BLACK MONDAY 2008: Foreclosure Apocalypse?

Dude, that's not the finger I'm feeling like giving here…

Okay. "Black Monday" already happened, in the 80's and then also back in the 20's according to some slang-artists, but one of the attorneys I work with gave this last Monday (July 14 2008) the name, and it seems to have stuck. You could also call it "Screw Everybody We're Foreclosing On You All" Monday, if you're so inclined.

Here's what happened, and pardon me if I sound a little frantic, but I feel a bit like Cassandra here; I'm freaking out about this but by and large, most people don't seem to realize it happened. Most people only know one or two people involved in mortgage negotiations, so they didn't see the coordinated collapse that I saw.

In a nutshell, what happened is that Monday morning, all the major mortgage banks in the U.S. issued some kind of order or decree, that they would cease conducting any kind of workouts or negotiations with borrowers, and instead foreclose on every home they could.

I know this because the nonprofit I work for is a sort of hub that helps people understand their options and take steps to avoid foreclosure. That means that I'm in regular communication with, among other people, brokers and lawyers who are trying to help people who have problems with their mortgages and need to negotiate with their mortgage companies; as well as individuals who are trying to work things out themselves.

Mortgage negotiations are absolutely critical…
Because mortgage problems are very, very often related to bad loans whose payments are increasing, or to properties whose values are now way under the value of the mortgage, or that have other problems like job losses or illness to deal with, helping people with mortgages often means contacting the lender and getting them to make a change to your mortgage so someone doesn't lose their home. They may change it from an adjustable to a fixed loan; lower your interest rate; forgive a late payment or two; or something like that. These "mortgage workouts" are not only common, but they are the accepted way for borrowers to handle problems with their mortgage. Governments and banks alike have been urging borrowers to contact their lenders and "work something out" as the main way of fighting foreclosures for some time now. That's basically what the whole "HOPE" thing the federal government "did" (if you want to call it doing anything) was. Unfortunately, the government neglected to give this solution any teeth by requiring banks to work with people, so thus far it's been a game of incredibly one-sided negotiations, often requiring people who are already broke to get legal help (a good lawyer can negotiate better than you can) if they want to keep their houses.

As if that wasn't bad enough, on Monday, the banks stopped making any deals.

Let me say that more clearly: As of 9 a.m. on Monday, ALL the major banks stopped making ANY deals whatsoever that I'm aware of. They even called off workouts that were in progress, including ones that were all done except for signing the papers. This is whether or not the borrower was actually in foreclosure yet.

…And now they're gone?
A comment related to me from someone who asked the biggest foreclosure law firm in our area about it was, "We've been given our marching orders: No more deals. No more workouts. We play by the rules, and if we can foreclose, we foreclose." Apparently these "marching orders" came down from every major bank (at least) in the U.S. first thing Monday morning, and as of today, there still seems to be no movement away from this new "policy" of letting homes go into foreclosure en masse, with no way out whatsoever for troubled homeowners.

One of the attorneys I work with was busy negotiating about ten cases for us, and his panicked phone call on Monday afternoon was what tipped me off. Then my company started hearing from people who were involved in their own negotiations, every one of them with a story about how the bank called them on Monday and called off the whole thing. At this moment, I'm not aware of a single negotiation that's still going on, with the exception of two that an attorney I know managed to keep alive by convincing someone he knew on the other side to risk their job by breaking the new rules.

That means…. Lost your job and missed a few payments? Pay them in full, right now, or lose your home. Grandma got shafted into an unfair mortgage she should never have been given? Pay it on its terms (unless you can refinance by some miracle), or Grandma's homeless.

Interest rate about to increase, making your payments jump several hundred bucks a month, even though your home isn't even worth the amount of your loan anymore? Tough titties.

…And much, much more. I talk to and meet with these people every day, and up until this week, it's been a source of great pride to be able to help at least some of them out, because almost none of them deserve to lose their homes.

Well. As of "Black Monday", people who call me can either
A) have the credit score and means to refinance (which means they can't have missed any payments, and their mortgage can't be more than about 80% of the new, lower value of their homes, and they have cash on hand for closing costs); or
B) pack their bags.

But WHY???
What's really scary, besides the fact that nobody seems to know this is happening, unless they do a job like mine; is that if they do know about it, they don't know why.

Since Monday, I've written to several blogs and called everybody I can think of short of my state representatives (who are next, if I can't get some answers soon) to try and figure out what the hell banks are thinking. Nobody can tell me — in fact, everybody so far has been shocked to hear what I'm telling them about Black Monday. Everyone who checks up on it agrees that it's happening — major foreclosure law-firms have their orders to cease negotiations immediately; and citizens not in foreclosure who were attempting to work a deal out themselves all got shut out completely. No explanations — even the super-huge law firms don't seem to know why they were given these orders, or towards what purpose.

Thinking more generally for a moment, it's hard to see what banks can possibly gain from this behavior: They lose usually at least $20,000 on every foreclosure, which is way over the cost of working out most loans with the borrowers. I don't know about you, but I'm used to banks at least making sense — they may be evil sometimes, but you know how they tick; they're doing what they're doing because of the bottom line. But no-one I've spoken to can tell me how forcing millions of homes to go into foreclosure helps the bottom line for anybody.

One super scary thing that someone mentioned to me as a possibly explanation is that maybe the banks have gotten together and agreed to try a "suicide gambit" — basically threatening to eradicate themselves (which is what unchecked foreclosures would do at this point) if the government doesn't bail them out (as it plans to for Fannie Mae and Freddie Mac). This would be the most terrifying thing I could imagine — especially for homeowners — because as we've learned by messing with suicide bombers, there ain't much you can do to fight someone who's willing to die for their cause. So, although I can't find the slightest shred of evidence that anything other than that is going on, I'm going to keep hoping as hard as I can that that isn't it. If it's anything else, some weird legal or tax thing maybe, then there's a possibility that organizations like mine can figure out a way to negotiate with the banks that takes their "concerns" into consideration.

Hopefully I'll have more information later in the week — I'm still trying to get permission from some of our executives to make the really heavy-dirty phone calls. But this is definitely real, and if it continues, (seriously, let's hope like hell that it's temporary), it could be the worst thing to happen to the U.S. — and even the world — economy yet.

By the way…please forgive my rather hideous grammar and typesetting skillz, and my tendency to babble lately. This week…all these people calling and me knowing in the pit of my stomach that I probably can't help them now and can't even tell them why…it's been incredibly tough. Sorry.

FOR MORE INFO PLEASE CONTACT:

Nancy Belle
planetnews8@gmail.com
949-200-7335 (direct)
800-889-7372 (toll-free direct)

Larry Becraft responds to Jon Mosley about "COLONIAL ERA PAPER CURRENCY"

Jon Mosley,

In 1789, Peletiah Webster aptly described the social damage resulting from the experiments in paper money:

"Paper money polluted the equity of our laws, turned them into engines of oppression, corrupted the justice of our public administration, destroyed the fortunes of thousands who had confidence in it, enervated the trade, husbandry and manufactures of our country, and went far to destroy the morality of our people."

You, Jon, recently stated, among other contentions, as follows:

“The Framers clearly had in mind the possibility that paper currency and things other than gold and sliver [sic] can be money.”

This and other allegations you make clearly demonstrate that you know next to nothing about the legal history of money in this country, which is long and interesting.
The idea of paper money was clearly rejected by the Philadelphia Constitutional convention, and proof thereof is found in the several notes of the Convention. Furthermore, there are a large number of cases decided before the civil war that held that only gold and silver was money. For example, in Gasquet v. Warren, 10 Miss. 514, 517 (1844), that court stated:

"It means that which in fact and law is money, which is gold or silver coin. This in law is money and nothing else is."

Of the several decisions of the U.S. Supremes, perhaps the decision in United States v. Marigold, 50 U.S. (9 How.) 560, 567-68 (1850), demonstrates the thought of that court:

"They appertain rather to the execution of an important trust invested by the Constitution, and to the obligation to fulfill that trust on the part of the government, namely, the trust and the duty of creating and maintaining a uniform and pure metallic standard of value throughout the Union. The power of coining money and of regulating its value was delegated to Congress by the Constitution for the very purpose, as assigned by the framers of that instrument, of creating and preserving the uniformity and purity of such standard of value * * *.

"If the medium which the government was authorized to create and establish could immediately be expelled, and substituted by one it had neither created, estimated, nor authorized  one possessing no intrinsic value  then the power conferred by the Constitution would be useless  wholly fruitless of every end it was designed to accomplish. Whatever functions Congress are, by the Constitution, authorized to perform, they are, when the public good requires it, bound to perform; and on this principle, having emitted a circulating medium, a standard of value indispensable for the purposes of the community, and for the action of the government itself, they are accordingly authorized and bound in duty to prevent its debasement and expulsion, and the destruction of the general confidence and convenience, by the influx and substitution of a spurious coin in lieu of the constitutional currency."

You may read this decision here:

http://caselaw.lp.findlaw.com/scripts/getcase.pl?navby=case&court=US&vol=50&page=560

I have a wide variety of cites to and quotes from cases of this period posted here:

http://home.hiwaay.net/~becraft/MONEYbrief.html

Where did we get federal “legal tender paper money”? During the civil war, Chase was Treasury Secretary and he developed the idea (as published in the Annual Reports of the Treasury) of issuing federal notes to finance the war. Congress followed suit and issued those notes, later making them a legal tender. Chase was later appointed to the Supreme Court as Chief Justice, and I suspect that the reason for doing so was to insure he would uphold the constitutionality of those legal tender acts. However, he disappointed everyone when the Court took cert on a case from Kentucky; see Hepburn v. Griswold, 75 U.S. 603, 625 (1869). In this case, Chase concluded that his own acts of advocating legal tender paper were unconstitutional. I attach hereto a copy of the decision in Hepburn.

Only when the Court was packed with a couple of railroad lawyers did it decide to rehear this question. Then in the Legal Tender Cases, the power to issue such notes during war was upheld. That decision could not isolate where this legal tender power was found in the constitution; it merely pointed to the constitution and by fiat declared that such power was there.

This issue is long and complex. It would benefit you if you would at least minimally educate yourself about the legal history of this issue.

Larry

Benjamin Frankin & Paper Money

THE AMERICAN REVOLUTION (1764 - 1781)

By the mid 1700's Britain was at its height of power, but was also heavily in debt.

Since the creation of the Bank of England, they had suffered four costly wars and the total debt now stood at £140,000,000, (which in those days was a lot of money).

In order to make their interest payments to the bank, the British government set about a programme to try to raise revenues from their American colonies, largely through an extensive programme of taxation.

There was a shortage of material for minting coins in the colonies, so they began to print their own paper money, which they called Colonial Script. This provided a very successful means of exchange and also gave the colonies a sense of identity. Colonial Script was money provided to help the exchange of goods. It was debt free paper money not backed by gold or silver.

During a visit to Britain in 1763, The Bank of England asked Benjamin Franklin how he would account for the new found prosperity in the colonies. Franklin replied.

"That is simple. In the colonies we issue our own money. It is called Colonial Script. We issue it in proper proportion to the demands of trade and industry to make the products pass easily from the producers to the consumers.

In this manner, creating for ourselves our own paper money, we control its purchasing power, and we have no interest to pay to no one."
Benjamin Franklin 1

America had learned that the people's confidence in the currency was all they needed, and they could be free of borrowing debts. That would mean being free of the Bank of England.

In Response the world's most powerful independent bank used its influence on the British parliament to press for the passing of the Currency Act of 1764.

This act made it illegal for the colonies to print their own money, and forced them to pay all future taxes to Britain in silver or gold.

Here is what Franklin said after that.

"In one year, the conditions were so reversed that the era of prosperity ended, and a depression set in, to such an extent that the streets of the Colonies were filled with unemployed."
Benjamin Franklin

"The colonies would gladly have borne the little tax on tea and other matters had it not been that England took away from the colonies their money, which created unemployment and dissatisfaction. The inability of the colonists to get power to issue their own money permanently out of the hands of George III and the international bankers was the PRIME reason for the Revolutionary War."
Benjamin Franklin's autobiography

By the time the war began on 19th April 1775 much of the gold and silver had been taken by British taxation. They were left with no other choice but to print money to finance the war.

What is interesting here is that Colonial Script was actually working so well, it became a threat to the established economic system of the time.

The idea of issuing money as Franklin put it "in proper proportion to the demands of trade and industry" and not charging any interest, was not causing any problems or inflation. This unfortunately was alien to the Bank of England which only issued money for the sake of making a profit for its shareholder's.

Click here for more.