Hate Crimes… Sub Primes… it’s time to turn over the rock

I keep reading posts about this House Bill or that House Bill that is pending and will jump start the housing industry. I don’t believe the House nor the Senate can fix the problem. Gaping wounds are not restrained by band-aids. Lest you get the wrong impression, I don’t have the answer to our current market that appears frozen in time since last fall.

I am angry. I have been in countless homes, talking with home owners that can not pay loans that reset. I have been in homes with home owners that can not pay the mortgage and the condo fee. I am not fluent in Spanish, but I can get by and in many of the homes I have been visiting, the owners face the challenge of English as their second language (it seems so innocuoous when they use ESOL).

I have heard the stories of “just sign here” from those that speak English and from those that are challenged. I understand the “caveat emptor” feeling in this country. I don’t disagree that no one should falsify a document just because the person perceived to be in charge says “don’t worry, it’s done all the time.”

I have also noticed that a disproportionate number of these people are minorities. Maybe it is just that way in my area, but I have a sneaking suspicion, based on data shared, that minorities have been the victims in the subprime loan debacles at a greater rate than others. If this is true, loan fraud allows hate crime to come into the equation.

O.K., I have admitted I do not have the answer, but, I want one. I wrote my congressman (acutally I emailed him via his official US Congressman website).

Dear Congressman Holland,

I am writing seeking your assistance regarding the current “sub prime” loan implosion that has occured over the last several months.

The tactics of some, but not all, lenders and brokers involved in these transactions has left many borrowers saddled with mortgages they can not possibly pay. This situation has placed these individuals in a position where they will default on their loans and be forced to vacate the home they purchased.

Foreclosures will leave the individual or corporation that is ultimately holding the deed to lose a significant portion of the money that the expected to receive when the mortgage was eventually paid in full. We have seen the impact of this situation in the financial markets across the world.

Those that lose money are at the end “of the food chain” in these transactions. They invested in the mortgage market purchasing high risk instruments. The potential reward was great but many have learned where there is great reward, the risk is greater.

This group must live with their financial decisions. The origination of the loans they purchased deserves the scrutiny.

A large portion of those that have been caught up in the “sub prime” mess are minorities. In many cases, the original loan application was fraudulent. The point of contact person involved, whether directly a lender or a broker for a lender, did not fully explain the loan product being used.

The infamous “no doc” loans, “stated income” loans provided sufficient cover for these individuals to conceal the truth from the funding institution. There were also cases of rubber stamping appraisals and underwriters encouraged to get the package ready for settlement as quickly as possible. The implied pressure from above and below created an untenable situation.

Loan fraud occurs when the information entered on an application is false. That includes mis-stating income amounts, debt amounts and whether or not the home will be a place of primary residence.

The point of contact person represents the lender to the consumer. If that person advised a borrower to mis-state their income or provide any false information, the borrower might be inclined to accept that behavior is routine and should not concern them.

If a borrower was challenged to understand because English was their second language and were told, “don’t worry, just sign here.” Their trust in what they perceived to be the authority figure was abused. This occured in many cases.

The House and Senate can not repair all the damage that has been done and we do face a long period of recovery in the housing market. A recession is not out of the question.

Those that committed loan fraud must be forced to accept responsibility for their actions.

I firmly believe that the Federal Bureau of Investigation should set up a task force  to investigate what occured.

You see, if loan fraud can be documented, the additional charge of committing a “hate crime” can be added to the indictment.

As you know, a hate crime is any unlawful act designed to frighten, harm, injure, intimidate or harass someone because of a bias against the victim’s actual or perceived race, religion, religious background, nationality, sexual preference, gender or disability. Action taken during the offering, application, and closing process of loans that were made to individuals in these classes, may very well fall under the Hate Crime statues.

Regardless of income, everyone has a right to understand what they are signing and the acts of anyone that pressured a borrower, that did not understand due to a language barrier, to sign with “don’t worry” was a crime. The fact that a disproportionate number of members of these protected classes is now in default begs the question.

Systems that were in place to protect our neighborhoods, communities and nation were abused. I would hope that you would use the power of your position to raise the issue on the House floor. Those that abused the system should be held accountable.

Moving forward, enforcing laws on the books will be the first step towards fiscal and moral responsibility as we attempt to crawl out of the morass these “thugs” created.

Sincerely,

John MacArthur

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