ROAD TO RUIN: Mortgage Fraud Scandal Brewing

[5147848amp]

Could someone give me a short tutorial.? I'm, like, no economist!

First, why would Wall Street investors want anything to do with bad loans? Second, do these subprime loans have anything to do with Greece/the recession in the Eurozone?

Much oblige.

[mandelman]

@5147848amp In the interest of keeping this simple:

1. Wall Street investment bankers, not investors, wanted "bad loans" because they were betting that the bonds into which they placed these loans would default. A credit default swap allowed an investor to "short" the sub-prime market, by betting on a given bond's default. Credit default swaps also allowed investment bankers to believe that their positions were perfectly "hedged," which means protected in case of default.

[mandelman]

@5147848amp Continued...

2. BUT... the global financial crisis WAS NOT CAUSED BY BAD LOANS. The meltdown in the fall of 2008, was not a function of bad loans, it was the leveraged securities that blew up Wall Street's investment banks. Inside a mortgage-backed security, you might find 5-10% actual loans, and 90-95% leveraged securities. Leverage is "borrowing". Wall Street's bankers borrowed against the securities they created in order to amplify their returns.

[mandelman]

@5147848amp Continued...

3. As long as things went up no problem, but when things went down their leverage wiped them out. Imagine investing $10 and earning 10%. You'd have $11. Now imagine investing $10, but also borrowing $90 so you invest $100. If you made 10% you'd have $110, and after you re-paid the $90, you'd make an additional $10, which means you doubled your money. But if you LOST 10%, you'd lose $10, and be wiped out, because you only had ten bucks to begin with. That's leverage!

[mandelman]

Respond to this video...  Continued...

4. Wall Street's bankers would like us to believe that it was the "irresponsible borrowers" who are responsible for the crisis. It is nonsense. The bankers caused the crisis in every sense of the word. Imagine one loan for $100,000 being the collateral for $4 million in leverage. When the $100,000 loan defaults, it's not the $100,000 that matters it's the $4 million.

[mandelman]

@5147848amp Continued.

5. The banksters created derivatives out of mortgage-backed securities. Derivatives are securities whose values are "derived" from other securities. Mortgage-backed securities were divided into "tranches," which is just French for "slices." The top slice was rated AAA, meaning it was supposed to be safe, but paid the least amount of interest. The middle tranche was rated BBB, so it paid more interest, but was riskier. And the bottom slice paid the most, at the most risk.

[mandelman]

@5147848amp Continued...

6. One type of derivative is called a "collateralized debt obligation," or CDO. Think of a CDO as a tower of BBB rated middle slices of mortgage-backed securities. Another was called a CDO squared, which was a CDO with even more leverage or borrowing employed. The banksters sold these type of investments all over the world to pension funds, European banks and sovereign wealth funds, which are a country's investment funds.

[mandelman]

@5147848amp Continued...

7. By the summer of 2006, Greenspan has raised interest rates 17 times in a row in an effort to cool off the heated real estate market and the adjustable and teaser rate loans jumped up, and foreclosures started in the third quarter of 2006 as a result. By July of 07, S&P and Moody's, two credit ratings agencies that rate bonds, downgraded the ratings on 1,032 bonds and investors panicked because they no longer trusted the AAA and BBB ratings. Everything froze.

[mandelman]

@5147848amp Continued...

8. With no market for mortgage-backed securities, there was no secondary mortgage market, and then no mortgages, so housing prices went into a free fall... and foreclosures increased, which caused housing prices to fall further, which lowered spending, which made unemployment rise... which increased foreclosures. We entered a downward spiral, and we're still in it today. The only lending going on today as far as mortgages are concerned comes from the government.

[mandelman]

@5147848amp Continued...

9. In the case of Greece... Goldman Sachs helped Greece borrow, which countries do by selling bonds that comprise the National Debt. Interest payments on that debt can get quite large, and countries often have to sell more bonds to pay the interest payments. Goldman helped Greece right into the poor house and as the country's credit rating fell, it was forced to pay higher interest rates to sell more bonds... until it was in a death spiral.

[mandelman]

@5147848amp Continued...

10. Last one... When countries get into financial trouble, they have 3 options: 1. Devalue currency, but Greece can't because it's part of the Euro. 2. Slash interest rates, but Greece can't because rates are set by the EU Central Bank. 3. Print money and buy up debt, but Greece can't do this alone because of the Euro again. 4. A Bailout... that's where we are today. OR... Greece leaves the EU, defaults on its debt, and tells bankers to go fly a kite. Hope it helped...

[5147848amp]

@mandelman

Dude, man. Thanks for putting up with my beginner status. Untangling all of this stuff - all of the lingo alone - is causing brain pain. I've read through your response once. Another few times and it'll start to sink in! (You've got your own special folder on my desktop!) Anyhow, once again, gurt thanks for the reply. Here's to the end of the bankster occupation!

[theelbowfromthesky]

...and even after all this time... the criminals are still getting away with it

[Beingreal40]

In California, there's a fiduciary law that the mortgage broker is to serve the client in their best economic interest. But as you've seen in the crisis, who really follows the laws anymore.

[farmboycarl]

Many Americans had started making their homes the center piece of their finacial planning, so Wall Street had to destroy homeownership. First they pumped the market by building millions of unneeded new homes, and creating easy (but dangerous) financing for anyone with a pulse to buy them. Then they created Credit Default Swaps to capitalize on the collapse, and started manipulating interest rates and lending standards to pull the rug out from under the whole thing. It's TREASON pure and simple.

[spectrum0590]

Great video! Informing everybody about this scams.

[Gioxtream]

Mortgages that were based on Fraud?? I think. I want my house back.By The way... a multi million dollar law suit and Jail time for all those who create the terms of those bad agreements. PERSECUTION.

[michielma]

Bring these bankster-gangsters down. The scum

[rbrouwer5]

same situation....get an attorney..to much corruption in the paper system and mers...fight these jags. F@#k Chase and all the other banks.. They make way more on foreclosing then modification. thanks to the bailout to AIG and big banks.The Gov allowed this because all there buds (big banks ) were making huge money...and now with the biggest financial heist in American history they have hedged there bets and made money on the bailouts. For the people by the people.nope. For the Gov. by big bus.

[Orical001]

my god the first time I heard a black lady being so articulate...

[StopTheOilSpillNow]

great vid

[msbearpaw]

With 700,000 claimants in the recent Ameriquest MDL class action settlement not many of the claimants are aware that we will only be getting around $30 each in the settlement after lawyers fees and other agreements in the suit. It is not fair! I am hoping the Judge agrees and the suit starts over.

[HateClips]

Im glas that Ameriquest will be paying out to many homeowners which they ripped off here soon in the mdl class action settlement. those people are worse than vultures.

[hannahunney]

It almost happened to me. Buyer beware -kiss my *ss, thaitanium12.

I was relying on the expertise of the lawyers, brokers, realtors, title company, and closing agent.

The ONLY reason I knew something was wrong was because I had accidentally found a few articles about mortgage fraud while looking up something else, or I'd have never known the "little" mistakes, blank areas on paperwork, the lawyers (who were for the BANK, not me as my realtor intimated) wanting power of Attorney were suspect.

[jgz8]

The Élite ruling class in America, we have 300 Million Americans but 20% of the Elite rule you know how they are

and 2% at the top( 6 Million of them) ??? Third Fisherman: Master I marvel how the fishes live in the sea.

First Fisherman: Why as men do a-land; the great ones eat up the little ones Pericles, Prince of Tyre Vilfredo Pareto, Gaetano Mosca, Robert Michels, Niccolo Machiavelli

Read, NYU Professor The Machiavellians Defenders of Freedom by James Burnham

[vitomasilotti]

Excellent video! Thanks for posting this. I have reason to believe it, 100%!

[suzukispecialists]

This all STARTED with BIll Clinton signing into law the "Community Reinvestment Act" lowering the lending standards. This was the Gov't telling the Banks to dangle that carrot and yell at the top of their lungs "We Finance Anyone with NO MONEY DOWN" like a used car dealer. ACORN picketed & obama sued Banks to give risky loans. obama & others received millions for their part in all of this SCHEME and the gov't continues to blame the lending institutions, but will not accept any responsibility!

[thaitanium12]

You have to laugh don't you poor people trying to get rich without working relying on the price of their (well the banks) property to increse in value. Ever heard of caveat emptor, buyer beware? On a lighter note I have one tower bridge for sale located in London, quick sale required buyer to remove.

[Gizmosra]

It's starting all over again with appraisal management companies driviin by lowest fees and fastest turn times. Some of the largest amc's are now owned by the largest subprime lenders. Look at streetlinks

[kanika618]

this video is gud...!!!!

[Anothercoilgun]

The mentality (el stupido technicality) of kevint864

is 1/2 the reason why the USA is in such shit.

[Anothercoilgun]

Please search "Mortgage Madness" The series is 6 parts and is extremely detailed of this PLAN called a CRISIS.

[walgar2]

There were mortgages underwritten based solely on the verbal disclosure of the borrower. The lender did NOT want to know if the borrower could pay it back or not. Either the house went up in value or the borrower got foreclosed, either way the lender won.

[judywrite]

This video is very well done!

[jxh261]

When you apply for a loan you bring your current pay stub and your credit history gets checked. Please explain to me how the buyer can be blamed for taking loans out they couldn't afford when it's the loan officer's job to check and re-check the borrowers ability to pay that loan. There is no way the buyer can fake these documents when the bank can check any records they need before approving loans.

The idiots blaming the borrowers have drank the kool-aid sold to them by Fox news.

[kevint864]

@jxh261

You obviously have not been in the lending business.

Buyers / Borrowers knew what they were doing. Don't go putting the entire blame on the loan officer.

A borrower only needs a few loan denials to figure out that the next time they apply for a loan, they know what to say, how to say it and what documents to provide or produce.

[connielane]

Greed and deception fuels the world and this is what you get! It's not over yet.

[WashMitt]

What the stupid Republicans don't realize is this don't make them look better. It makes a 3rd party look better.

It makes Americans realize Republicans and Democrats are both the same.

[stewart0312]

Well down Obama. Keep bailing out the crooks on Wall St.

[monetarydemise]

To everybody who took one of these loans who couldn't afford it i say "FUCKING DUMBASS"

[marcomariaz26]

I worked for Ameriquest in 2002. They ARE krooked. Totally.

[SimplyPolitical]

Capitalism is just having a bad day.

[Beingreal40]

Full confession. Homeowners brought taxes and bank statements to proffesionals to guide them. Too much to learn and consider when your new to buying while being pushed to close a 45 day escrow buy a wicked realestate agent.. Last thing on your mind is to be part of a scam.

90+% never had intentions of buying more than they could afford. They were told they could.

[JipJDB]

@Beingreal40 Sad but true. If the buyer had no outside knowledge about what was going on, they (buyer) would tend to trust the "expert". After all, the "expert" is ALWAYS right and can be trusted.

[REOGURU]

Let's not get all teary eyed here. Half of all these loans were "cash out" refinances. In other words, people took out loans to pay off their bills, take vacations, do whatever, and now that the piggy bank has run dry, they're leaving their homes to the bank. Take a look at this older video that explains it all: watch?v=pmeBSWI9sF8

[monetarydemise]

right; thats exactly whats about to happen to the U.S.

[Prophetess7]

Wow. Keep in coming American News Project. I love your work.

[toeg1]

Beautiful and poignant. The Strawman that honest daily workers are at fault is killed once and for all. Job well done. But I still feel very sad for those who were suckered into all this and who lost everything while the fat cats on Wall Street dined on their crime.

[rjanis123]

I agree .a lot of people who were "sub prime" were duped .. and are paying for this, and probably will be for quite some time .. however .. no one is innocent. if you are sub prime, yet through happenstance you are given a chance to make more of yourself; albeit fraudulent, you are obligated to rise to your new situation. failure to do so is not the act of a victim, rather the negligence of the guilty.

[rjanis123]

if you understand your situation you know your limitations. if you don't understand, then you shouldn't act, or sign anything.. not knowing what you are doing, yet doing it all the same, could be viewed as criminal. I thus maintain that the "honest daily workers" are not innocent.

I still parlay most of the blame on cooperate blood suckers .. but none are innocent.

[toeg1]

rj,

No group is innocent, true. Two things about this, though:

1. The bank decides if THEY approve the loan. No normal borrower in the world has power over the bank's decisions. The borrower NEVER decides to approve the loan, ONLY the banker can do that. No one can stick a gun to the banker's head and say, "Do it."

2. If 10,000 people sought to take advantage for an average $300k homes, the net loss would be $3 billion dollars. We have bailed out to the tune of $5,000 billion to date.

[toeg1]

One more thing to keep in mind. EVERY SINGLE FORECLOSURE has meant a family loses a home. NOT ONE BANKER has lost their home. Not one banker, has lost their investment in their home. Not one banker faces possible life in the street because they lost their home.

To date, the bankers are being repaid IN FULL and the homeowners are maxing out their credit cards trying to stay in their house. BANKERS HAVE LOST NOTHING AT ALL. Families have though. Big difference.

[rjanis123]

I agree .. the bankers are all bastards .. and raped American people.. the very future of many many American Families has been sold out in the name of greed, and short sightedness.

but again, not at gun point.. if someone knows themselves, they know their limitations.

it is the job of the banker to sell loans.

it is the job of the consumer to know what they can and cannot afford.

[toeg1]

rj,

That's why it's called predatory lending. This video shows how the loan agents tricked many people who were told they qualify, and who the bank DID qualify, but should never have been qualified.

I can't FORCE a bank to give me a loan. But if the bank says I qualify when I don't, I'm not going to think, "These banks are trying to do me in." No one assumes the banks are out to cheat them. "If the bank SAYS I qualify, then I guess I qualify. They'd never write a bad loan, that's silly."

[rjanis123]

I missed the part of this posting where the bankers told the people that there payments would be different then they were, or that the house prices were different.

anyone buying a home know that the maximum home price you can afford is 2 to 3 times your family's annual salary. I know, lots of other stuff went wrong, interest only loans, etc.. and again I say the bankers are to blame.

but the deposed home owners share some responsibility. that's all I'm saying.

[rjanis123]

the borrower always has the ability to approve or disapprove a loan. No one went held these borrowers at gun point and demanded they take the money .. the paperwork that they had to sign, had all the numbers, and fine print on it.

and it's not just that we have bailed this mess out at the tune of trillions of dollars, our children, and our children's children have already been obligated in large part to the tune of trillions of dollars more.

[rjanis123]

good time to point out that in 2000 the only house I ever owned was foreclosed on.

a loan that never should have been written

but the small town bank was in bed with the real estate agent, and the home owner

[toeg1]

rj,

You did not approve that loan, only the bank did. By your own admission, he practiced predatory lending. You know that you did what you assumed were ALL the correct steps. You are not at fault. You know this for a fact.

Those losing their homes did the same thing. No one goes into a loan thinking, "well, I'll stay here and pay huge rent payments and upkeep for a few years and then leave and lose everything. I can't wait to lose everything." That's NOT normal human behavior.

[rjanis123]

fair enough.

however, let me simplify with a metaphor from my line of work, let's say someone comes into my restaurant, orders two slabs of ribs, appetizers desserts, and some bar drinks, but only has 10 dollars on them, and all their credit cards are maxed out. they are at fault when they default on their tab...they knew their limitations, and went over them.

I know the metaphor is only partially accurate, but the point remains, they knew they couldn't afford things, but purchased anyway.

[toeg1]

rj,

I agree. But in the banking industry, you don't get any portion of the loan until it's approved. They never give you "a couple of mil" to keep you happy while the loan is being approved by the bankers. That's bad banking.

With auto mechanics, restaurants, taxis, and other services, you get the service first. With banking, major appliances, etc. you are approved first before you can take possession.

It's industry specific. Every home loan I got I went through tons of proving I was okay.

[isminx]

Following the thread of comments that you and rj have been having. When it comes down to it, someone wanted to make a lot of money very fast, they broke or bent laws to make this happen. People will always 'want' more than they can afford, it's the American Dream to own a home, and why not a huge beautiful home? Folks did not use common sense, that was greed. Banks were too busy making money, and that was greed. Now, the banks that bought into the fraudulent practices are being bailed out.

[isminx]

And THAT is a crime. Our government is rewarding the crime by keeping these institutions in business. Who is to say that this will not happen again? Where is the punishment for committing fraud? The homeowners have instant punishment in foreclosure. The banks and wall street will never be brought to trial for their part.

[trakionfilms]

isminx,

You're right. One major point I'd like to make is the magnitude of the error. Even if there were thousands of people who wanted to lose their home and every landscape, building improvement or other investment they made in that home after only three years, the maximum amount of damage possible to the US economy would only reach around $5 billion. We have given over $5,000 billion to the bankers SO FAR. That's 1,000 times worse. The people lost everything, the bankers lost nothing.

[freddytuber]

but they might not know that their credit cards were over the limit because of fraudulent charges - guess you missed that point!

[rjanis123]

credit cards?

what?

who missed what point again?

[SubmarinerAndroid]

Again, info I don't get anywhere else. Excellent reporting. Thanks, ANP

[eyewitness043]

Great video and only the tip of the iceberg.

[alfredoconsalsa]

shit its about time

[ONQproductions]

STORM THE BASTILLE!!