The Beginning Of The End
The Beginning Of The End By Michael T. Snyder - Kindle Version

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How Big Banks Can Steal Your Home From You Even If Your Mortgage Is Totally Paid Off

Foreclosure - Photo by respresDid you know that the big banks have a way to legally steal your house from you even if you don’t owe a single penny on your mortgage?  Big banks and hedge funds are buying billions of dollars worth of tax liens from local governments all over the nation, and they are ruthlessly foreclosing on homeowners when they can’t pay the absolutely ridiculous penalties and legal fees that are tacked on to the original tax bill.  As you will see below, one 76-year-old man lost his $197,000 home that he fully owned over a $134 tax bill.  A 95-year-old woman lost her $300,000 home over a $44.79 tax bill.  This is a very, very dirty way to make money, and the predatory financial institutions that are involved in this business definitely do not want to talk about it.

Of course much of the blame should also be shouldered by the local governments that are coldly selling these tax liens to these ruthless predators.  If local governments want to collect their tax bills, they should do it themselves.  They should not be auctioning off their tax liens to cold-hearted financial institutions that are very eager to commit a legal version of highway robbery.

A few days ago, the Washington Post reported on the tragic story of a 76-year-old former Marine named Bennie Coleman.  Coleman had originally purchased his home with cash, but that didn’t stop tax lien predators from stealing his home over an unpaid $134 property tax bill…

On the day Bennie Coleman lost his house, the day armed U.S. marshals came to his door and ordered him off the property, he slumped in a folding chair across the street and watched the vestiges of his 76 years hauled to the curb.

Movers carted out his easy chair, his clothes, his television. Next came the things that were closest to his heart: his Marine Corps medals and photographs of his dead wife, Martha. The duplex in Northeast Washington that Coleman bought with cash two decades earlier was emptied and shuttered. By sundown, he had nowhere to go.

All because he didn’t pay a $134 property tax bill.

So why couldn’t he pay such a small bill?

Well, as the Post explained, these big banks and hedge funds keep tacking on interest, penalties and legal fees until the tax bills are many times the size that they originally were.  When the distressed homeowners can’t come up with thousands of dollars to pay off the debts, the big banks and the hedge funds move in for the kill…

For decades, the District placed liens on properties when homeowners failed to pay their bills, then sold those liens at public auctions to mom-and-pop investors who drew a profit by charging owners interest on top of the tax debt until the money was repaid.

But under the watch of local leaders, the program has morphed into a predatory system of debt collection for well-financed, out-of-town companies that turned $500 delinquencies into $5,000 debts — then foreclosed on homes when families couldn’t pay, a Washington Post investigation found.

In particular, hedge funds have discovered that this is a great way to make huge piles of money.  The following is a short excerpt from a CNN article that was published back in May

With buyers identified only by numbers or unrelated names, the fragmented, unregulated industry is opaque. Even the market’s size is debated — $15 billion a year, according to Howard Liggett, the chief executive of Distressed Real Estate Consulting Services, or $5 billion a year, according to the National Tax Lien Association, a trade group. While returns are a closely kept secret, investors typically make between 2.5% and 10% a year, or in the low teens for larger buys.

“The hedge funds are chasing yield in this business” says Albert Friedman, a principal at Alterna Capital, an alternative investment firm in Boca Raton that buys tax liens.

Insiders estimate hedge funds now control 40% of the tax-lien market, from under 5% five years ago, with regional banks, obscure partnerships sporting names like God’s ATM LLC, and mom-and-pop investors making up the rest.

And a number of “too big to fail” banks are involved in this business as well.

In a previous article, I described exactly how this works…

1) The big Wall Street banks set up or invest in shell companies that will disguise who they really are.

2) These shell companies run around and buy up all of the tax liens that they can get their hands on.

3) Predatory levels of interest (in some states as high as 18 percent), fees and penalties rapidly pile up on these unpaid tax liens.  The affected homeowners quickly end up owing much, much more than what the original tax bills were for.

4) If the collecting firm has to hire a lawyer, then that gets charged to the homeowner as well.  The bloated legal fees for some of these lawyers can end up being the biggest expense of all.

5) If the tax liens do not get paid, the collecting firms move in to foreclose as quickly as legally possible.

According to the Huffington Post, Wall Street banks such as Bank of America and JPMorgan Chase have been gobbling up several hundred thousand tax liens from local governments.  It appears that “distressed housing markets” are being particularly targeted.

Many of these tax liens are sold in online auctions, so it is unclear if many local government officials even realize who the big money behind many of these shell companies is.

These big financial institutions may consider this to be “good business”, but the truth is that they are absolutely shattering lives in the process.  This is particularly true when it comes to older people that do not fully understand what is happening to them.  Just consider the following examples from a recent Washington Post article

A 48-year-old math teacher paid his taxes in 2007, but the tax office took his $1,400 payment and applied it to the wrong house, crediting an entirely different taxpayer.

A 58-year-old bank employee almost lost her house in 2010 because the tax office mistakenly sent bills and notices to a wooded lot across from a strip shopping center in Virginia — 12 times.

A 69-year-old hat designer was given the wrong payoff amount and ended up in court to save her property, owned by her family since 1943.

Those homeowners found out about the mistakes in time to fight. Ninety-five-year-old Daisy Dolsey, living in a nursing home and struggling with Alzheimer’s, wasn’t so lucky: She lost her $300,000 house over a $44.79 tax debt even after she paid her taxes.

Doesn’t that just sicken you?

And then the big banks and the hedge funds have the gall to wonder why people dislike them so much.

In this day and age, large financial institutions have become more cold-hearted than ever before.

Always make sure that your property taxes are fully paid, and always keep a paper record of all financial transactions involving your home.

If you do slip up and make a mistake at some point, there is a very good chance that a ruthless financial institution will try to swoop in and steal your home right out from under your nose.

The U.S. Has An Even Larger Gap Between The Rich And The Poor Than Downton Abbey Does

The U.S. Has An Even Larger Gap Between The Rich And The Poor Than Downton Abbey DoesThere are two very different Americas today.  In one, the stock market is soaring, high end homes are selling briskly, big banks and hedge funds are rolling in money as if the last financial crisis never even happened, and life is really, really good.  In the other America, good jobs are incredibly scarce, incomes are declining, and poverty is skyrocketing to levels that we have never seen before.  The gap between the wealthy and the poor in America is getting wider with each passing day.  In fact, it is my contention that the U.S. has an even larger gap between the rich and the poor than Downton Abbey does.  If you have never seen Downton Abbey, you really should.  It is one of the most extraordinary shows to appear on television in years.  It is a drama set in the UK which follows the lives of the aristocratic Crawley family and their servants throughout the early part of the 20th Century.  It can be a bit jarring to watch servants wait on their masters hand and foot and refer to them by such titles as “Lord” and “Lady”, but the truth is that in many ways there is more inequality today than there was back then.  As far as people living in the worst areas of cities such as Detroit and Cleveland are concerned, the socialites that live on Fifth Avenue in New York City or in multi-million dollar homes out in the Hamptons might as well be from another planet.  If you have lots of money, America is still a really great place to live.  If you barely have any money, America can be really cold and cruel.  Sadly, our politicians continue to pursue policies that make things even better for those working for the establishment in places such as Washington D.C. and Manhattan, and worse for all the rest of us.  This has especially been true over the course of the past four years.  If nothing is done, the gaping chasm between the rich and the poor will continue to get even worse, and in the end that will have some really severe consequences for our society.

So is the answer to raise taxes and “redistribute” more money to the poor?  Of course not.  Today, we are already paying dozens of different kinds of taxes every year and the government is handing out more money to people than ever before.  But poverty just continues to explode.

What the poor in the U.S. desperately need are good jobs, but we continue to ship millions of good jobs out of the country and Barack Obama continues to pursue policies that are killing the U.S. economy.

There is not much help on the horizon for the poor or the middle class in America, and that should be distressing for all of us.

But things in the wealthy parts of America are going absolutely wonderfully right now.  Let’s take a few moments and contrast what life is like in the two Americas right now…

In the “good America”, stocks are absolutely soaring.  In fact, the S&P 500 closed above 1,500 on Friday for the very first time in more than five years.

In the “bad America”, poverty statistics just continue to get worse.  According to a newly released report, 60 percent of all children in the city of Detroit are living in poverty.

In the “good America”, hedge funds are rolling in the profits.  The Dow just had its best January since January of 1994, and many analysts are projecting that 2013 will be a banner year for the markets.

In the “bad America”, median household income has fallen for four years in a row, and millions of families are really struggling to find a way to pay the bills each month.

In the “good America”, expensive homes are selling at a pace that we have not seen in years.  Just check out what is happening in the Hamptons.  According to the National Association of Realtors, sales of homes worth at least a million dollars were 51 percent higher in November 2012 than they were in November 2011.

In the “bad America”, there are hordes of young adults that cannot find jobs and cannot take care of themselves.  Shockingly, U.S. families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.

In the “good America”, the “too big to fail” banks are partying like it was 2005 again.  For example, revenues at Goldman Sachs increased by about 30 percent in 2012 and Goldman stock has soared by more than 40 percent over the past 12 months.

In the “bad America”, poverty is exploding and government dependence has become a way of life.  If you can believe it, the number of Americans on food stamps has grown from about 17 million in the year 2000 to more than 47 million today.

In the “good America”, those working for the establishment will do just about anything to make a buck.  For instance, Goldman Sachs made 400 million dollars driving up food prices in 2012 while hundreds of millions around the world existed on the edge of starvation.

In the “bad America”, millions of families are wondering how they will make it until next month.  If you can believe it, more than a million public school students in the United States are homeless.  This is the first time that has ever happened in our history.

In the “good America”, everyone has a good ride.  In fact, sales of luxury German-made vehicles set new all-time records in 2012.

In the “bad America”, those that have lost everything are shunned and ostracized.  In fact, many communities all over America are actually making feeding the homeless illegal.

The fact that there is poverty in America should not alarm you.  Every country in the world has poverty.  What should alarm you is how rapidly it is growing.  Even though the Obama administration tells us that we are in an “economic recovery”, things just continue to get worse.  The wealthy elitists in Washington D.C. and New York City may be doing wonderfully, but the truth is that the middle class continues to shrink and just about every poverty statistic that you can think of continues to rise.

If you are convinced that we do not have a “wealth gap” problem in the United States today, just check out the following statistics.  Most of them are from one of my previous articles entitled “The Middle Class In America Is Being Wiped Out – Here Are 60 Facts That Prove It“…

-According to the Economic Policy Institute, the wealthiest one percent of all Americans households on average have 288 times the amount of wealth that the average middle class American family does.

-In the United States today, the wealthiest one percent of all Americans have a greater net worth than the bottom 90 percent combined.

-According to Forbes, the 400 wealthiest Americans have more wealth than the bottom 150 million Americans combined.

-The six heirs of Wal-Mart founder Sam Walton have as much wealth as the bottom one-third of all Americans combined.

-At this point, the poorest 50 percent of all Americans collectively own just 2.5% of all the wealth in the United States.

-The United States now ranks 93rd in the world in income inequality.

-The average CEO now makes approximately 350 times as much as the average American worker makes.

-Today, corporate profits as a percentage of U.S. GDP are at an all-time high, but wages as a percentage of U.S. GDP are near an all-time low.

Sometimes, when the “good America” and the “bad America” collide, the results are quite humorous.

For example, a 23-year-old homeless Brazilian man and his friends recently decided to “move in” to a 7,522 square foot house down in Florida that is valued at $2.1 million.  The following is from a recent article in the Orlando Sentinel

Bank of America has filed to evict nine squatters from a $2.5-million mansion in a posh Boca Raton neighborhood.

In a filing in Palm Beach County court that names 23-year-old Andre De Palma Barbosa and eight other unknown people, the bank claims rightful ownership of the home – despite Barbosa’s attempt to stake his claim on the foreclosed waterside property by using an obscure Florida real estate law.

Barbosa has been invoking a state law called “adverse possession,” which allows someone to move into a property and claim the title – if they can stay there seven years.

A signed copy of that note is also posted in the home’s front window.

Yeah, they will be able to get him and his friends out of there eventually, but in future years I fear that the conflicts between the rich and the poor will not be so nice.

Already, a very ominous “Robin Hood mentality” is building among the poor in this country.  Many wealthy people don’t even realize that it is happening.  But someday when desperate “flash mobs” are roaming through their neighborhoods looking to do a little “creative redistribution”, then they will get it.

Our society is starting to come apart at the seams, and there is an incredible amount of tension between the rich and the poor.  This is unfortunate, but instead of calming things down many of our politicians are actually exploiting this tension.

When our economy crashes, the class warfare of today may actually turn into real war in the streets.  Desperate people do desperate things, and when people are hungry and they can’t feed their families, many of them will not be afraid to go over to the wealthy neighborhoods and take what they want.

A lot of people don’t want to see them, but dark clouds are building.  According to a recent Gallup poll, Americans are more negative about where America will be five years from now than they have ever been before.  Most people know that we are on the edge of something really bad, even if they can’t really explain it.

It is time to get ready for what is coming.  Even though the stock market is soaring right now, that could change at any moment.  All of the long-term economic and societal trends are pointing to some really bad things in the years ahead, and sticking our heads in the sand and pretending that everything is going to be okay somehow is not going to help.

So what do you think about all of this?

Do you think that the U.S. has an even larger gap between the rich and the poor than Downton Abbey does?

Please feel free to post a comment with your thoughts below…

Downton Abbey

Goldman Sachs And The Big Hedge Funds Are Pushing Leverage To Ridiculous Extremes

Goldman Sachs And The Big Hedge Funds Are Pushing Leverage To Ridiculous Extremes - Photo by bfishadow on FlickrAs stocks have risen in recent years, the big hedge funds and the “too big to fail” banks have used borrowed money to make absolutely enormous profits.  But when you use debt to potentially multiply your profits, you also create the possibility that your losses will be multiplied if the markets turn against you.  When the next stock market crash happens, and the gigantic pyramid of risk, debt and leverage on Wall Street comes tumbling down, will highly leveraged banks such as Goldman Sachs ask the federal government to bail them out?  The use of leverage is one of the greatest threats to our financial system, and yet most Americans do not even really understand what it is.  The following is a basic definition of leverage from Investopedia: “The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.”  Leverage allows firms to make much larger bets in the financial markets than they otherwise would be able to, and at this point Goldman Sachs and the big hedge funds are pushing leverage to ridiculous extremes.  When the financial markets go up and they win on those bets, they can win very big.  For example, revenues at Goldman Sachs increased by about 30 percent in 2012 and Goldman stock has soared by more than 40 percent over the past 12 months.  Those are eye-popping numbers.  But leverage is a double-edged sword.  When the markets turn, Goldman Sachs and many of these large hedge funds could be facing astronomical losses.

Sadly, it appears that Wall Street did not learn any lessons from the financial crisis of 2008.  Hedge funds have ramped up leverage to levels not seen since before the last stock market crash.  The following comes from a recent Bloomberg article entitled “Hedge-Fund Leverage Rises to Most Since 2004 in New Year“…

Hedge funds are borrowing more to buy equities just as loans by New York Stock Exchange brokers reach the highest in four years, signs of increasing confidence after professional investors trailed the market since 2008.

Leverage among managers who speculate on rising and falling shares climbed to the highest level to start any year since at least 2004, according to data compiled by Morgan Stanley. Margin debt at NYSE firms rose in November to the most since February 2008, data from NYSE Euronext show.

So why is this so important?

Well, as a recent Zero Hedge article explained, even a relatively small drop in stock prices could potentially absolutely devastate many hedge funds…

What near record leverage means is that hedge funds have absolutely zero tolerance for even the smallest drop in prices, which are priced to absolute and endless central bank-intervention perfection - sorry, fundamentals in a time when global GDP growth is declining, when Europe and Japan are in a double dip recession, when the US is expected to report its first sub 1% GDP quarter in years, when corporate revenues and EPS are declining just don’t lead to soaring stock prices.

It also means that with virtually all hedge funds in such hedge fund hotel names as AAPL (the stock held by more hedge funds – over 230 – than any other), any major drop in the price would likely lead to a wipe out of the equity tranche at the bulk of AAPL “investors”, sending them scrambling to beg for either more LP generosity, or to have their prime broker repo desk offer them even more debt. And while the former is a non-starter, the latter has so far worked, which means that most hedge funds have been masking losses with more debt, which then suffers even more losses, and so on.

By the way, Apple (AAPL) just fell to an 11-month low.  Apple stock has now declined by 26 percent since it hit a record high back in September.  That is a very bad sign for hedge funds.

But hedge funds are not the only ones flirting with disaster.  In a previous article about the derivatives bubble, I pointed out the ridiculous amount of derivatives exposure that some of these “too big to fail” banks have relative to their total assets…

According to the Comptroller of the Currency, four of the largest U.S. banks are walking a tightrope of risk, leverage and debt when it comes to derivatives.  Just check out how exposed they are…

JPMorgan Chase

Total Assets: $1,812,837,000,000 (just over 1.8 trillion dollars)

Total Exposure To Derivatives: $69,238,349,000,000 (more than 69 trillion dollars)

Citibank

Total Assets: $1,347,841,000,000 (a bit more than 1.3 trillion dollars)

Total Exposure To Derivatives: $52,150,970,000,000 (more than 52 trillion dollars)

Bank Of America

Total Assets: $1,445,093,000,000 (a bit more than 1.4 trillion dollars)

Total Exposure To Derivatives: $44,405,372,000,000 (more than 44 trillion dollars)

Goldman Sachs

Total Assets: $114,693,000,000 (a bit more than 114 billion dollars – yes, you read that correctly)

Total Exposure To Derivatives: $41,580,395,000,000 (more than 41 trillion dollars)

Take another look at those figures for Goldman Sachs.  If you do the math, Goldman Sachs has total exposure to derivatives contracts that is more than 362 times greater than their total assets.

That is utter insanity, but we haven’t had a derivatives crash yet so everyone just keeps pretending that the emperor actually has clothes on.

When the derivatives crisis happens, things in the financial markets are going to fall apart at lightning speed.  A recent article posted on goldsilverworlds.com explained what a derivatives crash may look like…

When one big bank faces some kind of trouble and fails, the banks with the largest exposure to derivates (think JP Morgan, Citygroup, Goldman Sachs) will realize that the bank on the other side of the derivatives trade (the counterparty) is no longer good for their obligation. All of a sudden the hedged position becomes a naked position. The net position becomes a gross position. The risk explodes instantaneously. Markets realize that their hedged positions are in reality not hedged anymore, and all market participants start bailing almost simultaneously. The whole banking and financial system freezes up. It might start in Asia or Europe, in which case Americans will wake up in the morning to find out that their markets are  not functioning anymore; stock markets remain closed, money at the banks become inaccessible, etc.

But for now, the party continues.  Goldman Sachs and many of the big hedge funds are making enormous piles of money.

In fact, according to the Wall Street Journal, Goldman Sachs recently gave some of their top executives 65 million dollars worth of restricted stock…

Goldman Sachs Group Inc. GS -0.76% handed insiders including Chief Executive Lloyd Blankfein and his top lieutenants a total of $65 million in restricted stock just hours before this year’s higher tax rates took effect.

The New York securities firm gave 10 of its directors and executives early vesting on 508,104 shares previously awarded as part of prior years’ compensation, according to a series of filings with the Securities and Exchange Commission late Monday.

And the bonuses that employees at Goldman receive are absolutely obscene.  A recent Daily Mail article explained that Goldman employees in the UK are expected to receive record-setting bonuses this year…

Britain’s army of bankers will re-ignite public fury over lavish pay rewards as staff at Goldman Sachs are expected to reward themselves £8.3 billion in bonuses on Wednesday.

The American investment bank, which employs 5,500 staff in the UK, will be the first to unveil its telephone number-sized rewards – an average of £250,000 a person – as part of the latest round of bonus updates.

The increase, up from £230,000 last year, comes as British families are still struggling to make ends meet five years after banks brought the economy to the brink of meltdown.

Wouldn’t you like to get a “bonus” like that?

Life is good at these firms while the markets are going up.

But what happens when the party ends?

What happens if the markets crash in 2013?

When you bet big, you either win big or you lose big.

For now, the gigantic bets that Wall Street firms are making with borrowed money are paying off very nicely.

But a day of reckoning is coming.  The next stock market crash is going to rip through Wall Street like a chainsaw and the carnage is going to be unprecedented.

Are you sure that the people holding your money will be able to make it through what is ahead?  You might want to look into it while you still can.

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