Skip to comments.Gonzalo Lira On The Coming Middle-Class Anarchy
Posted on 10/09/2010 6:30:19 PM PDT by dennisw
The Coming Middle-Class Anarchy
True story: A retired couple I know, Brian and Ilsa, own a home in the Southwest. Its a pretty house, right on the manicured golf course of their gated community (theyre crazy about golf).
The only problem is, they bought the house near the top of the market in 2005, and now find themselves underwater.
Theyve never missed a mortgage paymentBrian and Ilsa are the kind upright, not to say uptight 60-ish white semi-upper-middle-class couple who follow every rule, fill out every form, comply with every norm. In short, they are the backbone of America.
Even after the Global Financial Crisis had seriously hurt their retirement nest eggand therefore their monthly incomeand even fully aware that they would probably not live to see their house regain the value it has lost since they bought it, they kept up the mortgage payments. The idea of them strategically defaulting is as absurd as them sprouting wings.
When HAMPthe Home Affordable Modification Programwas unveiled, they applied, because they qualified: Every single one of the conditions applied to them, so there was no question that they would be approvedat least in theory.
Applying for HAMP was quite a struggle: Go here, go there, talk to this person, that person, et cetera, et cetera, et cetera. Its like they didnt want us to qualify, Ilsa told me, as she recounted their mind-numbing travails.
It was a months-long strugglebut finally, they were approved for HAMP: Their mortgage period was extended, and the interest rate was lowered. Even though their home was still underwater, and even though they still owed the same principal to their bank, Brian and Ilsa were very happy: Their mortgage payments had gone down by 40%. This was equivalent to about 15% of their retirement income. So of course they were happy.
However, three months later, out of the blue, they got a letter from their bank, Wells Fargo: It said that, after further review, Brian and Ilsa had in fact not qualified for HAMP. Therefore, their mortgage would go back to the old rate. Not only that, they now owed the difference for the three months when they had paid the lowered mortgageand to add insult to injury, they were assessed a penalty for non-payment.
Brian and Ilsa were furiousa fury which soon turned to dour depression: They tried contacting Wells Fargo, to straighten this out. Of course, they were given the run-around once again.
They kept insisting that they qualifiedthey qualified! But of course, that didnt help at alllike a football, they were punted around the inner working of the Mortgage Mess, with no answers and no accountability.
Finally, exhausted, Brian and Ilsa sat down, looked at the last letterwhich had no signature, and no contact name or numberand wondered what to do.
On television, the news was talking about robo-signatures and foreclosure mills, and rank illegalitiesillegalities which it seemed everyone was getting away with. To top it off, foreclosures have been suspended by the largest of the banks for 90 dayswhich to Brian and Ilsa meant that people who werent paying their mortgages got to live rent free for another quarter, while they were being squeezed out of a stimulus program that had been designedtailor madeprecisely for them.
Brian and Ilsa are salt-of-the-earth people: They put four kids through college, they always paid their taxes. The last time Brian broke the law was in 1998: An illegal U-turn on a suburban street.
Weve done everything right, weve always paid on time, and this program is supposed to help us, said Brian. We follow the rulesbut people who bought homes they couldnt afford get to squat in those McMansions rent free. It would have been smarter if wed been crooks.
Now, up to this point, this is just another sob story of the Mortgage Messand as sob stories go, up to this point, its no big deal.
But heres where the story gets ominousheres where the Jaws soundtrack kicks in:
Brian and Ilsathe nice upper-middle-class retired couple, who always follow the rules, and never ever break the lawwho dont even cheat on their golf scoreseven when theyre playing alone (Because if you cheat at golf, youre only cheating yourself)have decided to give their bank the middle finger.
They have essentially said, f***it.
They havent defaultednot yet. Theyre paying the lower mortgage rate. That theyre making payments is because of Brian: He is insisting that they pay somethingIlsa is of the opinion that they should forget about paying the mortgage at all.
We follow the rules, and look where thats gotten us? she says, furious and depressed. Nowhere. They run us around, like lab rats in a cage. This HAMP business was supposed to help us. I bet the bank went along with the program for three months, so that they could tell the government that they had compliedand when the government got off their backs, they turned around and raised the mortgage back up again!
And charged us a penalty, Brian chimes in. The non-payment penalty was only $84but it might as well been $84 million, for all the outrage they feel. A penalty for non-payment!
Nevertheless, Brian is insisting that they continue paying the mortgagealbeit the lower monthly paymentbecause hes still under the atavistic sway of his law-abiding-ness.
But Ilsa is quietly, constantly insisting that they stop paying the mortgage altogether: Everybody else is doing itso why shouldnt we?
A terrible sentence, when a law-abiding citizen speaks it: Everybody else is doing itso why dont we?
Im like Wayne Gretsky: I dont concern myself with where the puck has beenI look for where the puck is going to be.
Right now, people are having a little hissy-fit over the robo-signing scandal, and the double-booking scandal (where the same mortgage was signed over to two different bonds), and the little fights between junior tranches and senior tranches and the servicer, in the MBS mess.
But none of that shit is important.
Whats really important is Brian and Ilsa: Whats really important is that law-abiding middle-class citizens are deciding that playing by the rules is nothing but a suckers game.
Just like the poker player whos been fleeced by all the other players, and gets one mean attitude once he finally wakes up to the con? Im betting that more and more of the solid American middle-class will begin saying what Brian and Ilsa said: f***it.
f*** the rules. f*** playing the game the banksters want you to play. f*** being the good citizen. f*** filling out every form, f*** paying every tax. f*** the government, f*** the banks who own them. f*** the free-loaders, living rent-free while we pay. f*** the legal process, a game which only works if youve got the money to pay for the parasite lawyers. f*** being a chump. f*** being a stooge. f*** trying to do the right thingwhat good does that get you? What good is coming your way?
When the backbone of a country starts thinking that laws and rules are not worth following, its just a hop, skip and a jump to anarchy.
TV has given us the illusion that anarchy is people rioting in the streets, smashing car windows and looting every store in sight. But theres also the polite, quiet, far deadlier anarchy of the core citizenrythe upright citizenrythrowing in the towel and deciding its just not worth it anymore.
If a big enough proportion of the populacenot even a majority, just a largish chunkdecides that its just not worth following the rules anymore, then that societys days are numbered: Not even a police-state with an armed Marine at every corner with Shoot-to-Kill orders can stop such middle-class anarchy.
Brian and Ilsa are such anarchistsgrey-haired, well-dressed, golf-loving, well-to-do, exceedingly polite anarchists: But anarchists nevertheless. They are not important, or powerful, or influential: They are averagethats why theyre so deadly: Their numbers are millions. And they are slowly, painfully coming to the conclusion that its just not worth it anymore.
Once enough of these J. Crew Anarchists decide they no longer give a f***, its over for Americabecause they are America.
The Center for Public Integrity has a story, written by Michael Hudson this past August 6, that shines a light on the issue of perverse incentives of the HAMP program. These perverse incentives came to light because of a whistleblower, a former employee of Fannie Mae, filing a lawsuit. Fannie Mae was so keen on being perceived as a money-maker, after the Federal government bailout, that the aid programs passed by the Congress and signed by the President were turned into profit centers.
The former executive, Caroline Herron, recounts:
It appeared that Fannie Mae officers were focused on maximizing incentive payments available to Fannie Mae under various federal programs even if this meant wasting taxpayer money and delaying the implementation of high-priority Treasury programs, she claims in the lawsuit.
Herron alleges that Fannie Mae officials terminated her $200-an-hour consulting work in January because she raised questions about how it was administering the federal governments push to help homeowners avoid foreclosure, known as the Home Affordable Modification Program, or HAMP.
Herron further alleged that trial mods were implemented regardless of eligibility of applicants, so that Fannie Mae would be eligible for Federal government bonuses.
Ms. Herrons testimony in fact proves Ilsas suspicion that there was a scam at bottom. As Mr. Hudson writes, Herron charges that Fannie Mae continued in headlong pursuit of trial mods even though it knew that many had little chance of becoming permanent. [. . .] Fannie preferred doing trials, Herron alleges, because it was eligible to receive incentive payments from the Treasury Department.
So in the pursuit of these perverse incentives, people who did not qualify for HAMP were enrolled in the program. And when their trial mods were up after 90 days, they would be notified that they didnt qualifyregardless of whether they in fact did qualify, as in the case of Brian and Ilsa.
All so as to be perceived as a profitable operation, worth having been bailed out. All so as to be perceived as returning Americas money.
As of February, 2010, of the over one million homeowners mortgages under HAMP auspices, 83% were trial mods. One would assume that those 850,000 homeowners would also be assessed an $84 penalty for non-payment.
$84 times over 850,000? You do the math.
From the ZERO HEDGE website....thanks zero hedge!!
It’s a very bad idea to strip motivated, capable people of their dignity and then rub their noses in it.
In my 20s, not married, and I rent.
Wow. Thanks everyone way to totally mess up the country before you hand it over to my generation.
Good thing I’m armed.
Middle class revolt bump.
That is one big way liberals justify their existence.
Where’ve I seen that line before? Unintended Consequences?
I’m going to go drink heavily now, and see if I can say anything civil about this one...
Is there anyone else reporting on this that backs these allegations up? If it can be proven that Fannie Mae Execs were bonused on HAMP trials...
But, this thought came up...if the feds bail-out the banks because the title and mortgage holder issues create a scenario where folks who do not have to do so default then where will the feds get the money? From us of course, so if we are paying for all those defaults then why should we continue to pay ours as well?
And this is all about the breakdown of the Honor System; you pay your bills, you pay your taxes, you don’t cheat at little things or big things. Now, we all run the risk of acting like Clintons or Kennedys.
Zer0 set the tone by stiffing the Auto bondholders. I now set the rules with which I deal with Zer0 bailout banks like BoA. If they don’t like it, go cry to Zer0.
In my 20s, not married, and I rent.
Wow. Thanks everyone way to totally mess up the country before you hand it over to my generation.
Good thing Im armed
Did Mommy and Daddy pay their mortgage? Because they sure didn’t teach you manners.
Looks like middle America is thinking going Galt is a better and better idea...
I’m with Ilsa
If they want to know if the bank is paying attention- just stop making payments. Or make their payments into an escrow account.
“Its a very bad idea to strip motivated, capable people of their dignity and then rub their noses in it.”
Yes. It is.
There are enough monkey wrenches in the gears of the US economic machine that I am wondering if we will just seize up. Frankly, I think that’s the plan.
What a joke! That's been the danger all along, with the government treating the Constitution and the Law like toilet paper. Having judges overturn Prop. 8 and other sane laws.
When the government doesn't obey the law, why should anyone else? Here's another aspect of that, the Obama Administration is working feverishly towards 'racial justice'. What they are doing is convincing white Americans that the Civil Rights movement was a hustle. It was a way to discriminate against whites.
This is the job of the GOP to turn this all around and actually communicate. We're doomed.
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