HousingPANIC Quote of the Day

"When you want more than you have, you think you need... and when you think more then you want, your thoughts begin to bleed. I think I need to find a bigger place... cause when you have more than you think, you need more space until you have it all, you won't be free."

- Eddie Vedder, "Society" from Into the Wild, 2007

(side note - really dug listening to this song and Vedder's full Into the Wild soundtrack while driving through the impoverished yet hauntingly beautiful Montenegro today)

It's too bad so many sheeple listened to realtors on commission these past couple of years, and made the worst financial mistake of their lives

People around the country (and around the world) made some serious financial mistakes the past couple of years. Leverage is wonderful on the way up, but when prices fall soon after "buying", even a small decline can wipe you out with highly-leveraged real estate.

After a lifetime of working and saving, the simple mistake of buying a house at the peak (or even today) is enough to ruin everything. The risk was massive, the reward was questionable, and the warning signs were everywhere, yet the sheeple went ahead and did what they did, and now they're paying the price (or screaming for bailouts).

Millions of people around the world will be losing their houses during this downfall. Foreclosures will skyrocket. Inventory will build. Prices will crash. And it was all so predictable. Classic mania, classic crash. And classic opportunists, idiots and conmen herding the sheeple into the worst financial mistake of their lives.

Those who only bought within the last couple of years, however, face a different story. Since their homes may be worth less than what they paid, they can't sell for enough to pay off their mortgage and could face skyrocketing monthly payments when their loans reset to higher interest rates.

"The people who are in the most trouble are those who bought most recently, because they bought when it was going up and then it went right down," said Hans Johnson, associate director of the Public Policy Institute of California in San Francisco.

Since the Late Great Housing Bubble will be the biggest mania of all time, it's time to read up on the South Sea Bubble for a chuckle

Unfortunately the people who got screwed the most during the Great Housing Bubble were the ones who had no knowledge of historic manias and bubbles. "It's a new paradigm!". "If we don't buy now we'll be priced out forever!". "Everyone's getting rich!". And on and on.

Well, we all know now how that turned out.

Here's a primer on another classic bubble - the South Sea Bubble of 1720. Man, we still laugh and laugh about that one. Love the tulips too. But now, before our own eyes, we've seen the biggest financial bubble and mania in the history of humanity.

Here's to you world. You did it. You are officially more financially stupid and greedy than any other generation that ever came before you!

The South Sea Bubble

The South Sea Company (1711 – c1850s) was an English company granted a monopoly to trade with South America under a treaty with Spain. Following the South Sea Company Act of 1720, it became better known for the "South Sea Bubble", an economic bubble that occurred through overheated speculation in the company shares. The stock price collapsed after reaching a peak in September 1720.

Diana Olick at CNBC nails it: It's not toxic loans and the subprime meltdown that smashed the housing bubble. IT WAS GREED.

Here's a posting on her CNBC Realty Check blog (permalink now on HP sidebar) mirroring my point that the subprime meltdown didn't cause the housing crash as the MSM, NAR and TCDL would have you believe. It's a symptom, not a cause.

What caused the bubble was pure, simple, human greed. Greed. GREED. Gordon Gekko Greed.

My take: Corrupt realtors, corrupt appraisers, corrupt mortgage brokers, corrupt homebuilder CEOs, corrupt congressmen, a corrupted MSM, an incompetent Fed and foolish naive homedebtors and floplords - all driven by one thing - GREED.

Here's her post highlights. Wadda ya think?

I'm getting a little annoyed with the premise that the subprime mortgage crisis and tightening lending standards are wholly to blame for the current headwinds in housing. Of course, they are contributing to the problem, and of course, it's important for us to keep on top of regulatory and institutional changes in the mortgage market. But here's the thing: I think we might be missing one of the boats in the blame game -- specifically, greed.

I want to talk affordability and I want to talk greed. As home prices climbed higher during the heady days of the housing boom, affordability crept lower, and -- inexplicably -- more people decided to get in on the game.

Yes, the mortgage products offered the venue, dare I say, and loaded buyers right on the bus to home ownership. But investors, speculators and everyday folks who wanted to live beyond their means bought into the products without looking back.

Now all those same folks have a big welt on their wrists where they got slapped. They finally see that what goes up must come down, even in the big, happy land of green-grassed neighborhoods and glitzy, glam condos... and they're getting out of the game.

Make it a HousingPANIC movie night - Boiler Room, Glengarry Glen Ross and Wall Street

I love this scene in Wall Street when Gekko is all cool talking on his new mobile phone

Seriously, what happened in mortgage broker and realtor offices all around the country (if not the world) these past five years is straight out of these three movies.

We've been here before, and we'll be here again.

It's called greed. Makes people do crazy, evil things for a buck.

Got popcorn?

It's all coming out now. Read this mortgage broker's declaration on the fraud, corruption, evil and boiler room tactics going on at Ameriquest

The out of control mortgage broker industry IS F*CKING SCREAMING FOR REGULATION. There were boiler rooms full of unethical conmen all over the United States these past few years, right under the noses of our bought-and-paid-for Congress and bankers who would buy up any loan on sight so they could sell it on to China, mutual funds and hedge funds.

And now we'll pay the price. This will end so ugly as it unravels, you'll tell stories to your children's children one day and they'll be amazed.

Here's the deposition from a reformed conman, in a desperate homedebtor suit vs. Ameriquest, in its complete and raw format. I've bolded the really sick stuff.

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
LUKE RICCI AND TRACI RICCI, TERRI
SECK, and TERRI BAUMGARTNER, on
behalf of themselves and all others similarly
situated,
Plaintiffs,
v.
AMERIQUEST MORTGAGE COMPANY, a
Delaware corporation, and DOE
CORPORATION,
Defendants.
Court File No. 05-1214 JRT/FLN
DECLARATION OF
MARK BOMCHILL
1. My name is Mark Bomchill. I am over eighteen years of age and of sound
mind. I was employed by Ameriquest Mortgage Company at the Plymouth, Minnesota branch of
Ameriquest, from September 2002 through September 2003. My job title at Ameriquest was
Account Executive. There were approximately 20 Account Executives in the Plymouth branch
office. During my tenure at Ameriquest, I closed approximately 90-100 mortgage loans.
2. As an Account Executive my duties included but were not limited to,
soliciting potential customers to refinance mortgage loans, processing and closing said loans.
3. When I started my employment with Ameriquest, I received training
demonstrating and encouraging high pressure sales tactics. Such training included watching a
series of videos relating to mortgage sales tactics featuring Dale Vermillion. Account Executives
were also shown scenes from "Boiler Room," a movie about unethical and illegal high pressure
sales practices by a securities brokerage firm. Account Executives were also provided with
scripts, including those integrated within Ameriquest's computer systems such as the SNAP
system. The scripts were on such issues as encouraging consolidation of debt, and for
responding to objections by potential borrowers. I believe that all of the Account Executives in
Minnesota (and nationwide) received this same training and the same scripts.
4. During my tenure as an Account Executive, I also participated in
approximately 3-4 Ameriquest telemarketing training sessions for Account Executives that
involved phone call role playing, in which the person playing the borrower would make
objections to the loan, and I would need to respond. The role-playing would be followed by
critiques of my performance in dealing with the potential borrower and responding to objections.
I believe that all of the Account Executives in Minnesota (and nationwide) received this same
training.
5. The branch manager and area manager constantly pushed Account
Executives to make as many phone calls as possible to solicit loan sales. Every day, there were
numerous "Power Hours" during which the Account Executives were required to only make
phone calls. The area manager was responsible for at least several branch offices within
Minnesota.
6. Account Executives were required to make at least 100 sales calls per day
if we had a significant number of applications in process. Otherwise, we were required to make
150-200 sales phone calls per day. I recall on at least one occasion, that the regional manager (to
whom the area managers reported) came to the Plymouth branch and told the Account
Executives that we needed to be closing at least 8-10 loans per month in order to get any
promotion.
7. Additionally, in the context of describing performance expectations, I
recall on at least one occasion that an area manager made light of, and even bragged about, the
high turnover rate among Account Executives when they failed to close the requis ite number of
loans per month. The area manager was responsible for at least several branch offices within
Minnesota.
8. Ameriquest's compensation plan was structured so that Account
Executives would not make any significant amount of money until we reached a certain sales
volume. For example, there was one bonus for the number of closed loans. Originally, Account
Executives would receive this bonus for closing 5 loans in a month. During my tenure at
Ameriquest, the quota for this bonus was increased to 8 loans a month and then to 10 loans a
month. Additionally, commissions were based upon revenue generated through closed loans.
Account Executives had to generate substantial revenue before they could earn any significant
commission. The sales goals and quotas at Ameriquest were aggressive, and far exceeded the
typical sales volumes at Household Finance, where I worked as an account executive prior to my
employment with Ameriquest.
9. Ameriquest's corporate office in Orange, California, sent all Ameriquest
Account Executives daily telemarketing leads through Ameriquest's computer system. I believe
Ameriquest started using the SNAP system at some time after I began working with Ameriquest
in September 2002. When the SNAP system was used, the leads were loaded into the SNAP
system. Prior to that, telemarketing leads were available through the computer system that
Ameriquest used at the time.
10. Ameriquest also provided Account Executives such as myself with scripts
to use in convincing customers to go through with a loan transaction. When the SNAP system
was in use, Ameriquest's scripts were included within the SNAP system. Prior to that, scripts
were available through the computer system that Ameriquest used at the time.
11. During my tenure at Ameriquest, the vast majority of the mortgage loans I
completed were "2/28s" – an adjustable rate mortgage loan that is fixed for 2 years and then
adjusts upwards based upon the LIBOR (the London Inter-Bank Offer Rate, i.e., the interest rate
that banks charge each other for loans, and which is officially fixed once a day by a small group
of large London banks). These loans also had a 3-year prepayment penalty provision that would
subject borrowers to a penalty payment if they attempted to refinance out of their loan before
three years had expired.
12. Ameriquest taught and encouraged Account Executives through scripts
and otherwise to promote mortgage loans as a means of consolidating existing unsecured debt
(including even such debt as automobile loans) with Ameriquest, and to mislead customers into
believing that such loans would save them money when they would not.
13. Ameriquest trained and encouraged Account Executives through scripts
and otherwise to encourage borrowers to take cash out from their mortgage loans for things such
as home repairs or vacations, in order to increase the total loan amount.
14. Ameriquest taught and encouraged me and other Account Executives to
inflate the stated value of the customer's property for the purpose of qualifying them for a
refinance loan. I recall an Ameriquest area manager indicating that appraisal values should
regularly be pushed by at least 10-15%. This area manager oversaw at least several Ameriquest
branches in Minnesota. Ameriquest taught and encouraged me to use its relationships with
certain appraisal companies to request specific (generally inflated) appraisal figures, and the
appraisal reports I received usually reflected such figures. Ameriquest made it clear that they
would not continue to give business to appraisers who did not come in with the "right" appraisal
values.
15. It was a common and open practice at Ameriquest for Account Executives
to forge or alter borrower information or loan documents. For example, I saw Account
Executives openly engage in conduct such as altering borrowers' W-2 Forms or pay stubs,
photocopying borrower signatures and copying them onto other, unsigned documents, and
similar conduct.
16. The culture at Ameriquest encouraged Account Executives to engage in
any conduct necessary to close the loan, to close the loan as quickly as possible, and to maximize
the total loan amount.
17. I was taught and encouraged to close loans without regard to the
customers' financial ability to make payments on the loan.
18. Ameriquest taught and encouraged Account Executives to close loans
under any circumstances. In fact, Account Executives were commonly told to "say anything" or
"do anything" they needed in order to close loans. It was common practice and part of the
culture at Ameriquest to mislead borrowers in at least the following ways:
a. Account Executives regularly lied to and misled borrowers about
their credit scores. Account Executives were encouraged to tell customers that their credit score
was so low that they could not get a better loan anywhere else, and to imply that Ameriquest
was doing them a favor by giving them a loan or that the loan was a stretch;
b. Account Executives regularly concealed or obfuscated the
existence of the prepayment penalty in Ameriquest loans ;
c. Account Executives regularly concealed or obfuscated that a loan
was an adjustable rate mortgage, rather than a fixed. In fact, it was common practice for
Account Executives to refer to adjustable rate loans as "fixed adjustable" loans ;
d. Account Executives regularly concealed from borrowers that the
payoff for the borrower's existing loan included a prepayment penalty, and often this meant that
the borrower would receive less cash out of the refinance than promised;
e. I was taught and encouraged to conceal or obfuscate specific loan
terms and specific figures, including the amount of fees, the interest rate, and the monthly
payment amount;
f. I was taught and encouraged not to disclose the fact that a
customer's loan did not include monthly escrow payments for property taxes and insurance, and
to let customers believe that the monthly payment amount included such payments;
g. If potential borrowers discovered the existence of the prepayment
penalties or had other objections, I was taught and encouraged to mislead them by telling them
that Ameriquest would waive the prepayment penalty if they refinanced within the next 6
months;
h. I was taught and encouraged to tell customers that they could
qualify to refinance at a better rate in the near future if they increased their credit score, when in
fact they could not (and the refinance would be subject to a prepayment penalty within the first
three years); and
i. When borrowers sought to exercise the right to cancel within the
one-week period Ameriquest represented that it offered to its borrowers, Account Executives
regularly told the borrower that the time to cancel had passed, and that he or she no longer had
the right to cancel.
I declare under penalty of perjury under the laws of the State of Minnesota, that
the foregoing is true and correct. Signed this __ day of January, 2007, at _______________,
Minnesota.
______________________________________
Mark Bomchill

Here illegally? No income? No credit? No problema - here's a $500,000 loan for a new house you'll never pay back!

No, this is not an April Fools joke.

HousingPANIC Stupid Question of the Day

Do you think ramen-eating real estate clerks and mortgage brokers have figured out yet that their greed, lies and corruption killed the golden goose?

The economy will collapse, lives will be ruined and millions of them will go unemployed, all because the corrupt NAR leaders, conmen mortgage brokers and unethical real estate clerks just couldn't help themselves.

They wrongly focused on the short-term windfall and their greed, at the expense of their morals, value as human beings, and career futures.

They made their beds. Now they get to sleep for the rest of their lives in the moral gutter, knowing they lied to, cheated, conned and stole from their fellow man. Yes, there may be a few moral, honest, ethical and genuine ones amongst the professions. But the majority killed it for the minority, and the rot at the top (TCDL) stained the lot.

The terms "Mortgage Broker" and "REALTOR®" will forever have a stench associated with them, and for good reason. The golden goose is dead.

Poor people should not live in big houses and drive nice cars. Debt is not wealth. A lesson will be learned.

It absolutely amazes me to read some of the comments from trolls on this blog - mocking people for saving, for being frugal, for clipping coupons, for driving 5-year-old cars, for living within their means, for buying things with cash versus credit.

What's happened to our world where 20 year olds live in McMansions and drive Mercedes cars, while making $50,000 a year? How screwed up are we when people rack up insane amounts of debt in order to look successful, when it's so obvious that the only thing they've been successful with is acquiring debt?

The Great Unwinding is also going to be The Great Smack Your Ass and Wake You Up for Generations X and Y. You work your way up in this life, you don't magically just get there without work and without making a decent living (unless your parents are rich of course).

A generation of spend spend spend, me me me, fake fake fake will now learn learn learn. And the credit crunch will be the catalyst.

Just ask any senior about how their grandkids are carrying on with their big houses, big cars, big TVs, and big debt loads - you're likely to get the same answer, "I don't know how they pay for all of that".

Well, they don't pay for a lot of it.

Never before has credit flowed so freely and never before has so much debt accumulated. Never before has it been easier to buy a house. That is, if you don't mind non-traditional mortgage products where no money down is needed and not only can you avoid paying down the principle (interest-only), but you don't even have to pay all the interest due (pay-option).

Of course, as a long-term plan, this looks like it may not work out so well now that housing prices are falling and subprime lenders are falling even faster.

The younger set has been fearless when it comes to taking on new debt over the last ten years. This is likely to change in the next ten years - all part of the Alan Greenspan legacy.

It's too bad that Lemming suicide is a myth - it would have provided a fine analogy for the headlong rush by youngsters toward the dream of homeownership and sure riches. The trouble is that nontraditional mortgage products, subprime lending, short sales, and foreclosures are no myths.