The young man sits at my conference table, a Sheriff’s Sale notice laid out before him.
His house, where he has lived with his kids, dog, wife and an accumulated 11 years worth of normal junk and memories the typical borrower has piled up in the garage and everywhere else, is to be sold at a Foreclosure Sale in less than three weeks. He is very nervous.
The first thing he asks me is “….whether you could call the bank and try to work it out for him. Maybe they’d pay attention to a lawyer.”
He explains that he had tried and tried, even kept a detailed record of all the calls, but never got anywhere. He had submitted papers repeatedly to get a loan modification but that did not work.
I asked him first what Bank held the mortgage. His hand is shaking as he hands me a piece of paper.
“I’m not sure” he said, a little embarrassed. “The Loan seemed to get transferred a lot.”
The paper flatly informs the reader that the home, with the kids and dog and wife and stuff, would be going to sale in 60 days. The Lender is identified as “Deutsche Bank National Trust Company as Trustee of the Home Equity Mortgage Loan Asset Backed Trust Series INABS 2005-A.”
So could I call them and work something out?
I wanted to tell him never in a million years, but it was probably more like never in a billion. The reason is that Deutsche Bank is not a bank at all. It is a “Trust”, better known as a legal device employed to shield the assets of wealthy people from their own bad investment decisions.
Designed with insane complexity by people who hold advanced degrees from places like Harvard and Yale, the “Trust” is actually designed to hold thousands of residential mortgages as “assets” for investors who make money from the stream of aggregated income derived from the “trust assets”.
My client’s mortgage was part of an investment scenario tied to the ability of a whole bunch of debt laden people to make their monthly mortgage payments faithfully. Hundreds and thousands of homeowners, their mortgages aggregating in the billions, all facing the consequences of their improvident borrowing. When a whole bunch of these people default, the investment goes bad. The borrowers lose their homes.
The pooled mortgage investments were and are rated by outfits like “Fitch Ratings”, kind of like a credit report for each investment pool. “A” ratings mean a good bet. As you go down the alphabet, the investment gets worse. It used to be easy to get good ratings, standards were lax, and the rating people said whatever they were asked to say. Things have changed, but never the fundamentals.
It is a pretty basic to axiom in investing that the investor ought to know a lot about the place their money is invested, and this is where the whole thing failed. The people who run the American financial industry have no knowledge of, or connection to, the regular ordinary people who make up middle America, like my poor client sitting waiting for an answer from me. They do not hang out with them. They do not shop where we shop. Their kids go to better schools than ours. They live in nice places like Manhattan, Washington D.C., Boston and San Francisco. They never hang out in our neighborhoods in places like Scranton, and Wilkes Barre, Pa. While they sit in expensive seats, season ticket holders, at the best sports venues, we watch at home on cable.
As a result, these financiers could never have really gauged the risk of investing in these “pooled mortgage assets” which are, in reality, normal peoples’ lives.
In 2008, this whole scam collapsed. Big lenders like Lehman Brothers failed. The government started using tax dollars to bail out banks.
So can I call and work something out?
It is more likely that aliens will land a spaceship in my yard, step onto the grass, and offer me a job as in house counsel to the galactic fleet. The divide which has been created may never be repaired.
Now how do I explain this to my young nervous client?
Eugene C. Kelley, Esquire
Kelley & Polishan, LLC
259 South Keyser Avenue
Old Forge, PA 18518
Tel: 570-562-4520
Fax: 570-562-4531
