We had planned to write a blog post on systemic fraud in the US financial infrastructure, particularly as it relates to the mortgage industry, mortgage origination and servicing fraud. However, today a very good article was published by Matt Taibbi of Rolling Stone which includes colorful first-hand accounts that vividly illustrates the problem on both a macro and micro scale.
The plan was to outline these same points regarding the device of “securitization” and “productization” of mortgage lending through derivatives that allow the formation of a traditional “pyramid” scheme, or what we prefer to call in the US a “Ponzi” scheme – perhaps, within a few years we may just opt to drop the name “Ponzi” altogether in favor of something like “business model for US banks in the early 21st century”. However, rather than reproduce what Rolling Stone has already done, we thought it would be a better to simply promote the existing article, with a few additional and brief thoughts on what we feel is likely the only solution.
Radical though it may seem, we believe the only way to stop the chaos of fraud and the breakdown of the rule of law in our courts, and most importantly to ensure that we ourselves are not participants in the fraud, is for homeowners who can afford their mortgage to stop paying it. Here are a few reasons why we believe this will ultimately bring about change and a restoration of the trust we badly need if we are to heal our culture:
a) The only remaining argument left to divert the attention of the masses from what is quite possibly the greatest heist in history is good old fashion “Ad Hominem” fallacy. By attempting to link the validity of the argument to the character of the person advocating for his or her rights – banks have committed a classic logical fallacy. Ad Hominem attacks aid and abet the human psychology of denial, a point not lost on our financial institutions in America.
For example, what is easier; to scorn those who are being foreclosed on because they can no longer afford their mortgage or to accept the possibility that our entire financial, and maybe justice system might be badly corrupted? Across all spectrums of crime, victims are often blamed, just ask attorneys who represent rape victims. This phenomenon is by no means unique to mortgage fraud, or those who have been raped by the institutions who carry out this trade. It has been made to appear as if those who have fallen on hard times are a matter of "incidental" inequalities in an otherwise procedurally just system. However, it is precisely the opposite which is true. Our financial institutions have created deliberate inequalities, through the use of procedurally unjust systems.
b) However, If someone comes before a judge who can easily pay their mortgage, but has chosen not to because:
1. They are not sure where or if their payments are going to the true note holder.
2. They no longer know who the true note holder is.
3. They have a legitimate concern that they may not be able to ever obtain clear title and/or title insurance (in the event of a sale) given what we now know about improperly conveyed titles and the illegitimacy of “MERS”.
4. They do not want to be an unwitting or passive participant in fraud.
5. They care about America, want our culture to be healed and recognize the dignity of every human being.
If these legitimate reasons are the cause to suspend mortgage payments, then what attack on these "non-cooperators" character can be leveled? In these cases, Judge’s will have to allow for proper civil procedure to take place in order for the legitimate inquiries of concerned Americans to come to light. Since banks virtually never produce adequate documentation (which appears to be by design), chances are things will escalate.
Americans who believe this is “the right thing to do” and who can afford their mortgage payment but believe it is in their duty not to participate in what appears to be widespread systemic criminal activity in our financial institutions should take the following steps:
1) Make requests of the servicer for important documents, in accordance with rules governing such requests. A proper RESPA and TILA request is a good place to start.
2) State your concerns, and explain why you would like copies of this important information and that you have chosen to suspend payment deliberately.
3) Create a special “escrow account” where you can place the funds that you would normally use to pay your mortgage. Tell you're servicer that you have set up the escrow account in place of sending them the money. Keep in mind that only the judge and your attorney will need to be privy to the details of your escrow account (an alternative is to place these funds in your attorney’s IOLTA account).
4) Put everything in writing , avoid phone conversations - they are not necessary.
c) Americans have a duty to ask critical questions about the operations of their financial institutions, and if evidence has been presented that a deal was made, but not everyone was playing by the rules, than those deals need to be looked at again. It is not good enough any longer to say, if it doesn’t affect “me” than, I’m not getting involved. We have a duty to one another as Americans, and more importantly as human beings, to care about truth and justice. What’s more, apathy, so long as we are not affected, is a short lived consolation. Ultimately, this crisis will affect everyone sooner or later.
d) We realize many people have a great deal of anxiety over their "credit scores", so we thought it appropriate to address the inevitable outcome of deliberately not paying your mortgage. While HUD does not allow credit reporters to report negative information while you have a pending RESPA request with your servicer, we cannot insure that your servicer will respect HUD rules, although there are serious penalties for servicers if they do not. So we think it is important to understand what exactly a “credit report” is, who designed it, and why it is that you were taught to have such great consternation over it from early adulthood, instead of being taught to have those feelings of anxiety about far more important things such as having debt. If after reflecting on this you find that you are still concerned about this “number” that has been attached to you courtesy of the credit reports - all we can say is that numbers have been used before to identify “human beings”. There are some fine examples of this business model that were affectively used in the early 1940’s in Germany and Poland. It usually involved a tattoo on the arm, because those folks too had lost everything, including the shirts off their backs. It’s a worthwhile endeavor to “study up” on what exactly the relationship is, when a human person is assigned a number instead of having their name acknowledged.
We Americans have some of the highest ideals in the world. We are high minded, enterprising, innovative and understand that human being are ultimately built for Freedom. Sadly, many Americans now feel greatly discouraged and desolate. We have a heritage worthy of any of the greatest civilizations in history – but we have somehow forgotten this. As a people we are confusing, our current economic weakness, with a notion of “who we are” - but the two are not the same, and the latter is of far greater importance. The fast growing developing countries of the world have nothing on us in this department, but if only we could see it again – they’re counting on us not to. Let us remember our principles of equality and solidarity, based on our profound belief in human rights, that recognizes the dignity of every human being. Otherwise, we cannot say that we have abolished slavery, only that we have altered its machinations.
By Gregory M. Lemelson
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.