This is a partial excerpt from my book, "The American Dream Becomes the Global Nightmare." http://tinyurl.com/4s3exmd

When the housing market began falling, I shared my plan with many people. Part of that plan was, instead of bailing out the Banksters and their accessories on Wall Street, we could have distributed that $800 billion to the investors, who actually owned the loans. In exchange, they would agree to reduce the interest rates to a manageable 5% per annum. In real estate terms, this is known as "buying down the loan."

This would have reduced the number of foreclosures because fewer people would have been hit by the increase in payments when the interest rates adjusted under the terms of the loan. The "bailout" required on each loan, which would have been minimal, would be added to the balance of the loan.

I have heard all arguments from people at the time I made that suggestion. That wouldn’t be fair to those who were more careful in their purchase or put more money down, or that they did not want to help pay for the idiots who accepted these loan ters, and who were not deserving of owning a house anyway. "Why should they be helped, since they did it the wrong way?" I was asked.

The reality is that those people, who did not want to help those who had been taken advantage of or got caught in the lenders’ predatory lending scheme, have suffered just as much, if not more, with their lost equity and, in many cases, lost jobs. Let’s take a look at an analysis of who really lost when the prices started dropping and no one wanted to “bail-out” the buyers who made bad decisions. The scenario is that two people bought identical homes in the same neighborhood at a price of $500,000.00. Buyer A, whose credit was marginal and could only get a sub-prime loan, put nothing down and had 2 mortgages; one for 80% of the price and one for the remaining 20% of the price. Buyer B, whose credit was excellent and was able to make a 20% down payment, had only one mortgage at 80% loan to value.

The chart below demonstrates that those who didn’t want to “bail out” the irresponsible homebuyers were the ones who were hurt the most. By resisting the help to those who were irresponsible, they took their own equity and threw it away without even realizing it.

                                             Buyer A                Buyer B
Purchase Price - 2006       $500,000.00          $500,000.00
Down Payment                            $0.00          $100,000.00
1st Loan                            $400,000.00          $400,000.00
Interest Rate         2.9% pmt, 6.5% actual       5.5% fixed
Monthly Payment                 $1,664.92              $2,271.16
2nd Loan                           $100,000.00                    $0.00
Interest Rate               6.5%, Interest only
Payment                                   $541.67                     None

Present Value                     $375000.00           $375000.00
Out of Pocket Loss                   Nothing          $100,000.00

The big loser is the guy who was responsible, and put down 20% and had a fixed loan. He, in most cases, was the one who was most vocal against those who had been irresponsible, and took on more than they could handle or didn’t pay attention to the terms of what he was signing. The lenders took Buyer B’s $100,000.00 down payment; while the irresponsible Buyer B only lost the place that he was living in on the lender’s investment.

No one, including the banks and the government, took the time to look at the BIG picture.

Jerry Brown Turns Back on California Home Owners

Jerry Brown has, once again, used his position in government to make himself look like a champion of the people, and once he accomplished that goal, he turned his back on them.

In June, 2008, in his position as Attorney General of California, Jerry Brown filed suit against Countrywide Home Loans and its officers alleging various acts of fraud, predatory lending and deceptive lending practices. The suit alleged (and I know it to be true) that Countrywide would pay incentives to mortgage brokers when they put borrowers into risky adjustable rate mortgages with pre-payment penalties.

Eventually, Countrywide and Bank of America (BofA acquired Countrywide) entered into a Stipulated Judgment whereby Bank of America and Countrywide would voluntarily modify mortgages on specific types of loans without all of the normal mounds of documentation that the lenders required for loan modifications.

The problem with the Judgment was that it did explicitly stated that the judgment did not provide a private right of action by the homeowner if Countrywide and Bank of America did not abide by the judgment. In essence, the only right of enforcement was left to Jerry Brown and the Attorney General's office.

I tried helping many of the people to save their homes through modifications, but Bank of America never followed the terms of the Stipulated Judgment. They demanded tons of documentation, would never provide an answer, and failed to modify the very loans that were the subject of the judgment. When I mentioned the terms of the Judgment to employees of of Bank of America, they had no idea that it even existed. They had the script that they worked from, and that was the end of it. They continued to foreclose on homes, and then resold them at below market value prices, continuing to drive prices down.

Jerry Brown never took any further action to enforce the terms of the Judgment.

Jerry Brown got the publicity he needed to start his new run for Governor of California, and now he needed to appease those who could provide campaign contributions ... the banks who had fresh TARP money.

Jerry Brown states that he is a "seasoned servant of the people of California." The truth is that he is a professional politician who loves nothing better than to spend the taxpayer's money on his pet projects and supporters. California does not need another 4 years of Jerry Brown.

Jerry Brown Rides Away Again

Once again, the illustrious Jerry Brown has grandstanded on behalf of the little people in order to get some headlines, and then turns his back on them while running for governor.

More than a year ago, as attorney general for the state of California, Mr. Brown filed a lawsuit against Countrywide Home Loans and its subsidiaries for its unlawful predatory lending practices, which was shown in great specificity in the complaint that was filed. Countrywide and Bank of America agreed to settle the lawsuit by agreeing to spend $8 billion dollars to modify those predatory loans.

Once that agreement was put into place, Mr. Brown pounded his chest and told everyone who was listening that he brought Countrywide to its knees, and that thousands of people would have their homes saved and the crash in real estate values would end. Countrywide/Bank of America announced their home retention program through which they would address all of these loans.
Fast forward one year, and we discover that foreclosures still take place, the value of property had continued to plummet, and realistic mortgage modifications are few and far between.

I have worked with many victims of these predatory loans, and my experience has been that they either say “You don’t qualify,” or they come up with a “modification” that is meaningless and unworkable. That allows the lenders to say, “Most of the modifications that are made are defaulted on again.”

Furthermore, Countrywide is a small percentage of the problem. Why didn’t Brown sue the others, such as World Savings (now, Wachovia and Wells Fargo) and Washington Mutual (now Chase)? There are dozens of others that continue to use government bailouts, while allowing the victims of these predatory loans to wallow in despair, destitution and continued unemployment.

Oh, I forgot. He needs to concentrate on another run for governor.