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Chapter 1: The American nightmare

Ever since the passage of HUD (Housing and urban development), the federal government had been forcing big banks to make extremely risky home loans, now known as the "subprime loans". These loans were often made with zero money down, and required no background check. In the 1990s through 2007, if you were unemployed, and you filed the proper paperwork, you would probably get a house you knew you could never hold onto for more than a few years. The politicians told us that this didn't matter, that the numbers of subprime loans were minimal, they said that the United States economy was too strong and vibrant to ever correct, that the growing population, and, for us, the demand for housing would boost the economy enough for us to outgrow the national debt in the loans given to the unemployed. But they were wrong, as all politicians are at least once, and this one was a dossier. The cheap credit that Washington D.C. pumped into the housing market led to the biggest housing bubble in American history, if not in world history. The driving factor that pushed this housing bubble was the artificial demand for housing that government capital made it look like was present in the marketplace. In truth, nearly one-third of the people buying houses around the turn of the millennium had no business buying the houses that they bought. When demand goes up, prices go up, exponential growth is expected, speculation takes over, and the rest is history. The government should have known, along with the people themselves, that in a nation where the birth rate is not enough to replace the population, housing prices probably shouldn’t be marching north at any considerable rate. But, as the economy had been vibrant for nearly sixty years, and as the government and large institutions had been relatively trustworthy for those sixty years, the people (especially the middle-class people) bought into the ideas of “Buy as much house as you can!,” “Go King,” and “Go Big or Go Home.” The government, along with a complicit private sector, gladly led us over the cliff. Although I will briefly talk about the housing crisis, and will focus on our current downward spiral, if I want you to get one thing out of this book, it is the fear of large institutions and government-business collusion that Thomas Jefferson and James Madison had ingrained in themselves, and that we have recently lost, along with a sense of empowerment in a free-market economy, and a rugged sense of individualism.

The government wasn’t alone in creating this massive housing bubble; however, they were vastly aided by a banking system that was eager to make as much money as possible on a growing consumer economy version of America. Traditionally, when someone took out a mortgage, it was mandated by law that the loan owner and servicer were listed directly on the title to the house. However, there was a fee of between $40 and $100 to register a title or title change with the county clerk. When banks became mandated to make risky loans in the 1990s, they came up with what they thought was a fool-proof scheme to avoid the inevitable housing crash’s brunt: they would sell the rights to collect on the loan multiple times. However, banks did not want to be stuck paying the $50 fee for filing the charge over and over. If you do the math by assuming that the average mega-bank made about ten million home loans between the mid-1990s and the 2007 era, if they each tried to change each title twice, that would cost the bank one billion dollars just for that expense (that’s $1,000,000,000). So, to remedy the problem and start issuing loans at the fastest pace possible, the largest banks got together to create an all-encompassing body called MERS. Virtually every bank in the United States is a member of MERS. MERS is a mortgage tracking service that converts the title and mortgage to a VIN number, by which they alone can track the information on the mortgage including the identity of the owner and servicer. When a bank is part of MERS, they technically turn over all of the titles and notes they have to MERS, and, by osmosis, every single other bank in the nation. That way, they can deny showing anybody the “blue ink” copy of their original title, and sell the mortgage as stock on the market, technically voiding the entire agreement with the homebuyer. My family got a taste of this runaround when we attempted to get a re-finance in 2011.