Future Homeowner

Dear Future Homeowner or Real Estate Investor:

During the preceding decade, the US per-capita home ownership percentage reached the highest ratio ever: 67.7% of American households owned their own homes. However, just a few years later, because of the nefarious dealings of the mortgage banking industry, the US economy and housing market imploded upon itself, virtually bankrupting the entire country.  Millions upon millions of those same homeowners lost their homes along with their life-savings and, all too often, their dignity and self-respect.  All of this mess was inarguably due to the greed and gluttony of some of the world’s highest paid people leaders within the financial world…stock brokers, banking officials and the highest echelons in the mortgage-banking industry.

When it was learned late in the 1980’s and 1990’s, by the heads of the major mortgage related institutions, that they could eliminate financial risk and amass billions in personal commissions and pure company profits by creating misleading documents with only the appearance of mortgage loans, the industry and the real estate went wild.

Without a “lender’s” ever spending a dime, the new arbitrage device provided the industry with unimaginable profits throughout the free world.  The standard practice among virtually all mortgage “lenders” at the time (the banks) became a process of creating debt-obligations with prospective home buyers who were given very low “teaser” interest-rates in order to lure them into applying for a loans they otherwise couldn’t afford: then selling those same so-called “loans” for cash to secondary note buyers, even before the first payment was due.

This practice virtually eliminated any risk of loss for the originating bank, while promising the secondary buyers gigantic profits when they sold the same notes to tertiary buyers (i.e., Wall Street who needed them as security for overseas stock purchases).  This was a grand scheme…for a while…in that all the originating lender had to do was wait for the otherwise unqualified borrower to drop in, ‘make them a risk-free loan, then wait for them to default and foreclose on the property while pretending (O.J. Simpson-like) to look for the true holder in due course, and sell it again (‘thus duplicating the original scheme).

For example:  Let’s say I loan you $100 and ask that you pay me back at the rate of 18 percent interest for a year.  This would mean that at the end of that year you would have repaid (if you paid at all) a total of $110 for the $100 loan.  Now, once the paperwork for that debt-obligation was created and signed (by you), I should have no trouble finding someone else to pay me, say $104.00 for the $110 receivable (‘a $4 profit to me for having one nothing and $6 for my secondary note-buyer, with no cash outlay on my part).  That “secondary note buyer” could then collect $110 for his $104 investment if he wanted to wait for the 12 months to pass…’or, on the other hand, he/she could likewise have no trouble in bundling, say, 100 or 1,000 or 10,000 of these “$104 loans” and selling them to another note-buyer for, say, $106 each, thereby making two bucks each and giving the final note-holder a nice profit of $4 each for all those little notes (‘in reality the actual numbers with respect to the sub-prime crash would be expressed in trillions of dollars, not just “dollars”).

Given the foregoing analogy, the reality is that it didn’t take long for the foreign end-buyers of US real-estate-secured mortgages (mostly China and Japan, but many other countries and overseas investors as well) to realize that they’d been sold the lowest grade mortgages of all (“C” paper purported to be Moody’s rated “AA+” paper).   The original “loans” in fact had, for the most part, been made to unqualified buyers, and were actually, at the time of their inception, known to soon become 65% uncollectible (as discovered later in court-hearings): thus the term, “Toxic Assets.”  It is at this point that those foreign investors ceased their bulk buying of stock secured by US mortgages: thereupon clogging the system with unsold stocks and mortgages for which no one had any money to cover; thus creating the so-called “sub-prime crisis” and the bankruptcy of one gigantic mortgage company and wall street brokerage after another throughout much of the world, especially the US (e.g., AIG, Lehman Brothers, Bear Stearns, Washington Mutual, Countrywide, Indy Mac, etc.).

The result…’As fate would have it, those institutions surviving the milieu grew exponentially even larger by cannibalizing the banks that were on the verge of failure, making even more billions of dollars than before, in no small party by ruthlessly foreclosing on the billions in toxic assets tht they had created (i.e., the bad loans they had made  without any risk to themselves, and for which they had already been paid billions by secondary and tertiary investors and note-buyers); and then “repossessing” the properties: mercilessly putting homeowners onto the street by the millions, taking their homes into their own inventories…’then audaciously and unconscionably auctioning them off to the highest bidder: i.e., in effect re-selling them all for still another gigantic profit and keeping all the money (after all, due to the demise of the real estate market and plunging home values, the end-note buyers and investors were no longer secured or owed anything).

Obviously there was never any sharing of any of all the banking industry’s ill-gotten windfall with any of the people so egregiously duped, and drawn so unwittingly into to their contrivance (if not conspiracy)…’and whose lives and livelihoods had been decimated.

The good news (i.e., for you and me, the creative real estate entrepreneur)…

Despite what has been going on over the past six plus years with regard to the so-called mortgage crisis and economic downturn, the result is that there are millions of properties out there right now with loans on them, that are in the hands of people who don’t want them anymore, but who can’t afford to sell and can’t afford to keep them either.   With the various owner-carry scenarios that we teach, these property’s loan payment-streams can be legally taken over without standard credit qualifying or down payments (‘if you but know how…’and that is precisely our specialty) while disenfranchised would-be buyers are standing by, by the millions, ready to take over those payments and cover all costs of ownership for a chance to once again enjoy the benefits and privileges of home ownership.