Yes

by Naima Manal

Created on: February 27, 2009

It may be too much to ask, sometimes, that people facing a disastrous and life-changing event could use a helping hand. The concept of the bail out is to restore balance so that everyone doesn't fall. So it is asked - how can you be happy, while your neighbor suffers?

The need for this bail out does not originate from homeowners. Rather, the source of it far exceeds the financial reach of America's hard-working class. In fact, there would be no crisis without the national greed that ate away the equity values of this small house here, and that small house there.

What is often misunderstood by those who were able to stay afloat, is that it was not just irresponsible refinancing on the part of the homeowner, to cash out on the investment of their primary homes. No, rather, many people have been swept away by the tsunami of the mortgage industries' loopholes and practices.

At this very moment, how about focusing on giving the homeowner a chance to live in their home. No, the playing field may not be as level to some, but let's put aside the games for now. People are actually losing everything they have, and if they are still holding on, they have already lost more than what they still have.

So, what is it that happened to so many people, on the level of the people, and not the national perspective of the mortgage industry? For many people, their struggles started during the late 1990s, in the time of the Y2K phenomenon - that the world was going to end in the year 2000, so stock up and save. Once the country reached 6 months into the year 2000, the the Y2K scare settled. People started to see more neighborhood developments, which slowly, in turn, added more value to neighboring real estate property.

Cautious mortgage predators were no longer wary of an impending doom, so this marked the beginning of widespread fraudulent practices against the unsavvy homeowner. Okay, but how?

Neighborhoods that were deemed as "developing" suddenly saw increases in their property values. For homeowners, many of their mortgage companies chose to sell their mortgage loans, for immediate profits, to more less-known companies. The moment a homeowner missed a payment and became late, these new companies put their mortgages into a different status. Even if they made subsequent payments but were late for the last 3 months, these loans were given the status of "sub-prime."

Now, the homeowner was unaware that while they continued to make their payments - even if paid on time - a new fee attached to their mortgage was generating more and more debt - the capitalized interest. This is where the interest on the late payments are calculated with another interest - interest making interest. The interest on these payments multiplied exponentially!

What was the limit on this exponential penalty? It was the new equity value of the home and the home's appraised value - increased property value from the local community developments. You see, these sub-prime lenders specifically scouted areas affected by development and real estate property booms. They also assessed the current appraised value of these homes, and this is how they knew what amount they could aim for, snatching the equity rug right out from under these innocent homeowners.

This occurred without any major penalty, only to the homeowner who was now living in a home they could not afford - and they didn't even get to use the very equity they worked so hard to build. This was the scam of predatory lenders that caused hardship for so many homeowners.

Many of these very same homeowners were further affected by September 11, 2001 and all of the events thereafter, in many ways. Through the loss of their employment and the overall economic plight of the country, many homeowners have been swimming against a tsunami for over a decade.

To make matters worse for these homeowners, some were given only two options - file bankruptcy or sell their home to someone they trust and then buying it back when they recover. What's wrong with both pictures? I'll tell you. Bankruptcy - it's just so sad that so many people had to file bankruptcy due to hardship caused by someone else's greed. The effect of filing bankruptcy can last for many years. The bail out, at that time, could have easily been - for these banks now needing a bail out themselves - a grace period of some sort, to allow the homeowner some time to start over again on their mortgage payments. The homeowners were certainly hoping for that type of fresh start.

Selling your family home to someone you trust - is this an option that anyone would want to face? I often think about what the actual, and not estimated, amount of homeowners who had to fight a fierce court battle, just to regain the rights to their own homes. This was also another equity buster for these homeowners. By the time it was all over, the equity went to the so-called trusted friend in exchange for the return of the house.

I know that what is described here barely touches on what has actually happened to so many people. It is so bad - and you know it's bad when the government mentions it - that many people will not be able to recover, even with a bail out. What they really, really needed was a "step in" and not a "bail out."

We are all still trying to figure out how this could happen. How could trusted financial institutions - which have to meet some sort of government regulation criteria in order to be in operation - do this in the name of mortgage funding? How could mortgage brokers operate in corruption? Certainly, the whole of the country deserves a bail out from this catastrophe - those who suffered and those who didn't but struggle to survive - and then the country needs a "reset-escape-reset-execute" to help heal the wounds of this mortgage infarction on the way homeownership has been infused with circulating corruption.

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