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New Lamps for Old

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The sorcerer returns and is able to get his hands on the lamp by tricking Aladdin's wife, who is unaware of the lamp's importance, by offering to exchange "new lamps for old."

Eminent Domain - The best-kept secret (weapon)

to condemn and then extinguish toxic mortgage loans. A secret weapon capitalists (and their pocket politicians) don't want you to know about.

For millions, the manufactured American Dream of homeownership has metastasized into the nightmare reality of Zombie Foreclosures.

New Lamps for Old.

Once upon a time, financing the purchase of a home with a mortgage loan, compared to today, was much simpler. After saving the customary 20% down payment, the borrower would meet with the local banker for a long-term, fixed-rate loan. Once income and character were investigated, qualified and then approved, the borrower signed a mortgage note, and gave a mortgage in exchange for a loan.

A mortgage note is the personal promise to repay a loan. A mortgage (lien) collateralizes or secures the mortgage note. Foreclosure can force the sale of the collateral (home) to repay the debt.

It was at the same local bank where the borrower made monthly loan payments for the life of the loan. If and when the borrower had a problem making a scheduled payment due to an unexpected expense or temporary hardship it wasn't necessarily an earthshaking event. The borrower could speak directly with the banker who could usually resolve the issue by adjusting the payment amount or due date - usually without a lot of red tape. That's because the local banker, who handled the bank's investments - which included the borrower's mortgage note - knew that keeping the loan (and the bank's investment) current and in good standing was in its (and the borrower's) best, long-term interest. Minor blips and slips were both anticipated, and manageable. Foreclosure, then a losing situation for all concerned, was something to be avoided and usually was.

In the era of mortgage loan securitization, brainchild of unconscionable finance capitalism, the once mutually-to-be-avoided trauma of mortgage foreclosure produced windfall profits for the financial-industrial complex -- specifically the loan-servicing industry. Those profits were sucked from the weary bones of those who were seduced and steered into the "American Dream." However, the American Dream morphed into the nightmare of mortgage foreclosure with its predatory low or no down-payment loans, an expedited minimal underwriting criteria, inflated valuation appraisals and slick terms only the financially sophisticated could fathom and/or avoid, and a compliant regulatory and judicial system.

Very few local banks make loans to keep as investments anymore. Loans are quickly sold, transformed, and bundled into complex (mortgage-backed) securities and quickly monetized into huge front-ended profits for finance capitalists. The local bank, instead of keeping the promise to repay as a long-term investment, earns an origination or transaction fee and has no further interest in the borrower, or the performance status of the loan. Usually, before the ink on the loan documents had dried, the promise to repay the local lender has been sold, assigned, or otherwise transferred.

To whom? And to whom is the debt owed?

That's the ten-billion-dollar question.

In the wake of the most recent financial meltdown, it seems many shortcuts to quick profits had circumvented or violated securities law, contract law, and the Article 3 of the Uniform Commercial Code (negotiable instruments). Subsequently, certain financial giants have been exposed to liability from claims of loss, misconduct, and fraud. By whom? There are several perpetrators, including the investors who purchased the securities from charlatans of Wall Street who manufactured and then sold a defective product - what was advertised and believed by the clients to be highly rated, low-risk mortgage-backed securities, and some of the millions of borrowers trapped in foreclosure hell.

But these securities were anything but secure. Though immeasurably profitable for the casino-capitalists, the securities and underlying debt remain toxic to their investor clients who may be holding worthless securities, and to millions of financially-stressed homeowners.

Getting back to the ten-billion-dollar question: Who are the rightful owners of the toxic mortgage notes? And why is this important? It's important because only the rightful owner of the mortgage note is authorized to modify the terms of a mortgage note. That's a little publicized reason behind the failure of many loan-modification programs and stalled foreclosure proceedings. Only the rightful owner can modify the terms of its Note, and only the rightful owner is entitled to payment: payment from (alleged) Borrowers in the form of monthly payments, or compensation as Rightful Owner & Seller in Eminent Domain condemnation proceedings.

This unanswered question is one reason why the power of Eminent Domain can be the Achilles heel for the too-big-to-fail/too-big-to-jail finance capitalists. The results from the search for the rightful owners of millions of toxic mortgage notes can be the peoples' secret weapon used to repair a terribly broken and dysfunctional housing and housing-finance system.

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Executive Director: Society For Preservation of Continued Homeownership (SPOCH), a 501c3 tax exempt, charitable and educational consumer advocacy.

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