Bankers & Foreclosures
I've alluded to the idea that buried deep in the motivation for this misguided legislation there are likely big bankers in dark corners. Who do you think actually pays to write up the Bills? A lawyer or law firm wrote that draft... but who actually paid them to do that?
I've alluded to the fact that Bankers and their brethren are always looking for ways to add stress to people who are already in stressful economic situations in order to force foreclosures.
Sounds a little conspiratorial doesn't it? Sure... Kind of... But if here are some facts:
Humm... yeah... something doesn't seem quite right does it... something related to the motivations is seemingly missing...
Bankers and the upper middle class make big money on foreclosures. It's just a fact most know to be true intuitively but few can actually grasp how it all happens. When those folks make money, it trickles down. If you can force foreclosures, the economy remains in motion and the job of keeping the economy in motion belongs to the private bank we call the Federal Reserve.
But what about the bank's losses? When homes get foreclosed on, there are losses too right? Nope. Not at all. It's a magician's trick. The losses are more than covered before the dreadful foreclosure event ever transpires, and they are covered by a pool of payments that were taken by those who were most likely to default (hint: it's called mortgage insurance...)
This is a pretty slick yet sick and twisted game of survival of the fittest going on right now. In bare form it can be seen as energetic cannibalism, but it's hidden fairly well and it's really hard to point a finger at any single culprit. Hopefully the sharing of a recent transaction I was involved in may help with this understanding.
=== Back Story ===
I bought and rehabbed row homes in Baltimore from 1998 through 2012. In total I rehabbed about 20 units (16 homes, but several were 2 unit buildings). In Spring 2016 I received a call from someone who bought a home from me in 2009. He was in trouble financially. He wanted to short sell the home but worst case he was going to have to let it go into foreclosure if they wouldn't allow a short sale. (Note... he had an FHA loan and he had been paying hefty mortgage insurance for many years.)
=== Math ===
What bank in their right mind would price that home at $165k, right?? After all, it only really needs $12k of work and it's a 240-250k home if it wasn't going to get stamped with the black eye of short sale/foreclosure.
Magically, the Short Seller's pre-sale appraisal, which is used to set a list price came in at $165k. Obviously, when they do this type of appraisal, they too factor in a similar set of costs and profit numbers, even though there are no line items for those on an appraisal.
My partner and I put an offer on the home and we purchased it for the appraised price/list price (actually a few k below). We completed the work in a month or so and put the home on the market. The home went under contract in about 30-45 days in the 220k range. The home sold. Below is a break down of all the folks who "made money" on this deal...
=== $$$ Beneficiaries from a single Short Sale===
The numbers below are rough estimates at gross income made by each participant in this transaction...
Whew!!... a lot of households and the State of Maryland saw income from this transaction didn't they!?!
The FED gets money into circulation via debt. Homes, Cars, Education... it's all around us. But they also keep money moving by allowing huge insurance systems to build up and then assisting with "claims". If you want to get me on an insurance conspiracy, lets talk about HAARP and those hurricanes that use to batter the east coast until I got my CAT Claims Adjust license... after which the hurricane claims business seemed to magically dry up for the most part. Who has control of those HAARP arrays now anyway? Oops.. getting off topic...
Do you understand the Foreclosure game any better now?
The foreclosure game is about forcing insurance claims and/or reimbursements from the Government. The only losers are those that can't afford their mortgage (and those who have been forced to overpay for insurance). Soooo... with this game we are in fact stealing from the poor and giving to the rich, but in their minds, the poor are being given a chance to own a home they could never afford if the system didn't exist, but that situation only exists because the Government gives away our natural resources to companies at lease rates and royalty rates that are pennies on the dollar. (It's a damn vicious circle).
In summary, Bank Losses on consumer loans don't exist. All losses are covered by prepaid insurance. The money that has gone into the insurance pools is distributed to those in the transactional business of putting those properties back into service again.
For all of those who could never understand how bankers didn't lose money on foreclosures, hopefully this fills in some blanks.
Why does everyone do this???
Hummm. It seems it's time for Change.
I've alluded to the fact that Bankers and their brethren are always looking for ways to add stress to people who are already in stressful economic situations in order to force foreclosures.
Sounds a little conspiratorial doesn't it? Sure... Kind of... But if here are some facts:
- Many people engaging in these short term rentals really are doing it out of economic necessity and not out of profit motive
- The math related to this legislation indicates there is no tax revenues to be had by the state after admin costs
- The math related to hotel losses is negligible
- The idea that sprinklers should be added to homes where a person would like to make an extra $80-100/month is draconian
Humm... yeah... something doesn't seem quite right does it... something related to the motivations is seemingly missing...
Bankers and the upper middle class make big money on foreclosures. It's just a fact most know to be true intuitively but few can actually grasp how it all happens. When those folks make money, it trickles down. If you can force foreclosures, the economy remains in motion and the job of keeping the economy in motion belongs to the private bank we call the Federal Reserve.
But what about the bank's losses? When homes get foreclosed on, there are losses too right? Nope. Not at all. It's a magician's trick. The losses are more than covered before the dreadful foreclosure event ever transpires, and they are covered by a pool of payments that were taken by those who were most likely to default (hint: it's called mortgage insurance...)
- Most have never seen the true math behind a short sale/foreclosure that explains where and how money is made (redistributed).
- Most don't include the piece that the bankers use to cover their losses (mortgage insurance and government subsidies)
- Most don't realize how sacrificing a single household supports a handful of others for a few months. (it's basically energetic cannibalism).
This is a pretty slick yet sick and twisted game of survival of the fittest going on right now. In bare form it can be seen as energetic cannibalism, but it's hidden fairly well and it's really hard to point a finger at any single culprit. Hopefully the sharing of a recent transaction I was involved in may help with this understanding.
=== Back Story ===
I bought and rehabbed row homes in Baltimore from 1998 through 2012. In total I rehabbed about 20 units (16 homes, but several were 2 unit buildings). In Spring 2016 I received a call from someone who bought a home from me in 2009. He was in trouble financially. He wanted to short sell the home but worst case he was going to have to let it go into foreclosure if they wouldn't allow a short sale. (Note... he had an FHA loan and he had been paying hefty mortgage insurance for many years.)
=== Math ===
- The seller owed about $260k on the home
- We estimated he could likely sell it for 240-260k if he had time, but that it would need some work, much of which he could do himself, but it would take time doing it solo.
- We estimated the home would sell between $220 and $240k if it sold after a short sale or foreclosure with the work that needed to be done done (so in move in condition). The decrease in market value is due to perception that someone's made a quick buck on a flip. Just human nature and part of the challenge with getting homes to appraise after a quick flip.
- I engaged a potential partner in a conversation about buying the home, repairing it and flipping it.
- We had to use the $220k sales number for budgeting.
- We estimated the work required to get the home to proper condition to be $12k in materials and labor at retail contracting rates
- We allocated $10-15k for hard-money borrowing expenses and transaction costs
- We allocated $10k for sales commission to a sellers agent and buyers agent on the back end.
- We realized we had to be able to refinance the thing and hang on to it should we not get a viable buyer by fall.
What bank in their right mind would price that home at $165k, right?? After all, it only really needs $12k of work and it's a 240-250k home if it wasn't going to get stamped with the black eye of short sale/foreclosure.
Magically, the Short Seller's pre-sale appraisal, which is used to set a list price came in at $165k. Obviously, when they do this type of appraisal, they too factor in a similar set of costs and profit numbers, even though there are no line items for those on an appraisal.
My partner and I put an offer on the home and we purchased it for the appraised price/list price (actually a few k below). We completed the work in a month or so and put the home on the market. The home went under contract in about 30-45 days in the 220k range. The home sold. Below is a break down of all the folks who "made money" on this deal...
=== $$$ Beneficiaries from a single Short Sale===
The numbers below are rough estimates at gross income made by each participant in this transaction...
- Original listing agent for short sale got both seller and buyer commission -- $7,000
- Short Sale Negotiation Company - recommended by the original listing agent to get the deal done -- $4,000
- Title company -- $1,000 (happens to be the same company as the short sale negotiation company, thus the lower number...)
- State Redecoration and Transfer tax -- $4000
- Short Sale Company Appraiser -- $400
- Contracted Labor for repairs -- $8,000
- Material Vendors for repair -- $2,000
- Buyers Mortgage Banker -- $2500
- Buyers Appraiser -- $400
- Buyers Home Inspector -- $400
- Title Company for the buyer -- $1500
- State Redecoration and Transfer Tax -- $4000
- Buyers Agent and his/her brokerage -- $5000
- Listing agent and his/her brokerage -- $5000
- Hard Money Lenders -- $10,000
- My partner -- $11,000
- Myself -- $11,000
Whew!!... a lot of households and the State of Maryland saw income from this transaction didn't they!?!
- One family suffered a loss, but many profited significantly.
- Would it surprise you if I told you that at least 6 of the people involved in this transaction earned money at a rate of $500 to $1000/hour (me included...).
- But what about the bank... the bank was the big loser right? Of course not. Remember... the purchaser had been paying a healthy mortgage insurance premium on an FHA loan for years. The bank's losses would be covered and that coverage would also include transnational costs and other expenses related to this short sale/foreclosure process.
- FHA insurance on a 250k purchase right now is about .85% annually -- which works out to $177.08 per month... or $2125/year, and the buyer had been in this home for about 8 years with a slightly higher premium so he paid approximately $17,000 into insurance. Now imagine he was grouped with 6 other homes all paying the same insurance... those home owners would have all paid a total of $102,000 into an insurance fund. As long as only one of them defaults, the fund breaks even and no losses go to the bank. That would be a default rate of 16%.
- Interestingly enough, it seems the default rate at any given time for FHA's may be closer to the 5% range... and that means he would actually have been in a group of 20 people paying insurance with the need to pay out 1... not a smaller group of 6... so ghee... there's an extra $200k sitting around in an insurance fund somewhere?!?!?! Damn. that's a lot of money not in circulation...
- Obama announced a mortgage insurance premium reduction the month prior to leaving office. Hummm. Maybe he wanted to claim they realized they had been over charging for insurance for years? ;-)
- Oh.. and the easiest way to get rid of excess money in an insurance fund is to force more claims (aka force more foreclosures) and when doing that, those forcing the foreclosures are actually stirring the economy, and with that kind of backwards, twisted and moronic logic, a lot of people might just turn a blind eye to some small nefarious stuff that "might" lead to some foreclosures.
The FED gets money into circulation via debt. Homes, Cars, Education... it's all around us. But they also keep money moving by allowing huge insurance systems to build up and then assisting with "claims". If you want to get me on an insurance conspiracy, lets talk about HAARP and those hurricanes that use to batter the east coast until I got my CAT Claims Adjust license... after which the hurricane claims business seemed to magically dry up for the most part. Who has control of those HAARP arrays now anyway? Oops.. getting off topic...
Do you understand the Foreclosure game any better now?
- Given the nature of mortgage insurance, few if any homes go into foreclosure without either having been included in a mortgage insurance pool, and the rates on those pools are regulated by those who profit from them (fox in hen house kind of thing). Those pools are likely now over flowing with money (and maybe that's why Obama announced a mortgage insurance rate reduction before leaving office...)
- If a home wasn't included in a mortgage insurance situation that is because there was more than 20% equity in the home at time of financing, and by the time any foreclosure might come upon those homes more equity would have been paid down, and frankly, if and when any banks would see losses from loans, I'm quite sure they have ways to divert that mortgage insurance pool as needed, and worse case, we have some back door government assistance to cover those losses if they can't pull from the overflowing insurance pools first. (that's that part A. Jackson mentioned when he said the write offs went to the bank... with the bank being the American People).
The foreclosure game is about forcing insurance claims and/or reimbursements from the Government. The only losers are those that can't afford their mortgage (and those who have been forced to overpay for insurance). Soooo... with this game we are in fact stealing from the poor and giving to the rich, but in their minds, the poor are being given a chance to own a home they could never afford if the system didn't exist, but that situation only exists because the Government gives away our natural resources to companies at lease rates and royalty rates that are pennies on the dollar. (It's a damn vicious circle).
In summary, Bank Losses on consumer loans don't exist. All losses are covered by prepaid insurance. The money that has gone into the insurance pools is distributed to those in the transactional business of putting those properties back into service again.
For all of those who could never understand how bankers didn't lose money on foreclosures, hopefully this fills in some blanks.
Why does everyone do this???
- Greed is certainly up at the top, but so is the Federal Reserve and the Office of Currency Control.
- Ultimately, our Consumer Bankers are but pawns for the OCC and the Federal Reserve, and the Federal Reserves job is to keep money circulating
- More accurately, the Federal Reserves job is to keep a portion of the populace floating in enough money that they feel economically free in a way that they don't ever question to true nature of the Federal Reserve.
- One way to keep money floating to the upper middle class is with the pressure needed to force foreclosures, as each citizen that goes down feeds numerous households for months, as the math above clearly shows.
- Some Lobbyist, Politicians and Attorneys know exactly what's up and others are just paid prostitutes working for green backs, oblivious to the games that are really in play.
- Unfortunately, the Federal Reserve has been using the energy of those that have fallen for too long now. A the tiny portion of the younger generations who have accumulated unfathomable wealth in technology never got taught the need to keep money circulating for the good of all... and the other part of the younger and middle age generation just got buried in a FED induced Valcano called student debt, so they are totally smoked. And that means we now have much BIGGER problems that are truly now outside of the FEDs ability to rectify.
Hummm. It seems it's time for Change.