The Blame Game

The REAL Culprits Behind the Mortgage Meltdown
by: Attorney Walter Hackett III

According to your average mortgage lender unscrupulous consumers schemed to dupe lenders into giving out mortgages to individuals who couldn't actually afford them - the truth is otherwise. In fact, beginning in the 1990s, mortgage lenders found themselves losing huge market share to "mortgage brokers" who would "shop" a potential borrower's loan to various lenders in an effort to find the "best" loan for a borrower. That's when the lenders realized it's MUCH easier to buy them than to fight them. Mortgage lenders began offering mortgage brokers a "Premium" for bringing a loan to them. While known by many names the most typical is the "Yield Spread Premium." The more expensive the loan (for the borrower) the higher the Premium.

This trend, coupled with the phenomenon known as "FICO-based" lending, resulted in lenders developing new loan products to create an entirely new group of borrowers. The result of their efforts - literally millions of consumers who once thought home ownership was out of reach were told they could, in fact, live the "American Dream." With an increase in the number of borrowers the demand for real estate exploded and home builders rushed to meet the increase in demand. To ensure the demand would stay high lenders became ever more creative in the financing products they offered going so far as to offer "No Income, No Asset" loans. Borrowers were being qualified for mortgage loans based ENTIRELY on credit scores with NO regard for their actual ability to pay. Since "equity" appeared to be rising with no end in sight, lenders threw caution to the wind.

Borrowers literally became nothing more than fodder for the financial hunger of lenders as they were steered into loans and victimized by an origination process that resulted in them being literally faced with a stack of papers and terse instructions to "sign here." Since borrowers believed they could trust brokers and lenders they did something amazing - they followed those instructions. Adding insult to injury income information provided by borrowers was often grossly misstated by brokers and lenders whose only concern was ensuring loan volumes continually increased.

Loan originations reached unheard of records while the industry literally found new ways to fund the apparently inexhaustible supply of borrowers they'd helped create. In California the "beneficial" interests in Deeds of Trust were "stripped" away from Deeds even though California law has historically held such interests could NOT be separated from the related obligation. Individual loans were lost in a sea of "securitized" loans from which "payment streams" were further stripped and "sold" to investors. Finally, the balloon popped and reality set in. As real property values flattened and the "pool" of borrowers stopped increasing the greatest Ponzi scheme in human history came crashing down.

Today, mortgage lenders and brokers and the "investors" who made billions of dollars from consumers and the "markets" literally blame consumers whose only "sin" was a desire to live the American Dream. In fact, it was and is the mortgage lenders, brokers and investors who not only created the illusion of ever increasing equity, but also loan products for people who couldn't actually afford such loans and the "secondary market" itself, who are the primary culprits in creating the financial nightmare America faces today. Homeowners don't have and never did have any ability to negotiate contractual terms of Uniform Loan Documents and rarely even had the chance to read the documents they were compelled to sign as an absolute condition for buying or refinancing a home. The "answer" to the problem is a simple one - lenders MUST be forced to modify loan terms and make loan payments affordable or the Nation will find the nightmare that exists today, will be a fond memory tomorrow.

This is still a Nation "of the People" and it's long past time we take it back and we start by taking back our money and our homes from the perpetrators of the greatest fraud in history - America's mortgage lenders and the "investment" community they created.

A personal message:

I'm writing this as 2008 comes to a close. It has been, without question, one of the most disastrous years for American families since the birth of this nation. Literally millions are faced with the prospect of losing their homes while our nation's resources are being shared with those who need and deserve them least of all - the very parties responsible for our current economic crisis. I thought it was important for me to write and let every person who is faced with financial troubles in these times know that you are NOT alone. I'm not saying this solely with the hope it will make you feel better, I'm saying it because I want you to both believe AND act on it. When we're faced with trying times it's been my experience that we feel isolated and alone even though we may be surrounded by many others. I urge EVERY person who is facing financial or personal problems to reach out to someone, to find some other person with whom you can share your feelings and concerns. Whether it's a minister, friend or counseling professional what matters is that you truly understand you are not alone and that while banks and our government may not care about you - people do!

The work I do often means I have to spend seven days each week in my office. It takes me away from my family and friends but I try to keep in mind I do it because of them, because they matter to me. I represent people who've been victimized by mortgage lenders and brokers not only because it's the right thing to do but because the human victims of the greatest Ponzi scheme in history matter too!

I'm not a professional counselor and my suggestions here shouldn't be taken as anything more than intended - a reminder; from one human being to another, to remember when you are troubled that you are not alone, that you matter. A reminder to reach out to others who will help you remember that without "you" there is no "we" and that the only way "we" can rise above this greed created nightmare is by working, by talking and by acting - together.

Walter Hackett