For those who thought predatory lending was a thing of the past due to President Obama’s now-Trump-defunct Consumer Protection Bureau, behold Dan Gilbert, owner of Quicken Loans/Rocket Mortgage, and owner of the Cleveland Cavaliers. Gilbert has, so far, managed to slip beneath the radar of the FHA’s FNMA (Fannie Mae) oversight and he did it just toward the end of the Obama presidency. Stopped the clock long enough to run from his responsibilities, yes he can and yes, he did.
PREDATORY LENDING STIPULATIONS MADE SIMPLE
Let me explain two of the main or major points about predatory home lending, or any kind of predatory lending for that matter:
_Inflated appraisals (always an inside job)
_Non-doc (inside / outside job)
_Inflated income (could go either way if the borrower inflates income or the lender decides to move the needle up a notch to make the prospect look like he or she has more income than they really do)
_Fudging the numbers on escrows (definitely an insider job, as most people don’t have a clue how escrows are calculated and don’t feel a need to do the math that the lender is supposed to do and get right. It’s the law, right?)
Let me also explain the mortgage lending process with its general categories, as it goes:
1) A-paper loans (A typically stands for “anglo” unless the non-Anglo person is exorbitantly rich); and …
2) B- & C-paper loans (B for “Black” and C for “colored” — typically your low-income people with homeownership dreams of their own who some feel aren’t supposed to have a home because, well, they aren’t rich as shown above).
FANNIE MAE AND THE CONSUMER PROTECTION BUREAU OF THE EARLY 2000S
When President Obama (and any and all of those who are against predatory lending) attempted to explain these simple home loan concepts to an American people that the news media says, on average, has an 8th grade education, the roof blew off the sucker.
President Obama, of course, never used the terms used above for how the papers are separated in the mortgage industry, but the truth is that from an REO (real-estate-owned) foreclosure perspective, even Bad-paper loans willfully structured for lies with bloated incomes and inflated appraisals can be easily shifted to the “Anglo”-paper column, depending upon the race and ethnicity and stated wealth of the property owner. That is JUST to make sure nothing happens to them when all hell breaks loose on everyone else, mostly Blacks and Hispanic/Latino peoples.
What he (President Obama) did say was that that “most vulnerable” of the nation are preyed upon simply because, like anyone else, they also want a home of their own.
That was the American dream cum American nightmare that nearly exploded the economy just before he was elected President in 2008. Private-side lending is supposed to bolster the economy and make more people homeowners and landholders, not make more people homeless and kill the economy.
HOWEVER..ABOUT THAT NIGHTMARE…
On the governmental side of the mortgage lending process, the FHA (Federal Housing Administration), founded by President Franklin Delano Roosevelt in 1934, was supposed to make America great again.
Just after the prior President (a Republican, of course) crashed the economy and brought us the late GREAT DEPRESSION of the 1920s, Roosevelt comes along in the 1930s with the job of bailing out the national economy, as did President Obama.
He does it by pouring plenty of captured federal funds back into the individual working American. He couldn’t have been working for “people on welfare,” they already had theirs. Yet, Obama, as Roosevelt once did, also finds himself in the predicament of trying to prevent future disasters of the same kind. Thus, the CPB.
Both Presidents had to find some pretty “creative” ways for more people to become homeowners, and in Obama’s case for people NOT to lose their homes, and also to shore up the job and housing markets that represent more than 90-percent of what America is supposed to stand for, not fall down and roll over for.
It is no secret, since the Great Depression created on the watch of a Republican in the White House, that land ownership is supposed to give even the most meager person in American something to inherit, to be proud of, and to pass on to their children; which, in turn, is supposed to build America, not tear it down.
“Tara” — Terra Firma — was the real NEW DEAL in America, especially in the antiquated antebellum south. Watch the movie “GONE WITH THE WIND”, if you don’t get it.
It was a fiction story about a reality regarding land-holding in the United States, land worked by slaves until the Civil War allegedly set them free and “Miss Missy” had to get off her lazy privileged behind and go pull up her own turnips and sweet potatoes and pick her own cotton bolls.
THE NEW DEAL AND THE OLD REPUBLICAN SABOTAGE MINDSET
There was nothing new about this deal under Roosevelt.
It was just the inaccessibility to average Americans that had to change, and truly, Roosevelt was the only one who was in a position to do it. The nation was pushing too hard for the VOTING PUBLIC to be either …
_ White and Rich and Male; or
_ White, period; or
_ Male, period; or
_ Able to read and write (knowing that this inability would cut off the vast majority of the children of former slaves who came off American plantations mostly under- or uneducated); or
_ Able to pass a “Poll Test” with civic information on it that most white people did not know themselves; or
_ Able to pay a “Poll Tax” that the disenfranchised could not afford to pay, made especially for them; and finally…
_ A landowner or homeowner.
That’s the ticket. Being a homeowner made a difference when nothing else did. Equity in a home is used for a variety of economically wonderful purposes, as needed.
It was the job of the lenders to make sure, however, that a person could afford to borrow money to meet that need, or even to use the equity in their homes for improvements or for other critical expenses as the need arose.
The outcome is supposed to be that the loan is turned down, the loan amount is lowered and offered at a non-usurious interest rate, or the lender uses the FHA/FNMA guarantee as leverage to insure the loan in the event that something unavoidable happens to the borrower.
Not avoidable, UN-avoidable. Predatory lending is AVOIDABLE.
What President Obama did manage to end, before he left, is lower-income people being charged higher interest rates as if the interest rate had something to do with the ability to repay the loan. It didn’t. D’uh.
When the Real Estate bubble crashed -again- in 2008, some 80+ years after Roosevelt fixed it, the people who borrowed money for homes were blamed by the general public for causing it when it was actually the predatory lenders who caused it.
Dan Gilbert of Quicken/Rocket, was called to the carpet most recently by the FHA and the Justice Department. He was asked to settle his predatory lending engagements over and over again, but he has consistently refused to do so. He is still running like a scarecrow now, but this time with a Republican Congress and “precedent” gifted to him by the Democrats in the 2010 and 2014 mid-terms. On this point, he can keep running until the end of time.
But the Bible says “The wealth of the wicked is stored up for the righteous.” He’s a church-goer, he knows what that means. ‘God is watching’, even when he thinks no one really knows what he did and can’t prove it. It was designed to make it “unprovable.”
Fortunately, the record shows that Gilbert was complicit in this mortgage insurance fraud on the FHA/FNMA. Unfortunately, he may never have to reconcile the cooked transaction books that demand unjust insurance payments from the taxpayer, and that only means that the real estate “exploding bubble of 2008” is headed for yet another crash soon enough.
The predators have yet to reconcile.
When the fudged underwriter’s numbers on income, appraisals, and escrows, even when the borrower tells the absolute truth, is passed through and overlooked by the government insurance gatekeepers, the taxpayers are held responsible for making sure that even the most stealthy of thieves cannot lose the game no matter what happens to the economy … may it bubble, crash, and burn, they hope.
The underwriting sales process includes “making whatever adjustments are necessary” in order to make that sale, or close that deal.
It is especially helpful when sliding skewed numbers past the government loan backers, because that is a guaranteed markup and funds expenditure on entire capital gains loan packages in bulk, especially in the secondary market where real estate owned is traded like so much cattle.
Of course, the same Trump who just let Cliven Bundy and his folks walk for sticking up the government on federal grazing fees is not in position to protect the American people who are trying to stay in their own homes without being stuck up by the same government that set Bundy free for actually breaking the law.
Simplified for your reading leisure …
In the REO foreclosure process, they already know when a short sale or foreclosure loan hits their desks that the loan is likely less than two or three, maybe about five to seven years old if the owner-borrower lucked out at some point. It’s intentional.
It is quick fast easy money that happens in 36 months, give or take a few, as opposed to a person who is able to keep their home and pay it off in 30 years.
These foreclosures also underwrite the better “A-paper” loans that cover up the mess that the predatory lenders made with the FHA/FNMA. It provides a rug, of sorts, under which to sweep the dirt.
THEY KNEW WHAT THEY KNEW WHEN THEY KNEW IT
“They knew what they were getting themselves into when they applied for the mortgage,” says J.Q. Public.
The Borrower/Homeowner usually doesn’t have a clue. Even “How To Buy A Home” loan classes don’t typically include detailed coverage on the underwriting process — just a credit bureau check mark. The teachers already know, or expect, that the Borrower won’t have a clue, so they don’t try to teach it to them. Chances are, they don’t know about it themselves. It’s just a glance and overview of the credit-approval process, never a lesson on how the stipulated “bumps and gags and wheezes” can happen in the meantime.
The borrower is told one thing, then something else unexpected happens down the road and the unexpected for them is what the lender was already expecting. The borrower never knew that the sales department of the loan company, hell-bent on increasing their closing numbers, used low-income borrowers as leverage to entice higher-income borrowers.
But they never knew what hit them until they see their FIXED RATE mortgage payment increase to something they never agreed to pay from the start. By the time they discover they were screwed in the underwriting process a year or so later, it’s too late to change it.
In the meantime, the predators know they can’t lose, no matter what happens.
When the low-paper foreclosure happens, the lender gets the FHA/FNMA insurance money (paid for by the understood subject -YOU, John Q. Taxpayer-), and they get the house and the market RESALE value of the home on top of that so they can do it to someone else, just because they can. If it’s a home in a substandard neighborhood, even better a place to find a desperate borrower who has no clue what the real underwriting process consists of.
YOU get to pay for it, John Q. Public Taxpayer, because the homebuyer can’t, and the government doesn’t want the house. They are not in the business of making direct home loans or bartering real estate deals, that just ain’t what they do. They weren’t even doing that under Obama, don’t care who lied on him.
THE JOHN MCCAIN EFFECT, LONG-TERM
Back in 2008, President Obama scandalized John McCain’s name in the final debate hour.
He asked McCain a question McCain was not prepared to answer, because he didn’t know a thing about working for what he wanted in life, only that he looked up and stuff just appeared from seemingly out of nowhere.
Things and “stuff” had been handed to McCain since he was a child with an Admiral father in the US military, and marrying rich surely didn’t change that for him. So, he got blown away by a simple question from Obama: ”John, do you even know how many homes you have?”
The understood answer was “YOU should, because I do.” When McCain couldn’t answer, Senator Obama told him how many homes he owned.
Gilbert, and others like him, use the taxpayers to pay for their car elevators and their 8th or 9th or 10th homes and land purchases, and also uses the taxpayer to buy his sports teams, and to support the allegedly ‘lazy’ people that he helps to make homeless.
So now you know.
When Gilbert and his crones say things like “We have a low overall foreclosure rate so it’s not our problem they can’t pay,” it’s because they are combining low-income borrowers with the richer ones — overall.
That makes the comparison an automatic lie, and it means they knew what they were doing when they did it.
The borrower no longer has that nice affordable mortgage they originally had, they now have one that is eating into a huge chunk of a tight income that was already budgeted out for other living expenses. In return, their income has not changed enough in that short a period of time to accommodate the sudden unexpected mortgage increase.
THE NEW DEAL FHA UNDER BEN CARSON
Ben Carson, if you go to the Trump White House website, has shoved the FHA beneath Ginnie Mae (‘Government National Mortgage Association’). All government-insured loans have now been stuck together when one really has nothing to do with the other. They were separate entities for a reason.
As a matter of fact, the entire Trump Administration White House website is now a royal clueless mess just like the clueless people he has hired and fired and who have quit.
Hint: People can’t even tell if Rudy Guiliani is on Trump’s side or not, because Guili has been massaging stupid from the ‘enemy of the people’ US Press from Day One.
The White House website overall is filled to point of complete purge and nonsense with dead and outdated links, mass confusion about where things are and why things are, and un-clickable national information messes that once flowed like a running river stream of clear fresh transparent water when President Obama and Vice President Biden were there.
The White House website is a complete indication of its current leadership — messy and all over the place, dead and outdated and outmoded.
Ben Carson has a simple duty to the honor and respect of his job to make sure the FHA stands its ground with Gilbert and helps the Justice Department to do the right thing by the homeowners who got screwed. Not the typical “white thing,” but the RIGHT thing.
The money shouldn’t be floating in the air where only the upper crust can catch it, it needs to make its way to keeping the homeowner in their homes, where they belong.That person’s one and only home should not be used as leverage to buy Gilbert and his ilk more homes than they can possibly live in at one time and more cars and car elevators and sports teams, like the Cleveland Cavaliers.
When the day comes that it’s more important for those predatory lender types to own several homes and buy basketball teams than it is for people to keep their ONE home, even when one of his LEAD PLAYERS is an advocate to end homelessness in his own home town, something has surely gone awry in America.
This did not happen on Obama’s watch—it started before he, before nearly all of us who are living now, were even born.
PUBLIC NOTE: The opinions expressed in this article are the author's own and do not reflect the view of the Urban Intellectuals, affiliates or partners.