How the Mighty Have Fallen

crossposted thursday 22 may 2008 at firedoglake

If you've ever complained that the people who run the government just don't understand what it's like for the little guy, this story is for you.

Laura Richardson of Long Beach, California, just saw her house go into foreclosure like so many other Americans this year.

Just one little thing that's special: she is a member of Congress.

You may recall our previous discussions of the House of Cards that is this administration's concept of a housing policy:

The government got rid of the speed limit and the brakes and all the guardrails, and woohoo! Anything goes in the financial markets.

Mortgages were given to people who couldn't possibly pay them back, bad debts were put in a dress and high heels and resold as speculative financial instruments, and now everybody owes everybody. But I'm sure everything is fine.

We have been warned that the storm was approaching.

But Congress didn't seem to care very much, this was only a problem for the little people. Well, not any more:

She bought the three-bedroom, 1 1/2-bath home in the state capital for $535,500. The bill collectors started knocking soon after.

The city utility department placed a lien on her property in June 2007....

In December, she received a default notice on the mortgage from the collection agency of Washington Mutual....

County records show the property was sold to a company called Red Rock Mortgage Inc. of Sacramento.

Richardson says the house isn't really in foreclosure. Um hm, that explains this sad visual:

A real estate agent's lock box hung Wednesday from the front door of the 1926-vintage house.

Hello, Congress? The people, you know -- the ones you were elected to represent -- are hurting out here. A lot of people have lost their houses already. Many, many more are on the edge.

House of Cards: Collapse of the Mortgage Market

crossposted 25 april 2008 at firedoglake

Sometimes you have to wonder what country we're living in. Reading Christy's post on tent cities and food rationing, contemplating a trillion dollar war and $4 a gallon gas, you just want to shake your head and wonder how the hell things could slide down so far so fast.

On the political side we see that the usual checks and balances on a power-mad executive have been damaged: Congress, what's left of the judiciary, the Mask Media, and intimidated whistleblowers.

And on the economic side, you can imagine where this is going, the same prosperity-loving administration -- and by prosperity-loving, I mean for the insiders, not the little people out there -- has removed most of the checks and balances from the financial world as well.

Calculated Risk heaps scorn on the regulatory incompetence:

Shocked? Homebuyers were speculating with no money down. Mortgage brokers didn't care because they would sell the loans immediately and collect their fees. Wall Street didn't care because they could package the loans and sell them to investors.

Investors would have cared, except they trusted the rating agencies.

[snip] ...the rating agencies weren't evaluating the underlying loans - they were performing statistical analysis using models based on lenders that cared if the borrower would repay the loan.

At the same time, regulators - despite numerous warnings - mostly ignored the problem, apparently for ideological reasons ("let the free market work"). What a mess. [bold added]

Ian Welsh has given us an overview of the mortgage crisis and proposals for how to unwind this tangled mess. Kevin Phillips joined us last week for Book Salon to discuss how the government systematically removed all the guardrails from the financial markets.

Blame where blame is due: the repeal of Glass-Steagall ripped down the firewall between banks and non-regulated financial firms during the Clinton administration. Then the Bush-Cheney administration finally found something where they were competent: tearing down all the remaining regulations keeping investment firms from going bonkers with the nation's savings.

So, whee! Anybody can start an investment firm, buy a bank, and have the bank invest in their gambling habit stock manipulation great ideas. I mean, what could go wrong?

Do you have a bank account, a pension plan, a mortgage? You could be in trouble without knowing it. Your bank account is probably not FDIC insured, ever check the fine print about that "new kind of account" that they switched you over to, to get more interest? Your mortgage, if taken out recently, might have a clause that allows the monthly payments to double or triple.

If you try to sell your house, you are caught in a market where housing prices are falling [of course, this is good news for people trying to buy houses, silver lining]. People who were counting on selling their homes to get retirement funds are about to get some sad news: home prices are likely to plummet in the next year, and will not recover for several more years.

Millions of people are already "underwater" where the value of the house is less than the money still owed on the mortgage and home equity loans. Millions more will be there soon.