One might think now that we are well on our way into the mortgage crisis, fraud related to mortgages would be going down. Sadly, this isn't the case and the story of a minister released on bond after being convicted for mortgage fraud — then rearrested for the same thing bears out this contention.
Another, even sadder twist are the desperate homeowners being taken in by scammers promising to rescue them from their current situation. Besides greed, fear is an often-used method to snare victims in fraudulent schemes. In May, the Comptroller of the Currency Administrator of National Banks (Treasury Department) issued a warning on this subject. Some of the scams include what are known as lease-back or repurchase scams, refinance fraud and bankruptcy schemes. Quite often, these schemes are nothing more than a means to steal whatever equity the person being foreclosed on has in the property, leaving them with nothing.
Bringing the mortgage crisis down to a more human level is the HousingPANIC blog. This blog is a wealth of information from the consumer point of view and keeps track of high-profile types recently arrested for mortgage fraud.
Thus far, in what has been termed the mortgage crisis, we've seen the banking industry get bailed out (at taxpayer's expense), a lot of people getting arrested, but so far very little help for the people who have been foreclosed.
I've seen this being rationalized as it's their own fault because they knew they were getting in over their heads. While this is true — especially in the case of the big players in the mess — many of the smaller players were being wooed, coerced and simply taken advantage of. To me at least, this bears consideration.
Finally, it appears that some help for the people being foreclosed is on the way and the Senate finally got it together and passed a bill. The bill is expected to be signed by President Bush with "reservations." In reality this bill, H.R. 3221, extends a lifeline to Freddie Mae and Fannie Mac by allowing people being foreclosed to convert to government loans. Freddie Mae and Fannie Mac have about $5 trillion in mortgages, which accounts for about half the outstanding loans in the United States.
Article comments
1 - bliffle
A lot of politicians and other charlatans will be coming forward now to claim that they know how to solve the subprime problem and that you should put them in charge of doing so, but you have to ask yourself "How can these guys be smart enough to solve the problem if they were not smart enough to come forward and solve the problem before it happened?"
We shouldn't allow these dummies to make even more mistakes after they demonstrated their stupidity before the problem became a crisis.
Get rid of them. Starting with the whole bunch of lying incompetents in the Bush administration and their hangers-on. And get rid of the incompetents in the previous administration, too, like Bob Rubin and Hillary Clinton. If any of them were as good as they claim we wouldn't have these problems.
Nothing worries me more than McCain having Phil Gramm as an economic advisor and Barak Obama having Bob Rubin as an economic adviser.
Obviously, neither of those guys should have influence over public policy since both of them paved the way to the current crises. Of course, both of them benefited the private companies they work for!
2 - Arch Conservative
"While I'm glad about half of the little people are finally getting some help, I have to question at what cost? The sad truth is that we (taxpayers) will pay for this and as usual, special interests and not the interests of the public seem to have too much influence in the decision process."
You answered your own question. The other little people. The one's that weren't so stupid or materialistic that they got into homes and mortgages they had no business pursuing, will pay for it.
3 - bliffle
Archie is half right. But, while he's willing to divide the 'little people' into the deserving and the undeserving he seems unwilling to make that same moral division among the Big People.
And that's Archies big failure, as it is for so many like him. He is willing to beatup the weak, but he gives the Strong a pass. Unless, of course, they have sex not approved by his mother (or some other Moral Agency).
But the real action, the real decisions, are made by the powerful, who not only rig the rules but use their special insider knowledge to improve their own investments. And the decisions they make have disproportionate effect on everyone.
In defense of the little people who got screwed by the subprimers, one can say that maybe they saw that as their last chance to grab a position on the economic escalator. Hounded by increasing rents, more inhospitable landlords, neighborhood crime, stagnant wages and the specter of runaway inflation from the enormous and increasing national debt, they may have tried to bet their diminishing savings in a desperate gamble to catch a place on the homeowners bus. After all, every financial adviser was telling them that their best investment was a home. Including all those bigshot TV characters who are now damning them for trying.
Don't forget that we readily bailed out the Big Guys with deals like Bear Stearns. We have precious little moral superiority to inflict on the less fortunate.
4 - Doug Hunter
I disagree with helping big or little people. The big guys are more at fault for this mess. I know many bankers at smaller banks that lend their own funds. They wouldn't dare touch the garbage that the secondary market was eating up. They knew, and so did their bigger brothers. The problem is that big business AND big government are so corruptly intertwined in this country. The big guys know if they gamble and win, they win, if they gamble and lose, well, they're "too big" to fail and will get bailed out.
Markets work better when the stupid are allowed to fail and smarter more agile alternatives emerge. Markets work better when companies are serving their customers and competing on price and quality instead of groveling at the feet of politicians waiting for handouts, bailouts, and pork. (in addition to the anti-competitive bills that are regularly passed to ensure new players have a harder time while 'grandfathering in' the good ole boys)
I despise big government and the businesses that benefit from it's corruption. Unfortunately, of my two choices for political party each only sees half the problem.
5 - bliffle
Psssttt - Doug: you don't HAVE to belong to a party. No kidding. You can vote and everything. No law requires you to join a party.
You're welcome.
6 - Clavos
"Psssttt - Doug: you don't HAVE to belong to a party. No kidding. You can vote and everything. No law requires you to join a party."
True, but the Parties have ensured that voting for anybody but their candidates is useless.
7 - Arch Conservative
I don't know exactly what you're talking about me and the big people bliffle.
I blame Fannie Mae and Freddie mac just as much as the incompetent iditos they gave loans to. They can all kiss my ass.
This bailout it would seem is designed to bailout both the "big people" idiots and the "little people" idiots. Only time will tell what it will actually do. I'm of the mindset that it will not serve to do any lasting good. You can't cure stupid and you can't cure greedy I'm afraid.
8 - bliffle
Archie must be choking and gasping as he indulges the smoke blown his way by various obfuscators liars and escape artists.
You have to ask yourself: is it the fault of the FNMA organization that we have this mess or is it the people who run FNMA? Why didn't the congress that created the FNMA fix it? Why didn't a responsible Executive demand improvements in it's operation? Why didn't the executive put forward better officers to manage FNMA? Why did congress approve bad managers? Who are the FNMA managers who created this mess? Will they be punished? Will the politicos who appointed them be punished?
In other words, who was remiss in allowing this to happen? What are we doing to avoid this in the future?
We can't just shrug our shoulders and say "oh, well, it couldn't be helped". Somebody screwed up!
I suspect that the guys running FNMA were political appointees. I suspect that various outside influences exerted heavy pressure on FNMA to get it to allow aberrant loan practices.
9 - Clavos
How naive of you, bliffle, to expect responsibility, efficiency and accountability out of federal agencies.
10 - Baronius
Bliffle & Clavos, are you sure? I thought that, since it's a private corporation, Fannie Mae's executives weren't political appointments.
11 - Clavos
You're right, Baronius.
Only GNMA still remains a full-fledged part of the government; FNMA is a separate stockholder-owned corporation, operating independently.
It does receive special considerations from the government, including, obviously, bailouts when needed.
12 - Lisa Solod Warren
If mortgage brokers were held responsible, if they could NOT sell the loans, thus not worrying if the loans failed, if the government had rules and regulations for the Big Guys who make the loans, and would not bail them out when they got greedy....
well, maybe things would be different.
And if banks worked with the mortgage holders to find decent rates INSTEAD of just foreclosing and selling the property at a loss, then maybe whole neighborhoods wouldn't go belly up and we would not be in such a financial crisis.
As it is, Fannie Mae and Freddie Mac are getting government help while no one is buying because A) they are scared and B) mortages, even to qualified homebuyers are becoming more difficult to get.
Were some little guys greedy in taking ARMs they knew they could not afford. Yup.
But if the banks worked with some of those people, perhaps we could avoid all the foreclosures, which, by the way, are being snapped up, once again by investors and speculators who will, once again, make money.
Good article.
13 - Dave Nalle
Ah Bliffle. Always eager to put the blame on Bush, even when there's no connection at all.
Here are the facts. FNMA was a creation of the FDR administration. It was spun off as a private entity by LBJ. It has no direct government involvement but does receive some special benefits and protections. Other than that it is privately owned and run.
As for Bush administration involvement, the Bush administration investigated financial irregularities at FNMA in 2004 and 2006 and sued the directors for $115 million in money they essentially stole from the company through manipulation of funds and bonuses. They also forced FNMA to carry out a new audit to correct accounting errors.
So in fact, this problem was created by Democrats and all the Bush administration did prior to the recent crisis was try to impose some accountability on the organization.
Dave
14 - bliffle
Good. So why is the FNMA failing now? Why were the managers not held responsible?
Why is the US government obligated to bail them out?
Is the charter of FNMA (a private corporation) to use it's privileges to screw money out of the US treasury?
15 - bliffle
FDR? Who the hell was that? What was that, a hundred years ago? Why would that make a difference?
Maybe if idiots like Dave and Clavos weren't so deeply wedded to their partisanship they could see where the truth lies and who the scoundrels are.
I won't mention Phil Gramms culpability in breaching financial boundaries in 1999.
Let me put it this way (just to humor them) Clinton did great damage to the economy by offsetting financial liabilities. Bob Ruben was his cats paw. OK?
Can you put aside your stupid knee-jerk attempts to exculpate any and all republicans and blame everything on FDR FOR A MOMENT PLEASE!?
We have a president and administration that sought, nay demanded, the most powerful position in history. They went to extremem measures to get the enormous power that they have.
So what the hell were they doing when they should have been doing their jobs? Dreaming up more pretexts for invading more unimportant countries?
The constant pursuit of partisanship has led Dave, etc., into the unfounded belief that I oppose BushCo because they are insufficiently liberal. What nonsense! I'm not even (primarily) opposed to them for their venality. I'm opposed to them because THEY ARE LAZY AND IRRSEPONSIBLE.
16 - Dave Nalle
Bliffle, just because you're so obsessively partisan, that doesn't mean that you're right in projecting such ridiculous bias onto other people.
I just pointed out the basics of FNMA's history. The reason it's relevant is that the flaw in FNMA lies with the basic concept of the government backing a private mortgage company, an idea which is characteristically democrat and shaped by two prior democrat administrations.
In addition, I pointed out that the government been taking measures to deal with the problems at FNMA dating back 4 years before the current crisis. They WERE doing their job. And it wasn't the lazy people at the top of the administration, it was the career, relatively non-partisan people at the CBO and the Office of Federal Housing Enterprise Oversight. These people aren't even political appointees.
Dave