Foreclosure-gate is heating up and the mad scramble for what's left of $45 trillion in real estate is guaranteed to leave homeowners homeless, pension funds unable to pay their pensions and even some of the biggest banks insolvent. A great housing goat rodeo was created when some of the 65 million mortgages on U.S. homes didn't follow proper legal procedures;
- Fraud by homeowners who lied on their loan applications
- Fraud by banks who didn't follow proper legal procedures around the notarization and processing of mortgage documents
- Fraud by investment banks who packaged this junk and resold it to unsuspecting pension funds
- Pension funds promised returns to their pensioners they could never achieve
Lies, lies, lies and more lies. In this jockeying for position, the only thing guaranteed is Leona Helmsley's Law i.e. "Laws and taxes are for the little people". But the little people are starting to fight back in the U.S. and we'll get to that after we do a quick review of the situation at hand and how we got there.
In the old days, that would be pre-1980's, banks and savings and loans actually knew their customers and wrote and maintained loans on property themselves. Something similar to this scene from "It's a Wonderful Life" where George explains to his depositors, who came to withdraw their money, where it all went:
In those days, the corner bank knew the customer, the house, the depositors, they kept the records in a file cabinet at the bank -- it was where you went in to make your payment. Everyone knew that If you didn't keep up with the payments, the banker would foreclose on your property. That part hasn't changed.
Foreclosures is one thing, but what is the emotional impact on the rest of the property market going to be?