Behind the Mortgage Meltdown
By Nancy Matthis at ADMC
The role of Hispanic immigrants in precipitating the mortgage meltdown is obvious. Media outlets have been skirting the subject, presenting individual cases as victims deserving of sympathy.
One such article appeared in the
Washington Post,
describing the shattered hopes of an Hispanic woman:
'My House. My Dream. It Was All an Illusion.'
Latina's Loss in Va. Epitomizes Mortgage Crisis
By Brigid Schulte
Saturday, March 22, 2008
Despite her poor credit, Honduran immigrant Glenda Ortiz easily got a subprime loan for this Alexandria home, bought in 2005 for $430,000. It was foreclosed on last year....
She looked at only one house and paid too much for it: $430,000 for a run-down, one-story duplex in Alexandria, triple what the house had sold for the year before, and $5,000 more than the asking price, according to real estate records.
She agreed to a high-interest loan that would cost her more than $3,000 a month, more than 70 percent of the $4,200 that she and her husband brought home monthly.
She signed papers in English that she didn't understand....
The four-page article details how she was duped by other Hispanics, craftier than she was, who used their credit to secure a mortgage for which she was liable.
By last March, the home was in foreclosure. The loan originator and mortgage company had gone out of business. And Ortiz was headed to court....
But by then, real estate agents would have made their commissions, mortgage brokers would have their closing costs, and the risky loans would have been repackaged and sold to Wall Street....
The preceding tale describes one common scenario, in which Latinos prey on their own people and game the American economy at the same time. In this gambit, there is little possibility that the victim will keep the house. It is just a scam in which all the real estate principals cash in and depart, before Wall Street fund investors are left holding the bag.
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Here is another way the Latino immigrants take the housing market down. One immigrant buys a single-family property, for which the payments are way beyond what is affordable. Then several other families move in with them and help to make the mortgage payments. (This is against zoning regulations, but these are not enforced by politically correct public officials pandering for the immigrant vote.) One family lives in the dining room, another in the living room, and each of the bedrooms becomes home to an entire family.
Once this happens to several homes on a street, the resulting mess and litter begin to depress property values. Maintenance is neglected and the immigrants' homes become shabby. So the legitimate homeowners are the first to suffer, as their neighborhood begins to look like a third world country and housing values decline.
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Here is a third way the illegal immigrants take the market down. This also derives from the situation where several families live in one house. As communities begin to crack down on the illegal aliens who are freeloading on taxpayer-provided services and straining school budgets with ESL costs, some of the illegals leave. Now the immigrant homeowner of record cannot collect enough from the tenant pool in the house to make the mortgage payment, and the house goes into foreclosure.
As the pattern is repeated, soon the "third world country" streets become filled with houses at auction or in foreclosure, up to half the houses on the street. With so many for sale, the original homeowners could not get a fair price for their houses if they had to relocate.
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All residential demographics have their share of unwise people who purchased beyond their means, and got caught in an economic downturn. But, taking Northern Virginia as an example, it is clear that
the illegal alien population is the greatest factor. Two counties lead the effort to combat the alien invasion --
Loudoun and
Prince William. The statistics are compelling (see graphic).
One county that has seen a significant exodus of illegal aliens recently is Prince William County in Northern Virginia. The
situation is decribed by an article in the Washington Post:
By and large, those [foreclosed] properties are concentrated in lower-priced areas and Zip codes where many immigrants bought homes in recent years, often with subprime mortgages and other risky arrangements that required little down payment or documentation. In Northern Virginia and especially Prince William, many buyers were Hispanic immigrants....
....several ... real estate specialists in Northern Virginia estimate that 70 to 80 percent of foreclosure cases they see involve Hispanic families....
Real estate agents say the foreclosure crisis in Prince William has been exacerbated by local authorities' efforts to crack down on illegal immigrants....
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The tenor of the discussion in the mainstream media is to blame the local communities that discourage illegal immigrants. And that is very mistaken. The illegals committed a crime by entering this country without documentation. Other Hispanics committed fraud by luring their fellow Latinos into mortgage arrangements that were destined to fail, and by misrepresenting credit credentials to the lending institutions. Immigrant homeowners of record violated the local zoning laws. Employers of these illegals were complicit by hiring them against federal law. The mortgage sellers were duplicitous in lending money on paper to clients who clearly did not qualify. The banks were unscrupulous, knowing that they could skim a profit and package and resell the paper before the scheme crashed. The Wall Street buyers of the paper defrauded their investors by making bad judgements in buying these mortgage packages from the banks.
Now, in the face of all this corruption, our federal government has reached its sticky-fingered hands into all of our pockets for the billions of dollars needed to keep these reprehensible outfits afloat. There are
credulous apologists:
IRWIN KELLNER: Why Everyone Benefits From Bear Stearns Bailout
PORT WASHINGTON, N.Y. (Dow Jones) -- Never has one word been used so many times by so many people who think they know what's best for our sluggish economy than the word "taxpayers."....
On Sunday, an editorial discussing the steps that the Federal Reserve recently took to prevent Bear Stearns Companies Inc. (BSC) from going bankrupt mentioned the word "taxpayers" no less than nine times.
Like many others, the Times is worried that taxpayers will bear some or all of the cost of rescuing Bear Stearns....
Let me point out that whatever you call the Fed's actions dealing with Bear Stearns, J.P. Morgan Chase Co. (JPM) and the financial markets and whoever may appear to benefit directly from these steps, the fact remains that everyone ( taxpayers and non-taxpayers alike) has a stake in keeping the markets running smoothly.
That said, in my view, it is wrong ... to insinuate that using funds obtained from the general public via tax revenues to help prevent such an important sector of the economy as our financial system from seizing up benefits only a few: it actually helps everyone....
So, the bottom line is this: Almost everyone involved in this mess was dishonest. Our governments -- federal, state, and local -- let it happen because the politicians were pandering to the Latino vote. Now we are all supposed to shell out to bail them out, because they threaten us with the loss of our retirement pensions and devaluation of our other assets. Is no one outraged?
To add insult to injury, the high rollers who puppet-mastered this mess made out like bandits. There were many. Let's just take a look at Bear Stearns execs:
- Bear Stearns Chairman Jimmy Cayne
- Chief Executive Officer Alan Schwartz
- Former Co-President Warren Spector
MSNBC reports:
....don't cry for Cayne and his cadre of Bear big shots. Their paper wealth may have disintegrated but for years leading up to Bear's collapse they had been the beneficiaries of one of the most generous compensation packages in the industry. Over five years, from 2002 through 2006, Cayne took home total compensation — salary, bonus, restricted stock, and stock options — worth a combined $156 million. Current CEO Schwartz made $141 million. Former Co-President Warren Spector, deposed after the hedge fund debacle, did the best of them all, reaping $168 million.
The biggest chunk of pay came in the form of bonuses, which for Bear execs were relatively easily obtained. Through 2005, bonuses were based on the completion of any one of nine metrics, a tactic that virtually guaranteed that targets would be met....
From 2002 through 2005, Bear Stearns proxy statements show that Cayne and his lieutenants, Schwartz and Spector, took home bonuses of between $9 million and $12 million each.
Then came the fattest year of all, 2006. Bear's mortgage origination and other credit products grew at a 27% clip, and the company's expansion into these areas really paid off, at least for those at the top of the pay pyramid. Bear had eliminated the nine metrics for bonuses and moved to basing them entirely on one measure — return on equity, a number easily met by Bear's executives once they were on the subprime bandwagon. Cash bonuses jumped to more than $16 million for Cayne, Schwartz, and Spector in 2006.
Bear officials had no comment....
The no-money-down mortgage market was just a giant
Ponzi scheme with a window dressing of mortgage paper. It collapsed. And, thanks to the power brokers on Wall Street, the swindlers were rewarded and the American taxpayers were extorted. Far from protecting us, our government was complicit. And the housing market for illegal immigrants played a pivotal role. The corporate greed and endemic irresponsibility of major financial institutions were the cause of the so-called "meltdown," but the illegal aliens were the trigger and the catalyst.
Reference:
On March 26, the
National Public Radio program
All Things Considered observed that banker and economic historian Charles Morris predicted the mortgage meltdown. Charles Morris is the author of
The Trillion Dollar Meltdown, a book largely written
one year ago. Bottom line -- he saw it coming when "leading government and finance people were touting the rosiest of financial futures",
according to the report. On March 31st, speaking on Glenn Beck's
CNN Headline News program, Morris said, "The real number could be one trillion dollars."
The Trillion Dollar Meltdown: Easy Money, High Rollers and the Great Credit Crash
The sub-prime mortgage crisis is only the beginning: A more profound economic and political restructuring is on its way.
We are living in the most reckless financial environment in recent history. Arcane credit derivative bets are now well into the tens of trillions.
According to Charles R. Morris, the astronomical leverage at investment banks and their hedge fund and private equity clients virtually guarantees massive disruption in global markets. The crash, when it comes, will have no firebreaks. A quarter century of free-market zealotry that extolled asset stripping, abusive lending, and hedge fund secrecy will come crashing down with it.
The Trillion Dollar Meltdown explains how we got here, and what is about to happen. After the crash our priorities will be quite different. But things are likely to get worse before they better. Whether you are an active investor, a homeowner, or a contributor to your 401(k) plan, The Trillion Dollar Meltdown will be indispensable to understanding the gross excess that has put the world economy on the brink-and what the new landscape will look like.
