The contractual mortgage screw-up by the banks gives us a great way to speed up the recovery and reclaim what was lost in the the Great Bank Heist of 2008.
If you haven’t been paying attention to the MERS violations, you’ll need to read up to understand this idea…
But essentially, the chain of title on almost all the foreclosures going on in the mortgage market are in jeopardy: lawsuits as far as the eye can see; title companies unwilling to insure title; squatters; banks suspending all ongoing foreclosures.
It’s a frigging mess.
Meanwhile, ever since Rick Santelli launched the Tea Party on CNBC, we’ve been split down the middle class between those people who bought too big a house and are now desperately underwater–and those people who played by the rules. We all have friends in both groups.
Over at oligarch central (the Fed), Bernacke is suggesting that to kick start the economy we need more inflation. After all, the mortgages behind all the toxic assets they bought aren’t worth squat if home prices fall and people stop making payments.
I have a Tea Party solution…. and it is one Obama either gets behind or is exposed once-and-for-all as a Wall Street Stooge; his own left flank will desert him if he fights it. It’s radical, and there will be howls from the Wall Street crowd, but to Main Street Republicans this could be a silver bullet.
The incoming Republican House should draft legislation, making it clear to the Credit Reporting Agencies that MERS Violations are valid grounds for removal of a foreclosure from credit reports under the Fair Credit Reporting Act. If title companies aren’t willing to insure title, then Credit Reporting Agencies shouldn’t accept the validity of the foreclosures either.
The goal here is to encourage those underwater on their mortgages to mail in the keys, accept the foreclosure, stop squatting, without the ding to their credit – so they can buy a cheaper house later.
Right now we have a very ugly situation where many members of the middle class desperately want to believe that home prices are going to go back up in the near to mid term… so they keep making over-priced monthly payments… and what’s worse, these folks are so desperate to increase their home value, they’ll cheer inflation when it comes.
Of course, none of us wants to see their loans modified… because then they get to keep the big houses–and what do we get? Nada.
But if, instead, the policy is… “leave the big house, your credit will be ok… and when you save up 20% down, you can buy a another one,” then we have a policy that benefits Main Street Republicans.
WHY? Two reasons:
1. With foreclosures being deleted from credit reports, FHA can no longer accept 3% down. 20% becomes the rule, which gets the banks back into the mortgage game, the first step to getting government out.
2. The flood of quits will gut the TBTF banks… forcing their shareholders (and the banksters) into insolvency. Because of MERS violations, we get another shot to fix what went wrong with TARP.
Unlike 2008, now we know the inner-workings of the TBTF Banks, we know our money is safe, and the public can’t be terrified as easily this time… we’re callous.
This time, Main Street Republicans can be prepared. They can have their savings ready to capitalize on Deal-of-a-lifetime home prices as 8-12MILLION homes quickly go to market when the big banks get liquidated. Our country needs more landlords and more renters, and this is a fast path to get there.
The genius thing about liquidation of the TBTF banks right now is that the smaller local banks in our towns and neighborhoods (the ones that are left standing) will get our FDIC insured cash sent to them during the “Great 2011 Liquidation.” And they will willingly step back into the local mortgage market because the prices on the liquidated homes will be so low that they now are safe loans to make.
Think of it. We allow those underwater to walk away without bad credit… and immediately a massive wealth transfer occurs from Wall Street to Main Street. Only those with 20% down and good credit can participate.
Now all home owners are on the same side of the issue…. against the banks. Nobody gets a house too big, nobody gets loan forgiveness… the underwater folks just thank their lucky stars there was “Bank Error”–and we’re all glad the banksters learn a lesson of a lifetime.
Main Street Wealth wins.