I wouldn't sell the banks so short, guys. The banks and the bankers that run them are, by and large,
not idiots, and viewing them as such is dangerous.
Take a look at this paragraph from the article;
Quote:
In the final years of the housing boom, banks were lending to homeowners with no money down. To do this, they often made 80/20 loans, giving homeowners an 80% first mortgage and a 20% second mortgage.
Now, it seems these moronic mortgages require moronic foreclosures.
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Firstly, you have to ask yourself; "Why would Wells Fargo even do this?". The question is valid enough. After all, it would make more sense to simply provide one 100% mortgage, wouldn't it? Lewis says as much, but Lewis isn't an attorney.
Here's the skinny; Wells Fargo is able to recieve state subsidy for offering mortgages to homeowners with less than perfect credit or no down payment as per the Fair Housing and Equal Opportunity Act ,and a host of measures enacted by the public department of the same name, which falls under the jurisdiction of the office of the Department of Housing and Urban Development (HUD).
In their infinite wisdom, legislators thought to include a provision in the original bill that prevented lenders from simply giving mortgages away by prohibiting state subsidy of mortgages wherein there was a sole lien holder(i.e. the homeowner has no equity and is not using a federal housing subsidy). That in itself was a good idea, because otherwise banks would be handing out mortgages will-nilly and would only ever reap rewards for such a practice. Think about it. The state gives them money to provide such mortgages and the property is still subject to repossession if the tenant fails to pay. Win-win-win.
What was inexcusably stupid idea was the thought that the state could somehow shape the housing market in accordance with its' initiatives. This 80/20 mortgage is a perfect example, and there are many of them that have not yet gone to court or been reported in the media.
Wells Fargo complied with state mandate, got its' subsidies, and then followed the proper legal procedures when the time for foreclosure came.
The legislature did not think to specify that the lienholders must be different agencies, or that one must be a federal agency, and so defeated their own purpose. In their defense, they cannot specify that the Federal government must be a lien agent because such a thing is constitutionally prohibited, and with good reason. They had to find a way around that prohibition, but they did not take into account the fact that private interests are even better at finding "ways around" than the state is.
Honestly, who do you think loses in this scenario? It sure as hell isn't Wells Fargo. What is it going to cost Wells Fargo to sue itself? I will tell you now that the cost won't be anywhere near what Wells Fargo reaped in profits from mortgaging the property and will continue to reap from future motrgages. Remember that Wells Fargo was one of the financial institutions that did not go bankrupt or need a bailout during the houing crisis. They know how to use the system without staking their future success upon it, and the taxpayer ultimately pays for that busniess model.
Yes, by all means, laugh at the idiocy of Wells Fargo. They're suing themselves! What fools they are! With banks like this, it's no wonder we're in a fiscal crisis! lololololol! I'm sure they'd laugh all the way to the bank if they weren't already there.
Steamwake is right. They
are just jumping through the hoops. The worrisome thing is not their actions but the causality behind them.
Unlike the state, successful private interests don't simply do things because they fancy them. There is always a reason, even if that reason is not readily apparent, and they usually take the most safe and profitable course of action. It is in their nature to do so.
The real danger here lies not in the seemingly ridiculous actions of one financial institution, but
why they would take such an action in the first place. Take a lesson from the failures of so many half-ass investors and pundits that base their actions and claims and conjectures upon stories like this one.