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I am suing Citimortgage.....follow along as I hang these bastards.

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posted on Dec, 4 2010 @ 11:20 AM
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reply to post by CookieMonster09
 


At the risk of sounding patronising you seem to be lacking a critical understanding of the mechanisms involved in the mortgage process. You mention "borrowers" "defrauding" banks but fail to acknowledge the fact that any agreement is void ab-initio due to the fact that the bank does not lend you any "money". What they do infact do is lend you your own money !

Your mortgage application is essentially a promissary note and as such is a valuable consideration, this is entered into the banks asset account as a cash deposit. The bank then agrees to lend the buyer the money to pay the seller. But the bank still has no money to lend the buyer but, due to their acceptance of the buyers application (promissary note) they have a liabilty equal to the promissary note which is the agreed purchase price less any cash deposit paid directly to the seller.

All real estate transactions require that the property being sold must be conveyed, by the seller to the buyer, free of all liens and encumbrances which means that all liens such as existing mortgages, judgments, etc. must be paid before the property can be mortgaged by the buyer as collateral to the mortgage loan which is yet to be received by the buyer pursuant the promise made by the bank. How can this be achieved when the seller has not recieved any money from the buyer ? How does a buyer obtain a mortgage on a property that they do not own ?

The bank draws a cheque ( in US check) backed by the buyers promissary note and the agreement of purchase and sale which is deposited in their lawyers trust account. In effect using the buyer's promissory note as the cash to enable the purchase agreement. It was the buyer's promissory note that made the conveyancing possible. The property now belongs to the buyer which makes it possible for the buyer to mortgage the property to the bank. The buyer paid for it using their own promissary note.

The seller has not yet recieved any money or cash, so to statisfy this requirement the buyer is made to sign another promissary note.( I might add that at this point the seller doesn't know that the property has been conveyed to the buyer's name in order for the seller to receive any money.) The mortgage contract is attached to the promissary note which makes the buyer liable to pay the bank for the money or the loan which the buyer has not yet or will never receive for up to twenty five years or more depending on the amortization term of the mortgage contract. As this note is linked to the collateral through the mortgage contract it is valuable to the bank.

The mortgage contract and promissary note are then "monetized" and through a central bank and the bank recieves the value of the mortgage (principle + interest accrued over duration of agreement e.g 25 years,30 years) upfront !

The lawyer holding the cheque (check) backed by the orignal promissary note then sends a cheque (check) to the seller in payment for the property. The buyer paid the seller with their own money by virtue of the fact that it was the buyer's own money (the promissory note) that made the purchase and sale possible. And the banks walk away with upto 300% profit without using or risking any of their own capital !




posted on Dec, 4 2010 @ 12:02 PM
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reply to post by Damacles
 

Damacles...perfect explanation! Here is written testimony from Thomas A Cox that summarizes the fraud bestowed on buyers from the moment they sign their name on the dotted line of their mortgage. If we did the same, we would be imprisoned. Thomas Cox Testimony

I for one, want to OWN my home. I want to be able to give it to my children, I want one thing in life to be MINE. That is a basic right that is violated. When you exchange the labors of your life-the only life you will ever have, for a place to call home. Yet, your government, along with it's corporate minions, can come along and take your home at will for any reason they decide to pursue. Grave injustices are bestowed on people.

Is there anywhere in the world where you can actually OWN land or a home?



posted on Dec, 4 2010 @ 12:14 PM
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reply to post by CookieMonster09
 





And the "predatory lending" practices were done primarily by mortgage BROKERS, not the banks themselves. These were the same brokers touting Interest Only loans, Zero Down Payments, and fast, easy credit approvals


And you think the banks weren't well aware of what the brokers were doing? Who set up the parameters for the brokers? CookieMonster go back to Sesame Street and get an education.



posted on Dec, 4 2010 @ 12:30 PM
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reply to post by lostviking
 





It's funny, actually. Quite comical. The banks get defrauded, and the whole banking system practically collapses due primarily to mortgage fraud and sub-prime borrowers.


Your ignorance is appalling.



posted on Dec, 4 2010 @ 12:55 PM
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Originally posted by lostviking
reply to post by Damacles
 

Damacles...perfect explanation! Here is written testimony from Thomas A Cox that summarizes the fraud bestowed on buyers from the moment they sign their name on the dotted line of their mortgage. If we did the same, we would be imprisoned. Thomas Cox Testimony

I for one, want to OWN my home. I want to be able to give it to my children, I want one thing in life to be MINE. That is a basic right that is violated. When you exchange the labors of your life-the only life you will ever have, for a place to call home. Yet, your government, along with it's corporate minions, can come along and take your home at will for any reason they decide to pursue. Grave injustices are bestowed on people.

Is there anywhere in the world where you can actually OWN land or a home?



Is there anywhere in the world where you can actually OWN land or a home?


Listen up for some sage advice.

You come into this world naked and screaming with absolutely NOTHING.

If you play your cards right you should go out the same way - or better yet shot in the butt by a jealouse husband who came home early, while jumping the back fence nekkid - but you get the idea - you go out the way yiou arrived with NOTHING!

You can't take it with you!

This you don't own it and are but a temporary custodian of it for future generations.

You rent everything in this existence on earth even the air you breath expires eventually!

The "dream" is a fallacy designed to keep you in poverty as a wage slave to the system - so you can "leave it too your kids!".
(Yep so they can leave it too their kids - the same ones who got it all too easey and peed it up against a wall).

All the Gold and All the Silver belong to God - indeed everything in and of this world that the sinful selfish soul desires, is not of the one true God, but is of the evil God of this world (Satan).

Be thankfull for the air you breath and desire to own nothing.

It is more dificult for the wealth man to enter heaven than for a camel to pass thru the eye of a needle.

Be carefull what you wish for.

"Tennanting (owning) land is a responsibility to future generations to steward it well, so that they recieve it in as good or better condition than you received it".

Its an onerous responsibility, and the Good Lord rewards the grain that falls on deep soil with the lifegiving rain waters to make it yeild a bounty havest, but the grain that falls on rocky ground or is crowded out by useless weeds doesnt produce and is cursed.

The reward comes to those who tend their land and crops and recieve the lifegiving waters - not to those who go out and usurp the bounty of the lord, provided for other nations in order to increase their own gain!

Illegal acts of war against the so called "camel jockeys / Towel heads" to usurp their God Given oil instead of trading with them for it - since thats about ALL the bounty that God has blessed them with, can never end well for us.

We decided / chose / (more like alllowed our corupt leaders to choose for us) as free world nations blessed by God to cease tending our lands and crops and depend upon the lifegiving rain for our bounty, and instead to act against "the 11 really good suggestions" (thou shalt not kill being one of them) in order to increase our bounty/harvest without working!.

That can never end well for us.

Like I said one should be carefull for what we wish.

Cheers



posted on Dec, 4 2010 @ 02:24 PM
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You mention "borrowers" "defrauding" banks but fail to acknowledge the fact that any agreement is void ab-initio due to the fact that the bank does not lend you any "money". What they do infact do is lend you your own money !


This is silly. If you had your "own money", then you wouldn't need to go to the bank to mortgage the property in the first place. You would simply pay cash for the property. Your premise is patently ridiculous.



But the bank still has no money to lend the buyer..

Banks have billions of dollars in assets: Cash, equipment, real estate, investments, loan receivables. Look at the balance sheet of any publicly traded bank, and you can see quite clearly that the bank has assets to lend against. Some are liquid assets - such as cash (Yes, the banks actually have their own cash, not just deposits). Others are hard assets -- such as retail bank buildings, ATM machines, equipment, etc. Banks are businesses just like any other business.

Banks aren't the only institutions that lend money, either. Manufacturers lend money to dealers. Franchisors lend money to franchisees. This is normal business in America. Standard accounting basics.



How can this be achieved when the seller has not recieved any money from the buyer ? How does a buyer obtain a mortgage on a property that they do not own ?


More erroneous fluff. First, the seller does receive funds at the time of closing. Typically, this is done via wire transfer via the title company. The bank providing the mortgage to the buyer wires funds to the title company, which then, after closing, the title company wires these funds to the seller's bank. These funds sent via wire transfer are real, spendable cash money.

The buyer obtains the mortgage by proving to the bank -- through the credit application process -- that the buyer has the financial wherewithal to repay the loan. The bank has a right to approve or reject the credit application based on the bank's due diligence.



The buyer paid for it using their own promissary note.

Again, you are playing Mickey Mouse games with your logic. At the time of closing, the bank gives certified funds to the seller of the property. These funds are transferred between the two parties - buyer and seller - via the title company.

The risk to the bank is that the borrower will default. The bank typically doesn't recoup the original funding amount at closing until 10-15+ years or more into a typical 30 year mortgage loan. During that time, the bank runs the risk that the borrower will default. And, given the state of our economy, that risk is incredibly high right now because jobs are scarce, unemployment is high, and defaults are rampant.

During the credit application process, mind you, the applicant can forge and doctor his loan application, and provide fraudulent information to the bank. This is especially easy to do if you know a crooked mortgage broker that understood the funding sources that were too loosey-goosey with their credit parameters at the time. Thankfully, many of these banks and mortgage brokers have been shut down for their lousy lending practices.



The mortgage contract is attached to the promissary note which makes the buyer liable to pay the bank for the money or the loan which the buyer has not yet or will never receive for up to twenty five years or more depending on the amortization term of the mortgage contract.

More nonsense. The buyer takes title to the property. The bank places a first lien position on the house in the event that the buyer (i.e., borrower) defaults on the loan arrangement.

Assuming there are no pre-payment penalties, the borrower can repay the loan at any time, thus significantly reducing the amount of interest paid over the life of the mortgage.

No one is putting a gun to the head of the borrower to take out a loan. In fact, the borrower could just as simply rented a house without going through the whole mortgage process altogether. For some borrowers, this would have made more sense, as they do not have the true financial wherewithal or credit strength to qualify for a traditional mortgage anyways.



and the bank recieves the value of the mortgage (principle + interest accrued over duration of agreement e.g 25 years,30 years) upfront


Nonsense. The bank has not collected all of the payments from the borrower until the loan is paid in full. The bank runs a huge risk that the borrower will default.

If a bank writes a check for $500,000 at closing, that is money out the door. It is only after 10-15 years, sometimes 20 years, that the payments even come close to reaching $500,000. The bank does not receive this money "up front" as you say --- Otherwise, the loan would be paid in full, the lien released, and the mortgage would be over.



And the banks walk away with upto 300% profit without using or risking any of their own capital !


If banks are so profitable, why is the FDIC shutting down so many banks these days? Your logic defies even common sense.

You can't have it both ways -- Either the bank has no money to lend (your initial theory), or they are extremely profitable and flush with cash earning 300% profits up front on every loan they write (your later theory). Frankly, you don't have one clue what you are talking about -- But a simple course in basic accounting would probably help, instead of subscribing to silly conspiracy theories found on obscure web sites touting knowledge of the financial system.



And you think the banks weren't well aware of what the brokers were doing? Who set up the parameters for the brokers? CookieMonster go back to Sesame Street and get an education.


The smart banks -- the ones that have survived the crisis -- were aware enough of the fraud to steer clear. Yet, even then, some of our most conservative banks got jammed in these fraudulent loans.

Who pushed for these loosey-goosey loans? Arrogant politicians, of course. Trying to appeal to the renting public that couldn't afford homes in the first place.

Keep your insults to yourself, please. It only makes you look blatantly foolish.
edit on 4-12-2010 by CookieMonster09 because: (no reason given)



posted on Dec, 4 2010 @ 03:55 PM
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edit on 4-12-2010 by lostviking because: (no reason given)



posted on Dec, 4 2010 @ 03:58 PM
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reply to post by CookieMonster09
 


Cookie is the only one here making sense.

He is completely correct with this last message on how the process works. This is a very easy to read, easy to understand explanation of how a mortgage really works.

home.howstuffworks.com...

I encourage Demacles and the others who believe banks to be the root of all evil to read this and actually try and digest its contents.

Banks are needed. Most people could never afford a home without a mortgage, and where else can you get those funds? I encourage anyone who cannot afford a house to rent. I pity the people who truely do not understand how a mortgage works or think for some reason they can afford a $400,000 house on a $30,000 dollar a year job, but they only have themselves to blame when they walk away from their loans. And really, we the taxpayer can blame them as well. I do NOT appreciate having to shoulder a tax burdern for irresponsible people who do not understand financial responsibility.

When did the bank force you to buy a home? Again, Cookie is right on the money when he talks about banks taking the brunt of the damage when homeowners walked away from their irresponsible purchases when they could no longer afford them due to rising rates.

Banks DO put a lot of risk when taking on mortgages. The statement by Damocles that the bank makes 300% of the houses sale price up front is absurd. Untill the entire mortgage is paid off, they do not have that 300% in hand. If someone walks away from a depreciated home 2 years after purchase, its the bank that suffers, and then due to the stimulus packages, the taxpayer. Can you please explain how again the bank gets all money the minute the deal goes through without any risk whatsoever?

Its interesting that the OP made a recent message about how he bought many homes within 30 years and this is the only time he suffered. Looks to me like he was speculating on the housing market and got burned. Investments come with risks, if they did not, everyone would be rich.

I have a theory about conspiracy theorists in general. They are self-centered and feel entitled to everything in life with no risk. I laugh at so many posts about how TPTB are out to get everyone, yet we live in a time where everyone has a cell phone, car, home and can feed themselves (in the West, anyways). When any little thing goes wrong, they point the finger at the banks, the government, or some other made up entity that MUST be out to get them!

DONT get a mortgage for a home you can barely afford, if any little thing goes wrong you are screwed. DONT blame the people who give you the means to buy said house when you stretch yourself so thin in the first place you only have yourself to blame when the economy goes south. DONT assume that the economy will always be expanding, leave room for a little contraction here and there or other things such as a loss of work.

Learn responsibility and self-reliance people. Your sense of self-entitlement is starting to sicken me.



posted on Dec, 4 2010 @ 03:58 PM
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reply to post by lostviking
 


Lostviking, I hope you live in an area near where the new documentary movie Inside Job is showing. Here is my post from today in the ATS movie section detailing the scope of that film:

www.abovetopsecret.com...

Suffice to say that this film names a great many names in the 2008 U.S. financial services industry meltdown, including names of very high U.S. federal government officials involved. I hope it will help you a lot in your lawsuit.



posted on Dec, 4 2010 @ 04:00 PM
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You can't have it both ways -- Either the bank has no money to lend (your initial theory), or they are extremely profitable and flush with cash earning 300% profits up front on every loan they write (your later theory). Frankly, you don't have one clue what you are talking about -- But a simple course in basic accounting would probably help, instead of subscribing to silly conspiracy theories found on obscure web sites touting knowledge of the financial system.

I can see you feel particularly strongly about this subject, but if you would consider, for just a second , that you could be mis-informed you may gain some valuable insights. Clearly the banks have money to lend, what they don't have is a willingness to risk it, and why should they when they can get away with doing things this way. And as for the reason for banks collapsing, there are many reasons why that would be attractive to certain elements..... now that would be a conspiracy theory. LOL.

How Banks Create Money

"Banks actually create money when they lend it. Here's how it works: Most of a bank's loans are made to its own customers and are deposited in their checking accounts..... the loan becomes a new deposit, just like a paycheck does....."

Extract from "The Federal Reserve Bank of Dallas publication - Money,Banking and monetary Policy"

"Checkbook money is "created" by currency deposits.
Commercial banks create checkbook money whenever they grant a loan, simply by adding new deposit dollars to accounts on their books in exchange for the borrowers IOU."

Extract from "The Federal Reserve Bank of New York publication - I bet you thought"

Hardly obscure conspiracy sites, in my humble opinion atleast. To what accounting do you refer ? LostViking ask your attorney to demand the auditor produce bookeeping entries to prove the promissary note is not used to give value to the check and that other depositors money was used to fund the loan. If this were the case the bookeeping enteries would be a debit to a checking account or demand deposit account or savings account and a credit to cash. The promissary note would not be recorded as a bank asset. Surely if the banks actually loaned anything it would appear as a liabilty ? Atleast according to GAAP principles ?

edit on 4-12-2010 by Damacles because: unfinished sentence.



posted on Dec, 4 2010 @ 04:08 PM
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Originally posted by lostviking
reply to post by CookieMonster09
 





And the "predatory lending" practices were done primarily by mortgage BROKERS, not the banks themselves. These were the same brokers touting Interest Only loans, Zero Down Payments, and fast, easy credit approvals


And you think the banks weren't well aware of what the brokers were doing? Who set up the parameters for the brokers? CookieMonster go back to Sesame Street and get an education.


Quite a rude reply to a great point.

Please if you dont believe his point, ask yourself why a bank would accept the mortgage of someone who clearly cannot afford the home they bought when its only the bank who will suffer when they default on their mortgage payments. Hint? Because the banks too were dupped by irresponsible brokers.

If a broker offered to give me a $300,000 mortgage on my dream home when i make $32,000 a year i would run the other way, and fast. Its people who did just that then walked away from their houses who caused this. I wish to live comfortably, not stretched thin to the point of breaking. People think they deserve it all on a silver platter then wonder what when wrong when they cant afford what they bought.

No pity from me. Maybe they should make basic accounting a required course in primary school.



posted on Dec, 4 2010 @ 04:57 PM
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[Banks DO put a lot of risk when taking on mortgages. The statement by Damocles that the bank makes 300% of the houses sale price up front is absurd. Untill the entire mortgage is paid off, they do not have that 300% in hand. If someone walks away from a depreciated home 2 years after purchase, its the bank that suffers, and then due to the stimulus packages, the taxpayer. Can you please explain how again the bank gets all money the minute the deal goes through without any risk whatsoever?]

The banks recieve their proceeds upfront by securitizing the mortgages, that is the, banks would sell the mortgage loans which are then pooled, securitized and sold as bonds or other types of securities. Et voila you have upto 300% profit.



posted on Dec, 4 2010 @ 05:15 PM
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Originally posted by Damacles
[Banks DO put a lot of risk when taking on mortgages. The statement by Damocles that the bank makes 300% of the houses sale price up front is absurd. Untill the entire mortgage is paid off, they do not have that 300% in hand. If someone walks away from a depreciated home 2 years after purchase, its the bank that suffers, and then due to the stimulus packages, the taxpayer. Can you please explain how again the bank gets all money the minute the deal goes through without any risk whatsoever?]

The banks recieve their proceeds upfront by securitizing the mortgages, that is the, banks would sell the mortgage loans which are then pooled, securitized and sold as bonds or other types of securities. Et voila you have upto 300% profit.



Fair enough, that much of it is true, and Goldman/Sachs is currently being investigated for this, among other banks. This is dishonest in that they sold securities they were in essence betting against.

It still does not remove blame from those walking away from mortgages they signed onto. While banks were ripping off investors (the banks guilty of selling said mortgages in this manner), the defaulters are ripping off the taxpayers who are forced to help bail out the banks.

I did not invest in CDOs, i do pay taxes. Who do you think im pissed at?



posted on Dec, 4 2010 @ 05:21 PM
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Originally posted by ianmoone1
Maybe something you need to consider.

Where do Judges invest their $ so they will be "safe" and provide a god rate of return?

Answer = MOSTLY into BANKS! (And not just as savings with interest but into bank shares for dividents and an increased share price).

So anyone who thinks they are going to take on a bank in court is plum loco.

No Judge in his right mind is going to find against a bank (or other corporation into which they invest their money) and see his share price plummet or his interest rate cut or his dividend chech halve or dissapear altogether.

Get real!

Are some Lawyers / Solicitors corrupt crooks cheats and liars?

Undountedly YES is the answer.

And those corrupt crooks cheats and liars of Lawyers / Solicitors - go on to become corrupt crooked cheating lying Judges!

Combined with Corrupt lying cheating Politicians and bankers - and Accountants and police they form whats known as crime rings!

And whay is it called a "ring"...

Because a ring is a circle and every part of a circle is bent!

Therein lies todays lesson on banks, corporations, Judges, Politicians, bankers, Police, Lawyers, and accountants etc.

And we wonder why society is screwed!

Cheers!.


Well, they sure would have been idiots to have had their money invested in banks in 2008 and 2009!

www.guardian.co.uk...

That is a good article showing just why you would have lost your shirt having your money invested in banks at that time. Just talk to my friend who had his life savings invested in Lehmans.

Judges are people like anyone else, and perhaps with the exception of the Supreme Court justices, i dont see why they would know any better than anyone else where to have their money invested.

Even the Supreme Court couldnt stop the dominos falling in 2009. I do not see your point sir.



posted on Dec, 4 2010 @ 05:43 PM
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reply to post by nightbringr
 


I understand your position, I really do, but the people you are referring to were tempted by, firstly very favourable initial terms being offered by the lenders and secondly a bouyant housing market with prices rising steadily. They rightly or wrongly believed that they could refinance at a later date and would recieve better terms or simply sell and make a profit. I believe there is substantial evidence on the record to show that banks knew what they were doing issuing loans to people who they knew couldn't pay, safe in the knowledge that they wouldn't have to bear the consequences when the inevitable happened. I would look firstly to the banks and secondly to your government when apportioning blame because as ever it is the taxpayer who ultimately pays the piper.



posted on Dec, 4 2010 @ 05:54 PM
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Originally posted by Damacles
reply to post by nightbringr
 


I understand your position, I really do, but the people you are referring to were tempted by, firstly very favourable initial terms being offered by the lenders and secondly a bouyant housing market with prices rising steadily. They rightly or wrongly believed that they could refinance at a later date and would recieve better terms or simply sell and make a profit. I believe there is substantial evidence on the record to show that banks knew what they were doing issuing loans to people who they knew couldn't pay, safe in the knowledge that they wouldn't have to bear the consequences when the inevitable happened. I would look firstly to the banks and secondly to your government when apportioning blame because as ever it is the taxpayer who ultimately pays the piper.


All fair again, but in most cases it was the brokers approving mortgages and making commissions off the banks who then DID take the brunt. The message i posted after the last one shows a link to a site listing over 150 bank closures between 2008-2009. Seems like a pretty heavy price to pay to me.

The big banks did for the most part get bailed out, but the CEOs, who by your reasoning would know about the easy loans given out, were fired. Doesnt seem like somthing they would want to me. Granted, they would have already made their fortunes, but greed begets greed, and i cant see them WANTING to be fired.

As far as buyers buying in and then walking away when the market went sour, wouldnt saying they are stuck with their investment be the fair thing to do? After all, they DID sign a contract? I dont want anyone stuck with an unfair burden, but people need to understand a home shouldnt be somthing you speculate on.

A house is the most expensive thing a person will own, why would you not allow for a changing market and even a loss on income before purchasing?
edit on 4-12-2010 by nightbringr because: (no reason given)



posted on Dec, 4 2010 @ 07:32 PM
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reply to post by nightbringr
 


Yes the CEO's would have been fired, but as you correctly point out their fortunes had already been made by that point and they would have no doubt negotiated very favourable severence terms. Their circumstances are very different to the average man on the street in that they would probably have been able to walk into another equivalent position after a spot of gardening leave without any damage to their reputation or employment record. I doubt they would have wanted this but the rewards were no doubt worth the risks. Is it more acceptable for an executive to walk away than the average "Joe" when all either party was trying to do was chance their arm ?

You make a particularly salient point in the penultimate paragraph when talking of honouring contracts, I believe that society is based entirely on agreements or contracts of one sort or another, from the most mundane promises to friends and family, to mortgage agreements and commitments to your fellow man. Without the good faith of one and all society would disintergrate into chaos. This is why mischeif in contracts is forbidden in common law. But taken in the context of a system that is inherently corrupt, I would even go as far as to say "concieved in iniquity" (Banking was conceived in iniquity and was born in sin. - Josiah Stamp - former govenor of the Bank of England.) Then I would say that the buyer, who, having tried his luck and failed, walks away is by far the lesser of two evils.( The other being the corrupt exec.) But, to use the vernacular, s*%t falls so it is the man on the street who takes the blame when he has profited the least of all. Unfortunately society is not teaching or demanding responsibility, so thoughts such as factoring changing circumstance or the prospective economic climate would be drowned out by the here and now. Sad but undeniably true.



posted on Dec, 4 2010 @ 08:38 PM
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Clearly the banks have money to lend, what they don't have is a willingness to risk it, and why should they when they can get away with doing things this way.

No, most banks are in survival mode right now because of the mountain of defaulted mortgages on their books. That's why they aren't -- generally speaking --- lending money right now.

Many banks are swimming in defaulted loans, and when that happens, the state and/or federal bank regulators require the bank to shore up their capital reserves. Ultimately, this proves difficult for the bank to raise this kind of capital because there are very few investors interested in investing their hard-earned money into a failing bank with a history of loose lending practices.

It's not a matter of whether or not there is a willingness to risk the bank's capital on more loans, so much as the bank being already swamped with bad loans on the books.

Add to this the fact that, due to the recession, there are fewer borrowers out there right now looking for loans. Demand is weak. Businesses are trying to shave debt, not take on more debt. And consumers are the same way.



How Banks Create Money


Again, these are quotes pulled from the Internet, with no basis in fact or reality. Accounting 101: Banks, like any other business, have assets, and significant ones at that.

They don't need to make "money out of thin air" - they already have their own cash funds to lend, deposits on hand to lend against, liquid investments such as stocks and bonds, and plenty of hard assets in the form of real estate, equipment, etc. They also have very significant loan receivables on their books -- This is future interest they anticipate earning from contracts (i.e., loans) on the books (i.e., debts owed by borrowers).

Banks earn interest on their loans --- And this means profit for the banks that they can use for future lending to other borrowers.

You make it seem like banks just magically create money out of thin air. Nothing could be further from the truth. Banks have significant cash reserves to lend to borrowers, as noted above. It's not uncommon for a typical retail bank branch to carry anywhere from $50-100 million in deposits, for example. Lending a borrower $200,000 for a house is a drop in the bucket compared to the cash on hand that the banks hold.



Surely if the banks actually loaned anything it would appear as a liabilty

I am afraid you are mistaken. When a bank closes a loan, they pay for the house in real cash funds at the time of closing, which is the very inception of the loan. The bank, for example, might write a check for $500,000 at closing, which is given to the seller of the property in question.

At the time of closing, the borrower signs a mortgage note, promising to repay the loan over the next 15-30 years at a fixed or variable rate of interest.

The bank does not record this mortgage loan as a liability as you suggest -- The bank then records this mortgage loan as an asset in the form of a loan receivable. Again, this is very, very basic accounting. I have no idea where you are getting your facts, but they are incorrect.



The banks recieve their proceeds upfront by securitizing the mortgages, that is the, banks would sell the mortgage loans which are then pooled, securitized and sold as bonds or other types of securities. Et voila you have upto 300% profit.

The banks sold the note to an investor. The investor, however, got screwed over royally when the sub-prime borrowers defaulted on their mortgage loans. The underlying assets -- the mortgage loans themselves -- were garbage.

Also, you have to realize that the banks don't sell these loans at the profit realized after the loan is paid in full. They take a discounted rate from what they would have received if they had carried the loan on their books for the full 30 years. This allows the investor to reap the huge profits over the course of the next 30 years, not the banks. The banks make some profit from selling these loans, but they aren't taking the risk anymore -- The investors are.

There is absolutely no way an investor is going to pay a bank 300% for a sub-prime mortgage loan, even when times were good.



They rightly or wrongly believed that they could refinance at a later date and would recieve better terms or simply sell and make a profit.


In other words, the borrowers were speculators. They gambled, and they lost. And now they blame everyone but themselves for their own foolish mistakes.



posted on Dec, 4 2010 @ 10:25 PM
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reply to post by nightbringr
 


Out of all the homes I have owned, only one was a true investment property. We have moved ALOT. I appreciate that banks are there to assist us to buy homes, but there is a very dark side to this industry.

Foreclosures are a huge money maker for the banks. With all of the late and junk fees added to a troubled loan, the government foreclosure compensation, and the fact that these mortgage companies are insured against any losses- Foreclosures are, overall, a giant windfall for the banks. Tax write offs too. Also, what people are failing to grasp, is that no money is ever really loaned for a mortgage. It is fiat money, an accounting ledger......the bank doesn't loan it's own money.

About 6 percent (according to Tom Cox's testimony) of people in foreclosure have legal representation. The banks will win and lose some of these cases. That is a very small loss, compared to the 94% of homes they will foreclose on. The tide is now changing as people become aware that their lender has participated in fraud. Loans were illegally securitized, sold off, the paper trail destroyed. And now, when caught, banks have forged documents in attempt to demonstrate they have standing. If corporations are 'people' according to the Supreme Court, then why aren't these lenders and lawyers being imprisoned for fraud, forgery, SEC violations, and other laundering activities?

I agree that there were people that flat out lied on their mortgage applications. There were brokers who spiffed up borrower's applications and assets, and there are banks that made so much money in all of their greed, that a common sense resolution must prevail. Just tonight, here in Miami...I heard of a neighborhood home organization that said "You can buy a home and close in 30 days." Banks will continue to give out loans to people who are marginally qualified, because now we have all of these undesirable properties sitting vacant, and the county and state governments don't want these properties becoming crack houses and impacting the tax base. It is a mess of epic proportions, but despite what everyone on here says......there are banks doing some bad things....when they could be part of the solution, not the problem.

There is no reason right now, if someone has the ability to pay the arrearages and catch up on their loan, that they shouldn't be afforded a home modification. Less than 1% of people who apply for a modification receive a modification. There is something criminal with that number. The banks serve the banks, so if they aren't making money on foreclosures, why would they be foreclosing? Foreclosures are PROFITABLE. That's why they want people's homes. Period.



posted on Dec, 4 2010 @ 11:17 PM
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reply to post by DABIGRAGU
 


I wrote them so many times and they ignored almost every single request. I needed a detailed accounting.....but it took over a year to get it. I finally got it, and even my accountant couldn't figure it out. A Qualified Written Request is a joke....because all they send you, despite your questions, is the standard statement and a copy of the recorded deed. As if we are that dumb......





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