Frank Louis
What do Ed DeMarco (FHFA deputy director) and 1.7 billion dollars have in common? Another half-baked housing scheme doomed for failure
By Frank Louis
April 12, 2012

I ask this question because the federal government and Tim, the tax man, Geithner have come up with yet another half-baked plan to apply yet another level of modern monetary theory on us — the 21st century guinea-pigs- for the "new world order."

While the plan borrows one point from the "Frank Louis Thesis," lowering principal while allowing for future profit sharing should prices come back, it falls short and will not work for one specific reason: Down Payments! " (Read my previous articles archived on this site for the complete thesis)

This 1.7 Billion-Dollar plan does not take into consideration whether or not people made down payments on their mortgages when they signed the papers on that real estate. While the plan is wrought with other flaws such as requiring the property be owner occupied, behind in payments at least 60 days, and be under value by 120%, etc, it does not bother to calculate how that underwater position came about.

As I have stated in the past, if two people purchased $500,000 properties and those properties have dropped in value to around $350,000 or so, the person who made the 20–30% down payment, and has been paying down principle every month, would not be qualified for this program because their property would not be "underwater" enough to qualify. However, the person who bought the same property with no money down, perhaps had a negative amortization loan, and maybe even got cash back at closing for perhaps another $50K qualifies hands down. Where is the "fair playing field?" Some one please let me know! Hint: You can't.

Why is this so important you may ask? The short answer is simple; people who invested a good part of their life savings in real estate through down payments and now have underwater or near valueless property are enslaved to that real estate. Should they retire, need to move or become more and more in a negative cash situation with the property, their only solution is bankruptcy... or death. This is not the American Way that I learned as a child. All because, we were told, our government wanted to give "everyone" the opportunity to have "the American Dream." They created a nightmare!

Strangely enough, in this age of mortgage related fraud and broken paper trails untold wherein nobody seems to know who even owns the mortgage, one thing would be easy to prove: Who made down payments and who did not. Look at your closing documents. Enough said. Bring them down; give these people their money and their credit back. They were robbed. You cannot have a system in which everything is "relative" or "situational" but make fraudulently created mortgage debt fixed. Especially when it so adversely affects our personal wealth, our life savings, and our financial (and national) security. And, in an era when tax revenues are at record lows (due also to the low property values) where is all of this new taxpayer money supposed to come from?

Yep, we are taking yet another 1.7 Billion Dollars in "taxpayer money" to do this. Well you know my stance on this. I am a taxpayer. You and I both are probably taxpayers (or you would not be reading commentary and reporting on this website!) and we have been robbed! Estimates are that the net worth we Americans have lost in our real estate values alone are in the 10-Trillion Dollar range: a big chunk of the national debt if you ask me. Yet, the revolving door for those who created this mess between the government, hedge funds, and our universities continues. Take for example, the new Federal Housing Finance Deputy Director, Ed DeMarco. Where is he headed? If past practices are any indicator, let's look at his predecessor, James Lockhart III. Both have similar backgrounds having served in several capacities in government like the Social Security Administration. Now, Lockhart is the VP of a $9 Billion hedge fund and Mortgage Recovery Fund... Mortgage Recovery Fund?

Humm... I wonder what "inside information" he may have brought with him. I read where the fund returned 185% on investment in 2007. Pure genius I tell you, pure genius! Do you think that Mr. (I'm sorry, "Dr") DeMarco may have a similar future in mind? How about Daniel Mudd? He made over 34 million in 2009 after leaving Fannie Mae. How do they do so well and we do so poorly? "Knowledge?"

Bank of America also has a new "plan" called "Mortgage to Lease" in which the mortgagees may be "allowed" to remain in the property by surrendering the deed to Bank of America then signing a lease for the property. Can you imaging trying to get your hot water heater fixed if Bank of America is your landlord? I don't think so.

I recently read an article in high praise of this plan written by another PhD in economics, professor at the George Mason School of Management, "Dr." Anthony B. Sanders. I looked him up... prior to his current teaching position; he was the Director and Head of Asset-backed and Mortgage-backed Securities Research at Deutsche Bank. Hey, wait a minute... aren't they being sued by the US Government for mortgage fraud? Bank of America too, to the tune of $14.2 Billion!

Oh, did I tell you... in the Bank of America "solution," these loans will be eventually sold to hedge funds for "pennies on the dollar" (after they collect their government insured "losses"), thusly lowering the principal amounts drastically. Wait a minute, isn't that exactly why they do not want to do principal reduction for us... the people who made hundreds of thousands of dollars in earnestly made down payments on our property? Where is our "principle reduction?"

What is up with this???

The list goes on, and on, and on. It is this "Modern Monetary Theory," sweeping the globe creating all of these problems and these people have all bought into it. Postmodernism! Think about it. Some kid who lived at home while in college, gets a degree in financial planning and the next day, with no real world experience, he/she is a "certified financial planner." With what real "knowledge?" Spewing the Modern Monetary Theory, which we all know does not seem to work in the first place.

We seem to have made the mistake of mistaking education for intelligence, for knowledge and character. Just because someone is educated does not mean they are intelligent, and does not mean they know what they are doing. My mother had an expression she used for situations like this. She would say that these people are "educated beyond their intelligence." I think she was correct.

The scriptures (you know the book that our nation's founders read when they wrote the documents that protect our liberties.) warn of being duped by "wickedness, deceit, pride, foolishness" (Mark 7: 22) and turning away "from the truth" and believing "fables." (II Timothy 4:4). Perhaps the proponents of "Modern Monetary Theory" need to look to the "Bible Standard" rather than the postmodernist ones that are destroying our country. That is, while we are still allowed to talk with Him in this country.

Earlier this week (Wednesday, April 11), I was interviewed on the Bill Martinez Program, syndicated on 140 markets and on the web. Check out the interview on his website ( His programs are also available as podcasts and on itunes! Like him on Facebook too.

© Frank Louis


The views expressed by RenewAmerica columnists are their own and do not necessarily reflect the position of RenewAmerica or its affiliates.
(See RenewAmerica's publishing standards.)

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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