A good friend once said, “Perception becomes the reality.”

When opinion is accepted as fact, perception soon becomes reality, at least for those who share these opinions and cling to the resulting perceptions. Herein lies the reason for the division in America today and unless we make a concerted effort to separate perception from reality, opinion from fact, fiction from truth, that division will continue [JB Williams 2005].

While the President’s State of the Union speech was…better than expected;  he did however, couch a few of his phrases with mis-perceptions that have been bantered about by the banks since the beginning of this financial force majeure.

President Obama spoke about helping “responsible” homeowners as if to say only a few people would qualify for $3000 worth of help (yippee) and added that, “[W]e’ve
all paid the price for lenders who sold mortgages to people who couldn’t afford them, and buyers who knew they couldn’t afford them.”

Let’s look at the mis-perceptions. Who does the President consider to be a “responsible” homeowner? Is it only those who are making their mortgage payments because they still have the same job – maybe a government paycheck? Then we need to turn back the clock to about the turn of the century before the bank fraud and Ponzi scheme entered the scene full bore (they actually have been doing this for years but with more regulations) and induced, seduced and coerced good American families into defective loan products that they [the banks] never intended to sustain.

When we turn back in time (2001) we find solid American middle class citizens building their credit, making their payments and saving their money to be able to afford to own a home. Make no mistake these folks were targeted by the banks.  Look at almost any securitized trust and you’ll see high credit scores – very few, if any, under 640.  Most folks know how hard it is to keep a good credit score and what a watch dog you have to be to make sure nothing negative gets wrongfully applied – because it can take years to get it removed. It is offensive to American homeowners to assert that they were irresponsible or that they “bought mortgages they could not afford.”

Obama Myth #1
Only people currently paying their mortgage are “responsible” homeowners.

FACT:  Folks that bought homes and refinanced had stellar credit – this was not the problem. They made their payments as promised – they were manic about being on time with good reason; because they could not participate in owning, selling, refinancing or investing in real estate without good credit.

Good credit was the ticket into the game – the Super Bowl of high finance for the average American… the biggest ticket item a homeowner would likely ever own. Good, solid credit was the key.  Your good credit score was like an award – the longer you maintained it and the higher it was the more stature you had in the community.

If there was anything good to come from the mortgage bubble – it was the lesson learned to make timely payments and be rewarded with good credit.

Yes, these folks were responsible homeowners and they paid – especially those with the defective option ARM loans – until the banks could not perform and their defective option ARM began to detonate and escalate into obliteration.

Everybody – repeat that; Everybody was sold their mortgage with the promise that they could refinance into a permanent loan before their ARM expired – “as long as they made their payments on time and kept their credit score intact.”  The banks began to fail to perform in 4th quarter 2006 and by mid 2007 subprime credit stopped all but stopped flowing.  The banks had made promises they could not keep and the investors had begun to figure out there were a lot of misrepresentations tied to the Trusts and they began to sue. The homeowner, who had made his payments and just needed to refinance was doomed – this was not his fault.

And as the economy melted – so did the value of his home because it was just as falsely inflated as a Viagra erection.

Not only does the home lose value, the homeowner loses wages from cutbacks (a result of the fraudulent securities), his good credit score deflates – and in some cases he is even forced to file bankruptcy in an effort to protect his home because the banks refused to work with him – it’s a vicious cycle.

This did not happen because of “irresponsible” homeowners.  This was a result of bank fraud on the worldwide economy.

Obama Myth #2
“Lenders who sold mortgages to people who couldn’t afford them, and buyers who knew they couldn’t afford them.” 

Don’t you just want to smack somebody ‘upside the head’ when you hear that?!

FACT: Look, homeowners with a history of good credit were “targeted” by the banks. The banks did not care what the value of the property was – they just wanted a signature. The banks used the homeowner’s credit and willingness to pay as the foundation for the figure that they concocted and and then hunted down an appraiser who would write it up for them.

The appraisals were inflated.  Widely known to be true – testified to in Congress by the Appraisers’ Association, named in just about every investor lawsuit and written in hundreds of Wall Street demise stories and books – there is no doubt. But the homeowner did not know this. We are back to fraud again.

Appraisers are going to hoot and holler that they followed the rules – but see if you can find just one appraiser that never ever had a loan officer or real estate agent tell them the price of the contract – it was just the way business was done during the boom and nobody knew any better – except the banks. All it takes is one or two bad apples to spoil the entire barrel.

The homeowners made their decision to buy based on the value of the property. No idiot is going to buy a property for more than the appraisal price tag telling him what the property is worth – and no honest bank is going to lend – unless the schmuck is willing to buy back the difference plus the down payment and a couple of points for being stupid.

If these properties were GE stock – could you have purchased more than you could afford? Sure, maybe – but with honest GE stock – solid for the last 70 years (like real estate was touted to be, yeah?) you could have sold or traded it whenever you needed to. That was not the case in the mortgage fiasco. Banksters went underground when their credit dried up and they threw the blame on the unsuspecting homeowners – wasn’t that a nifty set-up?!

In most cases, the homeowners were buying what they thought was a good long term investment.  If the real estate market escalated in value as they were told it had for the last 70 years, and in some cases they had personally experienced 100% increases in value over a couple of years – it’s enough to make you a believer. The rapid increases should have been a clue – but new construction was driving the market, cities and towns were growing, it was reasonable to think you had picked a great investment property and awesome place to live and raise a family. The media helped – everywhere there were affirmations that real estate and credit would always be there for you… FDIC insured. Too big to fail.

The initial payments were factored into the homeowner’s budget – until they detonated. And nobody factored the detonation rates into the loan – not even the banks, “don’t worry about that you can always refinance…”.  Nor did the banks factor in a complete collapse. They didn’t care if you failed – but they certainly didn’t think they would.

So, were you sold a home that was more than you could afford? No. Not given the Viagra-like inflated economy and appraisals. If the appraisals had not been inflated, you could have refinanced, sold or maybe not even needed to make a change because you still might have had a job.

Roger Lowenstein, author of THE END OF WALL STREET writes, “household name businesses were firing hordes of workers… The litany of Main Street corporations pruning payrolls soon included Merck, Chrysler, Pratt & Whitney, Yahoo, Xerox, Alcoa and Coca-Cola.  The recession was not only wide, it was deep.”

You can imagine if big name companies were taking a hit, just how much small business owners were impacted – middle class America was being wiped out. Not because they were doing anything wrong – but because Wall Street banks inflated appraisals, systematically abandoned underwriting guidelines and over-rated bonds. The banks wrote more loans than they could legally hold and are now being sued for TRILLION$ by investors. The banks had committed fraud. They defrauded the homeowners into signing contracts that the banks knew were defective and used inflated appraisals to mask their premeditated scheme.

Or… President Obama – were you actually referring to members of Congress whose children, like Nancy Pelosi’s son – Paul Pelosi, Jr., that worked for lenders like Countrywide and “sold mortgages to people who couldn’t afford them” – and is that why there was no applause when you announced the investigative task force? Are members of Congress now holding their breath, as well as their applause, hoping their sweetheart deals are not exposed before the next election?

Finally, President Obama – let’s factor this thought:
The homeowners have skin in this game.

If you level the playing field and start from an equitable approach – you’ll see the homeowner has made substantial payments, taxes, improvements, closing costs and down payments that add up to a significant amount of money that should be taken into consideration.

Screw the ‘interest only’ defective mortgage loans contracts – those deals were based on bankers’ fraud. Let’s take it dollar for dollar and see where we end up? Even on a $1 million property (that was likely worth $500k or less) – the homeowner has paid at least $350k in monthly and down payments for 3 years – and that’s before taxes, insurance or improvements. Let’s add up the chips before we start caving into the banks – the banks are not the victim here.

The banks have shuffled the blame off on the borrowers for long enough. The banks were defrauding and failing long before the borrowers’ defaulted.

Let’s be Deadly Clear –
These mis-perceptions have become a reality that we need to change.

Whether or not you are represented by an attorney understanding the legal system is an asset.  The more you learn, the less likely you are to be taken advantage of or scammed.  Knowledge is power!