As a follow-up to some earlier posts, this post brings into view the public perception component of the housing crisis, in real time, in a definitive, compelling manner.
Last week, in a quiet, bucolic part of this lovely state of California, the jury rendered a verdict in a predatory lending case.
Let's recall the basic story:
(1) Lenders recklessly created residential real estate loans, out of thin air, granting loans to anyone who could fog a mirror. Radical new loan products emerged, such as no income no job loans, option loans, pick a payment, etc. This loan generation process generated fees to the lender for the loan origination. Other fees were tacked on to the loan, and many industries benefited, such as appraisers, realtors, insurers, as well as companies who built houses, and provided goods to furnish all the new houses filled with brand new home owners. The govt was fully supportive of this massive effort, too. No-one had any incentive to stop this madness, as all incentives aligned to perpetuate this free money scheme in the short term; no-one considered, or appears to have ever cared, of any intermediate term or longer term ramifications of this short-sighted, immediate, feel good scheme to place unworthy borrowers into a lifetime debt trap. Bernanke never saw it coming, or so he says . . .
(2) Following creation of the loan, the lenders sold or transferred or assigned the rights to the loan to other companies, who (1) purportedly placed the loan into a trust, thus creating a mortage-backed residential loan security, which was then sold on Wall Street as an investment vehicle, and (2) variously performed the loan servicing [collecting the payments from the homeowner, applying the payments to the various tranches of the various assignees of the loans, and initially, engaging in efforts to restructure loans as they began to go sour].
(3) The housing bubble then burst, exploding the whole fog-the-mirror-and-get-a-giant-loan scam for what it was, a giant ponzi scheme operating on a greater-fool theory.
(4) As part of the aftermath to the housing bust, naturally, private industry looked for solutions, all of which involved either outright fraud [creating fake paper and simply refinancing the earlier bad loan to hide the problem, robosigning fake documents to process MILLIONS of foreclosed homes, etc.], or some form of kick the can until some magic solution showed up [endless loop home loan modification processes, designed to simply allow the servicer to generate fees, while simultaneously allowing the entity holding the "investment" to not realize any losses from a defaulted loan].
(5) As private solutions, namely fraud and more fraud begin to reach the public perception, naturally, politicians emerged with supposed "solutions." Obumbler stepped in as the mouthpiece for the banks, implementing various federal govt plans designed NOT to wipe clean the bad debt, but to instead enrich the banksters by perpetually enslaving the debtors in an endless stream of monthly debt service, thus both (1) avoiding any real solution to the problem, which was simply bad debt that needed to be cleared, and (2) avoiding insolvency of the financial giants based on the default of massive secured paper that would have destroyed the western fiat currency system thus leading to TARP, and endless FED bailouts and our now perpetual ZIRP policies and rendering the fiat system a zombie.
(6) As the endless loan mod programs emerged and became operational, naturally, the incentive structure was changed. Servicers did not want loan mods, as that cut their revenues. Investors did not want to realize losses, so loan mods were delayed perpetually in a never ending string of constant requests for information, delays, denials, and transfers and sales of the underlying paper.
(7) Eventually, devoted and diligent attorneys began getting cases to court, keeping them in court, despite the obstacles, namely, the judges' resistance to debtors' getting "free homes," as well as the absolutely limitless wellspring of money and resources poured into the foreclosure machine designed to steal homes from MILLIONS of homeowners based on fraud;
(8) Some cases survived long enough to get into appellate courts, which began to realize the scope of the problem, thus triggering serious attention from law enforcement, including state attorney generals [corrupted as they ALL are, they are still politicians, and need votes, so this provided some opportunity for them to appear to be part of the solution];
(9) Some federal and state govt action lead to some settlements with the fraud banks, all of which were pittance settlements and nothing more than attempts to secure litigation waivers against future court cases from individual debtors;
(10) Eventually, enough case law support emerged, and enough collective skill and knowledge of superb lawyers spread around the country, and discovery documents began to appear, along with deposition testimony of those corrupt banksters and fraudsters leaking out into the public, that eventually the truth began to appear.
(11) Some judges began to let these cases proceed beyond the pleading stage, on various legal theories, and eventually, even in this wretched socialist state of Kalifornia, juries have begun to get these cases.
One such case is here: https://www.sacbee.com/2014/07/18/6566661/yuba-jury-awards-16-million-in...
How's this for an opening paragraph:
"It started out as a simple loan modification for a troubled homeowner. It turned into a $16.2 million jury verdict against a nationwide loan-servicing company."
Read the short article, and understand that the collective wisdom of the folks, the jurors, has now awakened to the real story of the housing bubble and bust.
Understand that no economic "recovery" can EVER occur until all of this bad debt is expunged from the system. Until this massive debt is wiped clean, the debtors will either struggle along in debt service, which means NO consumption at the Walmart, thus depriving the economy of vital money velocity and all that it entails, or they will default thus requiring write-downs, and reduction of value of QUADRILLIONS of derivative financial products that are, essentially, worthless.
Who here thinks that any big write-downs will occur? If you do, please contact me for sale papers on the Brooklyn Bridge.
Thus, MOAR and MOAR fiat printing MUST occur, to keep papering over the fiat debt scheme, to allow for debt destruction via homeowner defaults, which are ongoing, and will be perpetual until 20 Million homedebtors' loans are cleared, along with all of the paper derivatives based on the defaulted paper.