen is quick repossion by the banks and quick resale to people with money. If the courts had not inserted themselves into this mess in a harmful way it would have been a short recession. As it is we are actually still in that recession.
Everyone has a moral duty to repay their debts. They do have legal avenues to avoid that repayment but that does not negate their moral duty.
To correct the third anonymous (first answering?) the reason this recession has lasted 9 years is almost entirely manipulation by the Federal Reserve. Specifically, trying to inflate housing prices so that the banks holding mortgages don't lose money. The creation of trillions of dollars in cash, and the theft of what would have been $8 trillion earned by savers by transferring it to those banks has penalized everyone in the country for the '08 crisis. Which was caused in large part by collaterlized debt obligations (CDOs), mortgage backed securities, created by ... wait for it... those same banks the Fed is rescuing and that were protected by Dodd Frank.
ReplyDeleteWithout the government to mandate the sub-prime loans and the Federal Reserve to monetize them, none of this crap would have gone down. Or the recession would have been over long ago, like virtually every other recession in history.
I really came by to offer congrats, Divemedic. It has been a long, rough road.
Different anonymous here, same as 12:50 AM.
ReplyDeleteThe moral duty of a homeowner to pay a mortgage is no greater than any other business' moral duty to pay back a loan. The moral duty to pay a loan is reduced by the effects of government manipulation. Was the cause of this bankruptcy a poor buying decision, or government? Results of googling "street-pharmacy.blogspot mortgage" makes it sound like he would have paid if government hadn't created a bubble which drastically decreased both his income sources and his house value. In this case the root cause is all government. Don't blame the victim for the actions of government, he gets no blame for seeking to escape the disaster government caused. The lenders were quasi-government organizations and repeated crooks, not a local credit union which actually is honest.
In addition to the house price boom/bust government actions, there are all the regulations which makes houses unnecessarily expensive. He has no ability to avoid these, either. If he was on Gilligan's island with no government manipulation and he borrowed too much for a palm hut, then fine, it was his mistake. That's not the case here. It's only fair to call him on his freely-made choices, which in the absence of government manipulation might be for the same-sized house at one quarter the price against a more stable income stream.
The correct moral lesson is that Bible story where the citizen-suckers are willing to pay their agricultural surplus to Pharaoh to hold as taxes, then when they need it back Pharaoh says ha, now you're my slaves, and you can't do anything about it because you let me steal all your preps. Pharaoh and his employees are evil but the citizens are stupid to pay "taxes". Must have gone to public school and been indoctrinated by government employees. Still today we have an Egyptian obelisk monument in capitol city dedicated to another prep-stealer currency manipulator, General Washington.
ReplyDeleteSiGraybeard I mostly agree. The QE, the printing of money and the 8 year lowering of interest rates was a mistake. I do honestly believe that in the first few months they thought they could "fix" this AND most importantly they feared it would be the mother of all great depressions. What they should have done was let the failing banks/businesses fail and let the homes go into default and allow the homes to be sold and it would have been over after 12-18 months. The problem is that none of this fixed it and now $10 trillion deeper in debt we still face the mother of all great depressions but everything is worse.
ReplyDeleteTo the other anonymouses; When you borrow money you do indeed have a moral responsibility to pay it back. Yes bankruptcy allows you to legally end both the moral and legal responsibility but to knowingly tie it up in court for five years while living in the home and paying nothing and feeling all superior about it is simply wrong.
This isn't over. Obama and the rest of the bureaucracy made a terrible decision to basically kick the can down the road. This will not end well. Ironically the only saving grace for the U.S. is that many/most other countries are actually in worse economic condition and we (the U.S.) will probably benefit from that when the SHTF. My advice is buy PMs.
and what moral obligation does the lender have? In my case, the bank FORGED papers and was caught. Their lawyer was disbarred because of it. They LIED in court. They committed fraud and were caught three separate times.
ReplyDeleteCaught red handed photoshopping signatures and other documents, to the point where they had to pay me over $40,000 in damages.
Tie it up in court? No one still knows who owns the mortgage on my former home, and likely no one ever will. To this day, there are three different banks who still have a claim on that house.
But none of that matters because I borrowed money. Got it.
See my latest post.
http://street-pharmacy.blogspot.com/2017/02/the-end-of-my-mortgage-story.html
So I am just thinking that there are 2 sides to the contract in the loan process. Both sides know the rules going into the contract that bankruptcy is a legal and acceptable resolution of the contract. In fact I'm pretty sure there is wording in the contract spelling out the legal ways of ending the contract other than just by paying off the loan. The lender knows that a default is always a possibility. Among other reasons, that is why they charge interest. So to those saying "moral obligation", what about the moral obligation of the lender to follow the rules in the contract regarding default? Not to mention the rules about not lying in court or falsifying documents.
ReplyDelete"not lying in court or falsifying documents"
ReplyDeleteHere is the problem and the source of this great misunderstanding. Congress mandated that banks make these loans and mandated that banks sell the loans to Fannie Mae and Freddie Mack so that they would have money again to make more loans. Period, no dispute about this.
When the crash came some states/some judges decided that banks had not met the letter of the law. That is when a deed is registered it shows the "owner" and the mortgage holder. Simple so far right? But some courts have said that if the bank did not get a new deed when they sold the mortgage then they broke the law and/or no longer have legal title to the home through the mortgage process. Again a fact not in dispute.
After this happened two (or more) different tracks of events occurred: 1. The crash brought a huge load of paperwork, red tape and brand new or judge defined rules and the staff was under the gun to make sure it was all right. Some of these employees suddenly found out that form "A" or red tape "B" wasn't signed (hell in some cases never existed when the mortgage was made). And in some cases the employee took it open themselves to make it right; that is had the form existed it would have been signed, no question, so they rubber stamped it. Not the bank, an over worked employee facing mountains of suddenly piled on red tape when the entire world was collapsing. Did they do something wrong? Yes. Did the bank? No (at least in most cases) But in court or at least the court with the judges who were creating law the banks were going to lose so they generally agreed to cede the case rather than spend more money after bad.
2. The banks simply took it in the shorts and of course what this means is the taxpayers took it in the shorts.
What SHOULD have happened is congress step up and say "we mandated these transfers of mortgages and legally who owns the mortgage is meaningless as the debt still exists and someone actually holds the paper so lower courts butt out. But seriously if you were a congressman and probably was in office when congress mandated that the banks do this would you be eager to put a bullseye on your chest. So congress did what congress does and looked the other way.
Thus many mortgagees escaped all responsibility and often even lived rent free in the house while the banks tried to unwrap the red tape and the taxpayer kept paying the costs of this mess.
Part two
ReplyDeleteThis is why, IMHO, there is no 'pride' or status of being 'vindicated' to claim that you won in court or that you escaped all your responsibilities by declaring bankruptcy AND got to live in the house for free. NO, you were living off the taxpayer (and the banks) and at that point are little different from a welfare queen. Don't get me wrong, I can easily see why someone in this position would be gleeful that they got one over on the banks but it was mostly sucking off the teat of the taxpayers since the banks were paid off.
AND that brings me to an important part of this story. The banks had to be paid off. The federal government insured them AND the federal government mandated that they take the very actions that was destroying them. IF instead the federal government had washed their hands of this and never bailed out the banks the actual costs would be many times higher because the federal government insured everyone of these mortgages and would have had to pay up. BUT not before the banks would have gone tits up putting millions of depositors at risk (and ironically they insured that group as well). So as much as I disliked it bailing out the banks was the right thing to do.
Where did it all go wrong? In the late 90's Clinton and a Democrat congress was pushing to make homes affordable for the poor. They mandated all of these laws and programs that forced the banks to make questionable loans. When Bush got in 2001 his administration tried to get congress to slow it down and clean it up and was openly threatened by congress. Some of those videos of this are still on Youtube. Congress did this and they knew the risks but were after a short term gain of votes from those who wanted houses.
Congress did criminal behavior which caused the problems, but you conclude the homeowner is morally on the hook to bail out the taxpayers. What?? What you really mean is the homeowner is morally on the hook to bail out the congressional criminals. You are behaving according to political instincts which we also observe in apes, monkeys, wolves, I suppose generally in pack hunters. You worship powerful, charismatic, controversial war leaders.
ReplyDeleteCongress caused the problem by criminal actions. The collateral damage to taxpayers should be attributed to congressmen, the ones that did it and the subsequent ones that ignored it.
Yeah right I worship those politicians every Sunday. I cannot tell if you are joking or not but I'll give you the benefit of the doubt that you joking.
ReplyDeleteYes indeed you take a mortgage out with the bank and you sign 20-30 papers and you are under a contract. IMHO if you lose your job or source of income you do indeed have the legal right to file for bankruptcy. But if you have income and choose to pay nothing and still live in the home then you are living free at someone elses expense. There are no two ways about it when you don't pay and still live there you are a rent seeker.
This comment thread has run its course. There are other, more recent posts on this subject. Those who wish to comment on THOSE may do so there.
ReplyDelete