Frank Louis
Whoa: my mistake. Making home affordable program is a great success. I apologize.
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By Frank Louis
April 2, 2011

Yes, it seems that I have been wrong all of these months and years that I have been broadcasting and writing about housing. I have now finally seen the light. I now understand how successful our president's (Barack Obama) programs to "make housing affordable" have been. Yes, and now that I fully understand just how affordable these taxpayer-funded programs make housing I can only shout "Halleluiah!"

These programs are running like clockwork, lowering prices of housing in entire neighborhoods and cities through a method otherwise known as the "foreclosure." Yes, and as we know with foreclosures on the rise and in record numbers, the use of foreclosure as a mortgage modification program can only be touted as a "great success." Yes, truly "Making Homes Affordable," only for investment corporations, not for people.

That is correct, now that I understand this better; I fully understand how this works. Take a recent example I have become familiar with. This example is not a standalone event in any way. I have reported on other similar proceedings several times previously.

Recently, I learned of a home that had been valued by fraudulent appraisers, lenders, and realtors for around $950,000 in 2005 and had approximately a $560,000 mortgage. The owners had cashed out some equity to do home improvements, invest in real estate, etc.

A cash out, I will add, that they would have never done except for the fact that they were lied to about the market and their property's worth. Yes, some realtors, mortgage brokers, and some appraisers all stood to make more and more commissions pumping up values and pulling folks like these in so they could put that equity to work in the American Tradition. These "professionals," in the best interest of their clients of course, proved to these property owners what a sound decision this was — based on fraudulently produced comps of course, the value was there. The property had been owned by the same people for about 20 years.

The property was recently sold by the bank in a foreclosure for a little over $200,000 making it quite affordable. What a great success story. Yes, I must spread the word to the corners of the earth — what success these programs are having!

Yes, I am excited about all of these "successes," despite even the former Treasury's Special Inspector General for the Troubled Asset Relief Program, Neil Barofsky reporting in a 2010 interview with Reuters on these program. Barofsky said the Obama administration's $75 billion Home Affordable Modification Program (HAMP) has a definition of success that is "essentially meaningless." The article also reported that the program, funded by the $700 billion TARP Bailout program is "likely to be a failure when it wraps up in 2012." The program, Barofsky was quoted, "will be of questionable value, particularly in light of the huge investment of taxpayer funds." We pay for this information? I could have told you that... In fact I have!

WOW! No wonder I had thought it was not working. I had heard all of this reporting. But the evidence, Neil, is right here. Yes, the program you have been paid by us to oversee just made the house in this example even more affordable by around $700,000 to this family as well as making every other property in the area just as affordable. Great work Neil!

Neil, I think you have missed the point. Simply put the same spin on this that I have. Everything is more affordable now. And Mr. Barofsky, now that you recently stepped down, during your tenure with the Treasury, where did you put your money? Will we read next year of the billions of dollars you too have made from knowing exactly how to play this crisis like so many others in the revolving doors at the top between lawmaking and investment banking roles? Is Mr. Barofsky assuming any responsibility in his program's failure? I don't think so. Just noticing more flaws.

This success story, this foreclosure, made not only this property "affordable" but also every other property in the area become instantly even "more affordable" as a result. Yes, the values on every property in the area became more and more affordable (to buyers) as the values fell yet again. Our fraudulent economic system continues to rape the American public for their net worth and property equity assets. This is not market fluctuation. Of course we hear the excuse that "nobody held a gun to their head," and that is correct. As I wrote in a previous article, the real estate crisis is the perfect crime. No "criminal" no wrong doing, a crime too big to fail. Just greedy people using their homes as ATMs we have been told. However, you cannot overdraft an ATM.

Yes, the property owner in this situation had applied and reapplied for a modification under all of the catchy named loan modification programs. They had complied with jumping through the gauntlet of hoops hat the mortgage-servicing corporation required them jump through. They were simply requesting that the monthly payment be reduced by a few hundred dollars so that the monthly cash flow on this property might no longer be in the red. What I call a "short keep."

They were denied for rather vague reasons. Given the unemployment rate and other circumstances in this nation (not to mention that the property value was underwater) this surely seemed like a more than logical request on the part of the property owner. Rental incomes have decreased almost everywhere (up to 30% in places) as well as values (75% in places). However, these people were Americans who had worked and invested in this nation's future economic security in real estate. They were scammed.

Yes, it was one of those nasty "investment properties," not the primary residence. Given lower rents and the negative value of the property that had occurred due to the effects of the community reinvestment act, a simple modification would have made it practical for these people to keep the property. A slight adjustment to just the monthly payment seemed like the smart thing to do. Current rates are low.

After all, this loan servicing corporation's trade marked catch phrase (a sentence nobody else is allowed, by law, to even say) is something like "Helping Homeowners is What We Do," Wow, really touches the ol' heart strings. "Helping Homeowners Loose their Homes" is more like it. Truth anybody?

So, the servicing corporation, in the spirit of "making homes affordable" and in line with their catch phrase of "helping Homeowners" did just that. They sold the property at a foreclosure auction (where about 15 investor-representatives showed up) for $220,000, helping a real estate investment firm by making the "home affordable" for them. They will now hold the previous owner's feet to the fire for the remaining $540,000.

I am sure the lawyers representing whatever entity it is finally deemed owns the mortgage will try to take and sell even the previous owner's body parts when they die as they are entombed against the debt. The estate is liable and our bodies will probable be deemed as part of our estates in the not too distant future. I did see on television once that, if parted out correctly, our bodies could bring over $200,000. I am sure that some legal expert is working on the wording of such a law as I write this if it hasn't already been done. After all, don't you agree, our body parts should be considered part of our estate in the Godless society we are becoming.

Surely all of the property owners in the neighborhood are also truly excited as they all just lost about $300,000 or so in their property equity that same day; making all of their properties much more "affordable" to potential buyers. These foreclosures put even more properties in harm's way as they all become further and further upside down in value.

And who bought it? Perhaps a hard working American family with good credit and cash for the 20% down payment? People like the previous owners? Some family like the "greedy" family who just lost the property? A family that will live there for several years, then perhaps move to a single family home, keeping the property for their children and grandchildren? A family building a future through the "American Dream?" No, a real estate investment company bought it. Real estate speculators; the same type of speculators that brought the market to its knees by creating sub prime loans so they could sell more mortgages for the mortgage backed securities. The "business cycle" at work? I think not.

No, people who bought real estate with their life savings as down payments at the height of the market were not the evil speculators they were accused of being. They were not greedy. They were lied to regarding property values provided by the "professionals" in the real estate industry they hired. . They were investors in a very clandestinely lopsided and corrupt market, unbeknownst to them. The many of the same realtors who sold property at the fraudulent top of the market, a market that they fabricated in the first place, are now buying back the properties themselves at bargain basement prices at our expense. Not unlike hedge fund magnate John Paulson who had the good luck (he made $4 Billion) to know when to sell short all of the credit default swaps he had helped create and has now begun buying them back at severely reduced rates. Level playing field? I think not.

On a recent FOX News John Stossel program entitled "Freeloaders," Stossel interviewed a lawyer who has filed billions of dollars in what many would consider "fraudulent" claims against the Department of Agriculture in the Pigford Settlement, a program designed to resolve racial bias claims by blacks alleging to have desired to become farmers but were denied access to federal programs to do so due to race.

He asked Al Pires, the lead attorney against the USDA in these hearings: "How do you know they're farmers?" After along pause he answered, "They fill out the forms... We hope they tell the truth." Each claimant received $50,000. I am sure Mr. Pires got his share as well.

What??? He "hopes" they tell the truth? He is a legal representative in our legal system in our legal courts. But he assumes no responsibility for the data he brings to the court of law? Like Bernanke and the others who have ruined our nation, he may have a "flaw." As long as our legal system is so disrespected even by those who purport to champion it, we are doomed. Our founding Christian principles of right and wrong have been washed aside. Think the same disregard for our law did not happen in the real estate crisis? Think again.

Back to the property example at hand, think about it: The property owner requested only a reduction in a monthly payment of only a few hundred dollars to create a neutral or slightly positive cash flow and was more that willing to keep the property, even at the very underwater value. With the $560,000 mortgage, the monthly nut on this property was in the $3,500 range. Somehow, with the property being worth far less than the mortgage and loosing hundreds of dollars a month to keep it could no longer work. They had expended their reserves.

What do you think the new monthly payment will be at the new and improved $220,000 "affordable" price tag? If financed at today's interest rates, the payment might perhaps be $1,200 a month leaving $1,800 a month positive cash flow on the property.

The only reason on earth why some method of making this property work for these people was not accomplished is that the system is working against us and using our money to do so. As with attorney Pries, there is obviously no regard for justice within our rule of law. No worry, the investment corporation paid cash so they did not need to apply for a mortgage. Is someone trying to tell me that this even makes sense or that the original owner could not have made this lower payment of $1,200? I think not.

And why are not people who made cash down payments, or had meaningful equity in their properties that has been stripped from them treated differently in foreclosure consideration than those with the no-doc, nothing invested loans that caused the housing pricing spike of 2004-2006 in the first place?

Those who played by the rules and invested their life savings and their good credit in property were set up and robbed. They have been herded into foreclosure and bankruptcy courts. Their credit histories destroyed. They had faith in the fiduciary, legal roles those they hired to protect their rights and security had to them and these "professionals" did them in!

The "professionals" lied, it was a game, and they played a Ponzi game with our country. Now, after much research, the powers that be tell us that a 20% down payment will be the new norm. What brilliance! What is this? It was the "norm" when those same expert "authorities" decided to create the nightmare out of the American Dream of home ownership by negating any requirement of any form of validity in mortgages, much less a 20% down payment. People who paid down payments when many others invested nothing deserve their money back! And let's not forget the fake (straw) buyers realtors and mortgage brokers brought to the closing table.

This is why I have, for 3-years now, proposed what I have dubbed the "short keep." Yes, the short keep in which the bank agrees to have the current owner, provided that they had meaningful equity before this fraudulent downturn or made a standard (20%) down payment when they bought it keep the property for more or less what it would bring in a foreclosure or short sale situation. People who played by the rules, and have skin in the game deserve to be treated differently than those who do not. No more realtor and lender commissions, no more attorneys' fees for foreclosures, no more destroyed credit. Just a simple buy down or rate and term adjustment; foreclosure crisis solved! Economy saved, real estate values stabilized. End of story.

The Frank Louis "Short Keep" program is not intended for people who "bought" property with the no money down, no documentation, no income verification loans that created the housing spike and the resultant crisis we have at hand. And no media "expert" has yet to bring this issue up. No, the government initiated programs seem to all be designed to "help" the very people whose actions created the problems we are allegedly trying to solve. So why are people who paid and people who did not pay not distinguished between? Why don't our elected officials and those in the legal and media professions dare to ask this?

How unwise are these people we elect to office and appoint to the Treasury or Federal Reserve? Many of these are people who rotate between high paying positions at investment firms and legislative roles in a ritual that is a clear conflict of interest. Surely not at "arms length" as we are told is the standard to be upheld is described. They are destroying our nation with their "exotic financial mechanisms" and other misguided, shortsighted schemes from graduate school thesis's that do nothing more than to position them in situations that make them millions and billions of dollars each year that are ours. We all need to vote them out and soon. This needs to end.

We need to reclaim this country along with our borders, our language and our economic system based in Christian principles and our moral compass along with it. With 12 million foreclosures in the forecast with perhaps s many as 40 million people affected and probably 100 million people who have lost all of their property equity and are paying for property that is valueless, we have a pretty meaningful voting block with which to correct this situation.

And the geniuses on CNBC, and other financial media are sitting on their... (Well you know what they sit on)... amazed that foreclosures continue to increase, shaking their heads as housing values continue to plummet. They nod and tow the scripted line. Has anyone seen any media person make the likes of Ben Bernanke, Greenspan, or even a single realtor or mortgage broker uneasy with their questioning? Never. I would like to ask Mr. Bernanke what he feels he needs to do to correct his "flawed model" that led to this crisis. Nobody asks him that. No one asks Barney Frank what his definition of a "good mortgage" is. They just nod. Pawns!

In a recent account in Forbes online about the 9 worst cities in the US, it was reported that some genius mortgage research company discovered: as "more and more properties go into foreclosure, many ultimately become bank-owned." They also discovered that this is a process that "wrecks homeowners' credit and pushes the prices of local real estate down." Yep, further and further every day as I mentioned earlier on. Pure genius I tell you!

And we pay these people to discover this information? What detectives! Some taxpayer funded research initiative I would bet paid for this vital information. Why don't they spend their time and our money trying to get Americans who have lost pretty much everything their life savings and their good credit back? After all, isn't that what they discovered?

All of the cities on this Forbes "9 worst cities list" have housing markets with a larger than average number of delinquent home loans in a spiraling downward funnel that is killing our nation. Perhaps next year, this research think tank can discover how this crisis is spreading to other cities as well. They will probably receive even more of our taxpayer money through TARP or some other stupid affordable housing program to do the research as well. Maybe they can try explaining to me how the current solution to this crisis, foreclosing and more foreclosing, is going to solve anything.

The Christian basis of our nation's laws and constitution left no unclear message to our Founders. They read and pondered Scripture. They posted it on municipal buildings across this land for all to read as well. The New Testament of the Bible, 1 Corinthians 1:21 provides a rhetorical question for this time in history. It asks: "Where is the wise man? Where is the scholar? Where is the philosopher of this age? Has not God made foolish the wisdom of the world?" You tell me — but I think the answer is "Yes He Has!" Can we stop it? "Yes we can!"

Doesn't anyone in this banking industry understand that, in instances like the one I am discussing in this article, they are destroying both the country as a whole and all of its individual components (as in citizens who work hard and historically paid their bills) one by one as well. This foreclosure was, in no way necessary or just. It was a crime, a set up. And the people who created this criminal environment will only admit to things like "not fully understanding what would happen" or having "flawed economic models" and the like while Americans suffer and become bankrupt. When will someone stand up and ask the real questions? How long do we let this happen?

America, wake up! We can no longer stand by while our neighbors loose their life savings, their futures, and their financial stability while we quietly pay our mortgages on our underwater real estate like ostriches with our heads in the sand, until we die only to see it go into foreclosure then because it is still worth less than we owed on it.

© Frank Louis

 

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Frank Louis

Frank Louis is a print and on-air commentator who offers opinions and solutions on and for the economy, social issues, and the future of this nation. In the Old Testament, Nehemiah 4: 14 instructs us to fight for our houses; something we need to be doing now. Our future generations depend on it!... (more)

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