As further corroboration of the articles on this site and an infinite number of mainstream and not-so-mainstream sites, the banks sold mortgage bonds to investors under the presumption that the risk of loss was nearly zero. If done properly, securitization works. It gives a greater opportunity to more people to get home loan and other kinds of credit financing. And we now know that the primary target of many campaigns was to get new “customers” to take a loan (even if the bank wouldn’t give them a bank account) and in a huge number of cases consisted of those people who were faced with language, education and cultural challenges. Any fool would know that if you are going to do business who are restricted by such challenges, things are not likely to turn out as planned. The City of Miami thinks there is something wrong with that plan. So do I.
It is easy to see why scam artists would target such people. They are easy to convince because the con man convinces them he or she is trustworthy. The “customer” comes to rely on the seller for information about whatever it is he or she is selling. In conventional terms it might be selling insurance on a weekly payment basis or selling an annuity for a large down payment made from the proceeds of life insurance. The insurance turns out not to be real or, in less pernicious cases, the insurance doesn’t cover nearly what was promised by the seller. In any event the Seller makes money because the customer gives money to him or her. The money goes into his or her pocket and they are able to live off their ill-gotten gains.
All this gets a whole lot less obvious when the “seller” is trying to “give” money to the customer and have the customer sign loan papers. Why would anyone give up the money knowing that the loan has a larger risk of failing because the customer is challenged in some ways that make it less likely they will have employment, less likely they will have savings and less likely that they will be able to pay the interest, much less the principal amount “loaned?” It sounds like a fool’s errand — lending money to people who are not likely to pay the money back. And yet, the banks did exactly that and employed tens of thousands (10,000 convicted felons in Florida alone) to sell such loans.
The key question is not whether the banks did it to make money. The answer is obvious. Of course they were making money — but how when they were getting agreements to pay the loan from people who would never pay it back — often because after the teaser period was over it was obvious on its face that nobody in their financial circumstance could pay more than their entire household income? The only rational answer is that the banks had no risk and that they made all their money on the front end AND when the loan failed by betting against the loans they were selling to unsuspecting investors. And the only way they could pull off that maneuver is to intervene in the lending process such that the investor and borrower never meet up. And the only way they could avoid disgorgement of their illegally obtained profits from “proprietary trading” and “fees” is to foreclose on as many mortgages as possible.
So when you take the entire program on its face, you can see that foreclosure was an integral part of their profit model because it cuts off the rights of borrowers, investors, insurers etc. from demanding disgorgement of illegally obtained compensation that was never disclosed at closing — an absolute requirement under the Truth in Lending Act. And they knew the day would come when everything would collapse and the proof of that is that they were betting on exactly that to happen.
And they knew that they would be destroying documents, “losing” documents etc such that they would be fabricating those documents with such advanced technology that the borrower never realized that he was being shown a document he had never seen before, much less signed. And finally, they knew they would be fined and censured. No matter — they simply used investor money again to pay fines and damages that were caused by the banks put are being paid by still unsuspecting investors. (except for people like Vincent Fiorillo bond manager at DoubleLine who has had enough of this game).
The Miami suit needs to result in discovery that digs deep into the books of JPMorgan to see just how much money was made on each of those bad loans (bad for both the investors and the borrowers) to see just how much money they made, how they made it and how much they made. The results will astonish most casual observers. The bottom line is that the banks made profits that were higher than anytime in history but they weren’t really “profits.” They were proceeds of theft.
It should all be disgorged and the communities that were decimated by the Bank should be restored. That is the RIGHT thing, especially when you learn that many of the “loans” were the result of hard sell, midnight visits signing piles of documents the customer had no way of understanding and no opportunity to read even if they could understand them. Add to that the refi’s were really homes that were paid off or nearly paid off. If they had just been left alone, the same people would have actual positive net worth and would never have faced foreclosure.
JPMorgan sued by Miami over mortgage discrimination
- At issue are alleged predatory lending practices in minority neighborhoods since at least 2004 which Miami blames for causing waves of foreclosures in the housing bust. After issuing high-cost loans to minorities, JPMorgan (JPM -0.3%), says the city, refused to refinance on the same eased terms extended to others.
- The lawsuit follows a similar one launched a few weeks ago by Los Angeles. Wells Fargo, Citi, and BofA face similar charges.
Filed under: AMGAR, CDO, CORRUPTION, evidence, expert witness, foreclosure, foreclosure defenses, GTC | Honor, investment banking, Investor, marketing, MBS TRUSTEE, MODIFICATION, Mortgage, originator, Pleading, Servicer, STATUTES, taxes, Title, TRUST BENEFICIARIES, trustee | Tagged: bad loans, discrimination in lending, JPMorgan, MIami |