The Federal government is about to settle the ForeclosureGate affair, according to a report in the New York Times on April 9. The Times noted that twelve million homes will be lost by 2012. Home equity values are down by $5.6 trillion since the real estate crash.
The proposed settlement culminates an effort by federal prosecutors to address strongly supported allegations of widespread mortgage fraud perpetrated on as many as sixty percent of current mortgage holders. Homeowners were sold mortgages, serviced for the loans, and, in some cases, subjected to foreclosure and eviction based on fictional contracts and collections practices that violate the most basic principles of contract law and specific federal code pertaining to fraudulent debt collection.
When Wall Street got massive bailouts in 2008, the ultimate rationale was, pass the bailouts or face a complete financial collapse. We are already hearing hints of a similar deep rationale in the ForeclosureGate affair. '
The proposed settlement will not move the evicted back to their homes. It will not establish a moratorium on foreclosures, running at over a million per year. There will be no cram downs forcing the banks to absorb part or all of inflated housing prices caused by a real estate bubble that the banks and Federal Reserve Board helped create. In addition, be assured that the settlement will not hold bankruptcy courts accountable nor the attorneys for their failure to spot obvious errors in bankruptcy proceedings, errors that would have invalidated many creditor claims.
The settlement, however, will create a private relief for the big banks, regulators, and politicians responsible for this mess. The relief will spare the bankers prosecution under existing laws and seriously complicate lawsuits that have the potential to devastate lending institutions by righting the wrongs done to citizens.
The housing market will limp along. The politicians who stood by during the entire affair will claim that justice has been done. The big banks will stumble in their comatose state scavenging for the next financial scheme. There will be no justice for the people, only rewards for the perpetrators.
How can we be sure of this? Because...
The gross violations of acceptable contract and business practices are facts broadly publicized by lenders and others involved. These practices cannot stand the scrutiny of basic legal analysis, as will be demonstrated below.
Some of the most powerful and wealthy individuals and corporations in the land committed these violations. Therefore, the most powerful and wealthy will escape justice and reap even more financial rewards. That's how things work in a rigged system. It's axiomatic.
Just look at the bipartisan response to the financial collapse of 2008. Those responsible received massive bailouts and regulatory favor while citizens paid the price, captives of a seemingly endless recession with limited assistance from the government they support.
Let's examine the legal threat to the big banks and the wholesale fraud committed by the mortgage registration system put in place by the bankers, the twin threats to the wealthy and powerful. The truth is worth knowing before the United States Department of Justice, the big banks, and the others involved lower the curtain on another act in our decline and fall.
The Legal Threat to the Big Banks Requires Private Relief from a Settlement
In the early 1990's, Fannie Mae, Freddie Mac, and the big banks created a new system for recording and registering the sale of real estate. Undeterred by centuries of common law and carefully developed statues in place across the fifty states, the lenders created MERS, the Mortgage Electronic Registration Systems.
MERS altered the function of registering home sales with county officials, named itself as the mortgagee (the lender), and assumed the role of creditor when it was time to foreclose on a property. There are sixty two million mortgages in the MERS system. Forget the fact that MERS had no legal precedent or basis in existing law. There was a higher authority operating, greed.