US Politics and the Economy

Foreclosure Scam

By Ted Newcomen

One story that the U.S. “lamestream” media is studiously ignoring is the public auction foreclosure scam that’s currently being practiced on the steps of thousands of courthouses across the nation. It’s a racket so egregious that nobody wants to talk about it because it continues to bail out the banksters with billions of tax-payer funded dollars and yet keeps millions of prospective home buyers from getting a foothold on the housing ladder.

By way of proof I offer an example of what’s happening in my sleepy little backwater of Kent County, Maryland (about an hour-and-a-half’s drive from DC). The property in question, a modern townhouse, had originally been purchased by the homeowner for $170,100 in June of 2006 with a 30-year mortgage of $136,080 from the Peoples Mortgage Corporation at an interest rate of 7.5 percent.

Sometime in 2008 the mortgage company went into voluntary liquidation and the business was subsequently taken over by a bank that later sold it to another financial institution.

Sadly, in 2012 the homeowner died, still owing over $135,000 on the loan. Naturally all the mortgage payments stopped and the home was eventually foreclosed on by the mortgage holder.

Fast forward to 2014 and the mortgage lender is now on the hook for the original loan, plus over two years of missed monthly mortgage payments, Escrow fees, and insurance premiums but the house is now worth $40,000 less than the original purchase price due to the collapse in the property market.

But thanks to the President and Congress (and remember that’s BOTH parties) the mortgage holder doesn’t lose a single cent as the government has promised to buy up all the financial industry’s toxic assets using your (read “tax-payer”) dollars.

This is achieved by selling the said property at a public foreclosure auction on the steps of Kent County Courthouse where the reserve price is set at $167,000, over 30 percent more than the current market value of an identical adjacent home recently sold in the same development! Needless to say no local buyers were willing to bid up to this inflated price. However, the property was purchased by none other than the Federal National Mortgage Association (Fannie Mae—a tax-payer backed Quango1).

Not only did the original mortgage holder get back all its money from the loan, plus all missed payments, out of pocket expenses and various generous fees, it also made a very respectable profit on the convoluted but perfectly “legal” slight of hand. All paid for by you—the U.S. taxpayer.

Before the end of the year Fannie Mae will put this property in the hands of a local realtor who will then sell it at the current market price. The subsequent approximate $40,000 loss to the institution will also be covered by the U.S. taxpayer!

This is nothing less than a government sanctioned corporate welfare scam running at local, State, and national levels. Millions of foreclosed homes are going through an identical process across the country and we, the good old U.S. tax-payers, are making good the losses of the finance industry and its so-called “regulators.”

Back in April 2009, President Obama told a meeting of the nation’s top bankers that he was all that was “standing between you and the pitchforks.” Presumably he was trying to intimidate the one-percent who really run this nation and simultaneously placate the 99-percent who actually pay for everything? It’s nice to see he is still doing such a stellar job and that nothing has actually changed.

Our sham of a democracy has been hijacked by a political mafia and its corporate paymasters. Changing President or the control of Congress will not stop this and other corporate rackets. Voters need to start asking some serious questions of potential candidates for the 2016 elections unless they wish to keep subsidizing the financial losses of the establishment. Alternatively, they can just dust off their pitchforks.

1 “an organization to which a government has devolved power.”