American Dream to American Nightmare

Homeowners facing foreclosure face a gamut of challenges and emotions. Many cannot afford an attorney or they would not be in foreclosure in the first place. And, oh so many, were told when they first bought or refinanced back during the boom years -- don't worry you can re-fi in two years and get out from under that adjustable rate mortgage (ARM) - get out from under that ARM that is tied to the mysterious LIBOR which was manipulated anyway and which caps the adjustable rate at some outrageous rate as much as 15%. People bought the lie and bought the line. After all, property values were going up and up, why couldn't they re-fi in a couple of years, cash out the old equity and get a fixed rate. Oops there go the goal posts. Now way way over there. This strategy worked for a while, as all good Ponzi schemes do. The homeowners who jumped on fast, and then jumped off the merry go round, made some money. It's the people who didn't jump off fast enough that got run over, and it's still happening. Lots of homeowner roadkill.

Homeowners in foreclosure feel shame. Shame that they are unable to pay their mortgage, and shame that they fell for it. Most scams are under reported because the victims are ashamed. They berate themselves that they should have known better.

The Ponzi Scheme

If current events have proven anything, it’s that there is no more potentially profitable con game than the Ponzi scheme. The trick dates back hundreds of years, but it was popularized by Charles Ponzi, an Italian immigrant to the U.S. who swindled investors out of millions in the early 1900s before being arrested. The modern Ponzi scheme is a form of investment fraud in which a fake or corrupt stockbroker uses the money of his new investors to pay the imaginary returns of his old ones. Initial investments with the fake broker might yield enormous returns for the people being conned, but in reality their money has not been invested in anything–the con man has simply been putting it all into a bank account. Any time someone wants to withdraw money, or if he has to pay the returns of his old investors, the con man simply uses the money he’s gotten from new investors to do it. Nothing is actually being invested, won, or lost in the market. The con man is simply giving that impression so that people keep handing over more and more cash. Because it can only grow so far, any Ponzi scheme is destined to eventually collapse under its own weight, so the con man usually pulls a disappearing act after collecting enough money, leaving the investors with nothing but the fake returns they received to keep them involved in the swindle. Undoubtedly the most famous recent example involved Bernard Madoff, a New York financier who engineered a Ponzi scheme estimated to be in the neighborhood of $65 billion. Madoff was eventually caught and sentenced to 150 years in prison, but not before pulling of what is essentially the biggest con game of all time.

Sound Familiar?

Maybe not yet, stay with me. The picture becomes more clear the more you learn about this huge scam being perpetrated by the too big to fail banks. You go to buy a house. Like most Americans, you expect to put money down and get a mortgage on the house. That's how it has always been done. When you go to the closing table you sign the mountain of documents that are briefly explained, but there is no time to read the documents. And no time to absorb or question the brief explanation. So you sign. Somewhere in that mountain of paperwork, sign sign signing, is the agreement and acknowledgment that this lender may sell and transfer the debt to another entity, shall I say lender? Problem is, it isn't really a lender, it is a trust, a pooling service agreement. At the time, you don't really care, because all you're trying to do is close on this house and take possession. Even if some of the paperwork doesn't seem quite right or you don't understand it, you let it go. We all did. You think, if you question it at all, is that you have protections. There are laws that protect home buyers from fraud. The mortgage industry must have rules and standards to protect buyers. This is America.

You live your life. A month or more after buying you get a letter stating that the original lender transferred the debt or the servicing to another company. The letter includes assurances that the terms of your debt remain the same. You continue to pay the same monthly amount, the only difference is that you send your payments to a new address. Life goes on.

And life has a way of bringing on life events. Maybe you get sick. Maybe your spouse gets sick. Maybe your spouse dies. Maybe you lose your job. Maybe this country experiences the worst economic down turn since the Great Depression. And then, your ARM resets.

What you didn't know, behind the scenes, is that when your original "lender" transferred their interest in your property to another entity, your debt morphed into an Asset Backed Security, a bond, a security theoretically to be sold on Wall Street.

The lenders and the servicers were busy selling these securitized debt instruments all over the world. They gleefully sold the paper -- over and over. And that debt, in many cases, was never actually placed in any trust or pooling service agreement. They sold these as more like a potential asset, a position, and investors bought. The higher the risk the more the return. As long as new "mortgages" were created money was flowing. The investors were paid. Paid over and over handsomely. But when the financial crisis hit the world, sometime around 2008, and homeowners began defaulting on their mortgages, and it became clear that the asset backed securities were based on loans that had been misrepresented and the asset backed securities that had supposedly been put into trusts were never transferred correctly and homeowners ARMs reset - the s**t hit the fan.

The bottom tier of the Ponzi scheme failed. The house of cards tumbled.

And this just in:

Hey friend,

INCREDIBLE: The Justice Department has evidence JP Morgan Chase committed major banking fraud - but instead of filing criminal charges, they're *negotiating* with them to settle for a small fraction of the damage they did.

Tell the Department of Justice that negotiating with criminals on their own punishment is unacceptable. America is tired of Chase paying fines. We need Chase doing Time:

http://other98.com/dont-negotiate-with-chase-prosecute-them

Thank you for doing the right thing.