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The Grand Mortgage Scam
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Sheriff
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3953 posts
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 posted 7/17/2008 3:44:36 PM
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I gotta put this in writing, 'cause this is funny as hell and will probably piss lots of people off.
Anyway, you know IndieMac crashed and burned, 3rd largest "government-supported" but private mortgage "lender". It was bailed out by the Government, i.e. by your and my taxpayer's money. Now the same fate is coming for the largest one, Fannie Mae. Trust me, it is coming, there ain't nothing you and I can do.
So, this is what they all call "credit crunch", and why:
Basically, IdieMac, Fannie Mae and Freddie Mac are Government-created but privately run entities that purchase all mortgages. Here's how it goes:
Mortgages are underwritten by a number of banks and brokers. Mostly largest banks, Citigroup is among the biggest, Wells Fargo, Chase (wich is owned by J.P. Morgan), Bank of America.
Small banks can't write mortgages, that is THE RULES. Why? In theory, "to protect american people", in practice because home mortgages are among SAFEST, MOST PROFITABLE INVESTMENTS BIG BANKS DO. I'll come back to this a little later.
Banks sell mortgage blocks. All do. Who is the buyers? Fannie Mae and IndieMac. Basically, Fannie Mae, Freddie Mac and IndyMac are nothing more than mortage garbage dumps for the big banks. Why? Because of the fractional reserve.
What is Fractional Reserve? It is a rule that allows banks to create $10 worth of lending for each $1 of the real money they have (sometimes even more, $99 for each $1). So basically if you get a $300,000 mortgage, a bank will only have to have $30,000 of actual PAPER MONEY (even less, but let's assume this amount for simplicity).
Now, mortgages are front-loaded, you pay mostly interest first. So for the first couple of years banks enjoy UNBELIEVABLE PROFIT OF 100% OR MORE on their mortgaged money. There's so much profit they can't allow smaller banks on this scam, so smaller banks are forbidden from issuing mortgages.
After a few years bank "packages" mortgages and sends it of to a mortgage dump i.e. Fannie Mae. They don't care anymore what happens to that mortgage, whether Fannie will be able to survive on it, or what not. It was, after all, created so most profit can be squeezed and the rest dumped onto it. So, Fannie Mae has many unprofitable mortgages and hence will go bankrupt right after IndieMac.
[Message edited by Sheriff on 7/17/2008 3:58:43 PM]
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Sheriff
Admin
3953 posts
author
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posted 7/17/2008 3:47:37 PM
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What is going to happen after that is that"public outcry" will "make" the Government to step in and pay for the mess with our taxpayer's money. The Big Banks will count profits, us poor people are going to pay TWICE for our mortgages, first by paying mortgage bill, and second by sending moneys to the Government who's going to bail out Fannie Mae so Big Banks can move on to their next FRAUD SCHEME.
So why is it called "credit crisis"? Because when Fannie Mae is bankrupt (which is NOW), it will not be able to buy ANY mortgages from Big Banks. Hence, a free-for-all Wild West mortgage profiteering has come to an abrupt stop. Banks will have to scrutinize every little bit of the detail about every potential customer now because they THEMSELVES will have to make sure mortgage is profitable. So they will issue an exponentially FEWER mortgages.
And therefore, we are looking at one particularly bad Real Estate market crisis.
Oh yeah, don't worry there's still Countrywise, the biggest non-bank mortgage broker which has already been bailed out. They will HAVE to issue mortgages, or go bust again. But it's ok, it is owned by Bank of America, which ownes VISA and Mastercard - the biggest fake money credit casino on Earth.
[Message edited by Sheriff on 7/17/2008 4:00:23 PM]
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