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Thread: Congresswoman stands up to the banks (dept. of utter joy)

  1. #1

    Default Congresswoman stands up to the banks (dept. of utter joy)

    Saw this on Lou Dobbs tonight (Thursday Jan 29) - the strangest ep of his show I have seen in that I agreed with everything he had to say!!

    Basically, Congresswoman Representative Marci Kaptur of Ohio (democrat, of course) is telling foreclosed homeowners to stay put, and exercize squatters' rights - while availing themselves of competent legal representation. Her premise is roughly this:

    The banks got into trouble in 2 main ways:

    1. foisting mortgages (with bad terms, usurous interest rates and complex, cryptic structures and language) on people that couldn't possibly afford them or understand them who inevitably defaulted on those mortgages; this we call the subprime mess.

    2. In the old days, a lender held a loan; you owed the bank you borrowed from until it was repaid. Over the last 10 ys or so, banks have been bundling mortgages together, and selling the debts they originally created on to other parties, in the form of securities. Sometimes they chopped up various mortgages (even other loans) and created strange securities to sell.

    So when a person defaults on their mortgage payment, they are not defaulting against the originator of the loan, but against whichever party or parties holds the weird securities containing the person's mortgage.

    And it is often the case that it is not clear exactly who in fact owns the debt; it may be multiple parties! Foreign parties! No longer-existing parties, like hedge funds or bankrupt or bought out institutions!

    The point being that, under real estate law and banking law, unless the debt holder can 1/ be located, 2/ produce the note the defaulter defaulted against, the foreclosure can't go through!!! Hee hee!

    See Representative Marci Kaptur of Ohio tells foreclosed homeowners to stay put

    Here is part of the Lou Dobbs transcript:

    GRIFFIN: Elected officials are saying Toledo is not in a recession, it is a depression. It is this bleak backdrop that inspired Toledo Congresswoman Marcy Kaptur to take the floor of the House earlier this month to tell her constituents to stay put.

    REP. MARCY KAPTUR, (D) OHIO: So I say to the American people, you be squatters in your own homes; don't you leave.

    GRIFFIN: Kaptur says she has had it with government bailouts for Wall Street banks, but nothing for homeowners. She is advocating for a legal revolution, a demand that not one of her constituents leaves their home without an attorney and a fight.

    (on camera) Even if they've been foreclosed on, don't leave?

    KAPTUR: If they've had no legal representation of a high quality, I tell them stay in their homes.
    from: - Transcripts

  2. #2


    Now that's what I call good news for a lot of unfortunate people. I'm glad to see that someone in congress is finally pulling their head out of their, well, you get the picture.

  3. #3


    Quote Originally Posted by Raccoon View Post
    The point being that, under real estate law and banking law, unless the debt holder can 1/ be located, 2/ produce the note the defaulter defaulted against, the foreclosure can't go through!!! Hee hee!
    I don't think it's quite that easy to wait until someone shows up with a printed and sealed document claiming ownership of the mortgage.
    Usually, when those "weird securities" (Asset Backed Securities) are engineered, the original creditor remains responsible for the administrative handling of the loan. I.e. the bank still has the written mortgage document in their files, and by our definition the bank can not only demand payment, but must even do so under the contract they signed when selling the loan to some other party. Usually, the bank gets a fee for handling the admin stuff.

    I'm no expert in those 'weird securities' (as you call them), but the way I understand their construction, the banks sold the risk of the loan. Which means they still, technically, own the loan, but the party who bought those securities has to pay the bank money if the original debtor defaults. Sure, some securities may call for the entire loan to be transferred to the new owner, but I still doubt the bank would send the original credit documents to the new owners (who may be located some place in India and wouldn't have a clue where to find the debtor in some small town in America). So the actual structure of the security would be a loan from the new owner to the bank plus the risk going to the new owner. The original loan/mortgage contract between the bank and the home ownder still stands.
    It's no different than getting a loan from the bank to buy a house, but not for you to live in, but to rent to other people. You still have to pay off the loan even if your tenants don't pay their rent. Two separate contracts. At least in my legal system...dunno about yours.


  4. #4


    Many good points there, Peachy. (And congrats on your 3000th post.) I was trying to keep things simplified: these situations are very complicated, as as are the underlying securities, derivatives created against those loans, etc. etc. I was paraphrasing the congresswoman. BTW I saw her and others speak a bit more, who point out that many foreclosures, if brought into litigation, can take a year to resolve, during which time a house's occupants can't be evicted.

    She isn't saying don't pay your mortgage; in fact she says to do so. But if you do fall behind in payments, the remedies are not cut and dried. She cited the case of a woman who was put into a subprime mortgage that ballooned (doubled) from $800 to $1500. The woman had a credit rating that should have qualified her for a more regular mortgage: she had even put $40 000 down on her $180 000 house.

    The wiggle room that is in fact there though people don't know about it empowers debtors somewhat to face down the banks and negotiate a more reasonable contract. That is: 1. lower interest rates based upon today's low fed rates, 2. longer terms than the usual 20-25 years, 3. eliminating pre-payment penalties/payout penalties involved in remortgaging, 4. restructuring mortgages away from "interest only" and other risky types.
    Last edited by Raccoon; 03-Feb-2009 at 21:41.

  5. #5


    So only a democrat would be willing to say break the law?

  6. #6

  7. #7


    Quote Originally Posted by Fire2box View Post
    So only a democrat would be willing to say break the law?
    When it comes to disregarding personal responsibility, definitely.

    Look... Nobody held a gun to these people's heads and told them they had to buy a house. It sucks that people are "losing" (I prefer "banks taking back what people aren't paying for") their homes, but if that is the case, it wasn't prudent to buy it in the first place. These foreclosees are the ones that knew how much money they take in, and how much they can afford to spend. It was their choice to purchase a home that they couldn't comfortably afford (which includes an emergency fund to cover payments in the event of a crisis).

    If someone screws up, they need to be responsible for their actions (I know... crazy idea eh?), which in this case means relinquishing the property to it's rightful owner... The bank.

    It is NOT my responsibility to cover their ass, nor is it the responsibility of any other taxpayer, or our government. On top of all the bailout bullshit coming out of my pocket, we now have this Congresswoman advocating breaking the law by withholding property from it's rightful owners. Nice.

    Mr. "department of utter joy"... If you sold someone a PS3 and they agreed to pay you $20/month for 20 months, and only made one payment... Wouldn't you want the PS3 back, or would you say "sure, just keep it and don't pay anything"?

  8. #8


    I am not for people not paying mortgages, or rent for that matter. As to guns held to heads, there is no question naive homeowners should not have bought things they couldn't afford. But the government encouraged home ownership, and allowed mortgages at terms that should not have existed, as well as other failures of regulation.

    The question is what to do now. Nobody likes the idea of abnegating personal responsibility, certainly not me. But much of the solution to the present crisis is in the hands of the banks; widespread foreclosures hurts them as much as homeowners; restructuring mortgages to make them affordable, assuming people continue to pay them, is a better option than the present situation.

    There are questions of whether outright fraud was perpetrated in many cases of subprime mortgages. If there are people who were defrauded into contracts the contracts (or certain of their terms) are unenforceable. If the contract contains illegal provisions, like breaking usury laws, then likewise.

    Renegotiating terms for the ultimate good of all parties concerned happens all the time between businesses, nations, and others. The idea that one has some strength to renegotiate with one's bank is a good thing. We are no longer in 2005; times have changed so drastically that many contracts no longer are feasible.

    Oh - and nobody is advocating law-breaking. Read carefully. This is why squatting in a house also requires legal representation: to make sure laws are not being broken. States' governors don't tell people to break laws; they occasionally point out where the law is murky, and where assumptions of one's options aren't necessarily as limited as one thought.

  9. #9


    Quote Originally Posted by Raccoon View Post
    The question is what to do now.
    Let the people who bit off more than they could chew lose their properties and go back to renting, and let the banks that were stupid enough to lend money to people unable to pay them back fail and be liquidated. The people with poor money management skills and lack of financial foresight will learn a lesson, and new banks (hopefully with more sound business practices) will emerge.

    The biggest issue with the topic you presented with glee is that this Congresswoman is presenting an idea that will not only do nothing about stopping a home from being foreclosed on, but will ultimately land the (former) homeowner in jail for criminal trespass.

    How someone so dumb got elected to public office... Wait... That's status quo.

  10. #10


    NEJay, if you got a mortgage knowing fully how the payment structure would pan out and what you were getting into, then I agree with you. However, many of the sub-prime lending institutions the banks contracted to make loans for them were run in the same spirit as Madoff's Ponzi scheme. They were con artists, using confusing language and contracts, high pressure sales tactics and misleading marketing to get people to get mortgages they could never afford. For example, some firms had an explicit policy of never telling clients that their rates would reset at a much higher level. Even the bank executives overseeing these loan makers said their sales tactics were likely unethical, and if they weren't illegal now, they would likely be in due time.

    Just read what the FTC had to say about Associates First Capital, one of the pioneering subprime lenders, now part of the ever money losing Citibank.
    FTC Charges One of Nation's Largest Subprime Lenders with Abusive Lending Practices
    It's from this spirit of scams and cons that the majority of subprime lenders began. Remember, these are clients of the banks, and their interest is not making good loans, but rather lots of loans. If you read any of the histories of the current credit crisis or subprime (or multiple as I have), the widespread corruption amongst subprime lenders is evident.

    Or would you suggest that it's the homeowner's fault for being fooled? While I can often have contempt for stupidity myself, I do not believe a great and free country can be created by exploiting people's weaknesses. As a general rule, the law reflects that.

    Therefore, the affected homeowners should squat and fight for their homes, because many of them will win. It is only sane to renegotiate, for both the home owner and the bank. In the terrible housing market, a mortgage being paid at interest rates so low the banks lose a little money is better than a house that still cannot be sold at a price much less than the value of that mortgage and will depreciate even further as it's not maintained.

    Although, I should address the people on the other side of the equation that were conned. You know, the people who were fooled into buying the exotic asset backed securities these mortgages were bundled into. However, these people ran banks and pension funds, they managed millions if not billions. They had the resources (and supposedly the expertise) to see through these type of cons, yet failed to do so. For them I have less pity.

    As a final note, I don't believe that subprime lending is necessarily bad, but it is quite risky. If you respect and understand that, and more importantly respect your clients, then there is modest money to be made. Moreover, when no one else is doing that, there is an extreme amount of money to be made shorting them. / UK - US hedge fund makes 1,000% return betting against subprime
    Last edited by IncompleteDude; 04-Feb-2009 at 03:51.

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