Ron Collins
Jul 24, 2017 · 4 min read

if the lenders, with their armies of analysts, economists and mathematicians, grossly underestimated the risk, how can it be OK to blame the individual borrowers for (inevitably) having failed to appreciate it too?

It’s a fair point, in a sort of social-analysis sense, I grant you. But it’s a little too simplistic for me: those big, bad banks versus those poor suffering homebuyers. I suppose it doesn’t work for me in explaining anything, because I was once in that losing-the-house chair myself.

And the only honest assessment of my own calamity, is I had it coming. I spotted a soft-target banking market, with sleazy realtors running around using language like “I know a guy” and “creative financing” and “we’ll make this work” and “they don’t need to know that”. They were all in on it, the realtors, the bankers, the underwriters, the title companies, and yes sir, the buyers.

Mortgage lenders in the Denver Metro Area in the late 1980s were practically foaming at the mouth to sign loan contracts, they were renting billboards on the urban freeways advertising 110% equity deals, they were openly instructing their loan officers to just go through the motions and paper over any problems on an application. It was a junior arranger who explicitly instructed me on the technique of the “gift letter” where getting around state laws prohibiting the borrowing of down-payment funds could be done by committing the fraud of producing a letter saying the money was a gift. There were obscure rules about how they didn’t need to inquire about certain kinds of debts, and they made sure I knew what those were. Et cetera.

It was chaos, anarchy, a free-for-all. And it would just be naive to say that all those people buying all those homes weren’t mostly seeing an eager finance industry doing back-flips to loan out their money to anyone with a pulse.

My income wasn’t what I said it was. I had outstanding debts no lender ever found out about, because they didn’t want to know, and told me themselves how not to let them know it. The chasm between what got discussed across desks and what got put down on paper was as broad and deep as the Grand Canyon, and yes, everybody was in on the con.

For my part, I knew I was hustling the bankers. And I knew they knew I was. And they knew I knew that. It was one great big wink-and-a-nudge.

And over time, not only was I written a first mortgage nobody had any legitimate business granting me, but later a second, and then a third. It was a shortfall of a few thousand I couldn’t come up with on the third in the middle of a gigantic renovation I was doing with other people’s money, and thinking I’d sell the whole thing to pay them all back and still walk away with pockets stuffed with cash (which was what the whole house-flipping industry had been founded to achieve), which eventually caught up with me.

And what did the bankers say when they finally told me they had to foreclose? Essentially, that they had to do away with me, or they’d be in a lot of hot water themselves, I mean, look at this mess (my contract documents)…. They were personally offended that they’d “made it easy” for me when all my end consisted of was making the payments, and my not making them might leave them open to scrutiny over how the whole scam got signed off in the first place.

So when it gets suggested that bailing out the too-big-to-failers but not the scamming, hustling, defrauding realtors and local lenders and buyers was unfair, all I see is moral relativism in play. It took two to tango, and the harsh economics of it came down to, the buyers who’d had no business being buyers in the first place were expendable, boo-hoo, while the Big Guys weren’t.

Much as anyone might criticize a brand-new President who got handed this whole mess while he was still a president-elect, and I was never an Obama fan, I’d still probably have done the exact same thing he did were I in his shoes.

The scam in its essence all along, has been the tactic of gambling with the ratio of household income versus home equity. The reason it is a scam, is because neither amount even exists as real money. The income hasn’t been earned yet, and a figure at the bottom of an appraiser’s sheet is nothing but speculative fiction. A piece of property’s real value, its ONLY real value, is what a real buyer can, will, and does pay for it. Everything else, is making the entire concept of the American home into a great big casino.

Now I own the home I live in outright: a 1965 single-wide mobile home I bought from a private party and paid off in eighteen months. THAT is home ownership. This other thing, this mortgage racket that all parties are the racketeers in, has been high-stakes gambling with play money since it was invented.

    Ron Collins

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