Home foreclosure scandal in the USA

I have been forwarded some startling information on the USA housing scandal, which underlay the great credit crunch, from Australia. Read some details from this link. A quote with links to other background material is here:

Citizens Electoral Council of Australia

Media Release 12^th of October 2010

Craig Isherwood‚ National Secretary PO Box 376‚ COBURG‚ VIC 3058 Phone: 03 9354 0544 Fax: 03 9354 0166 Email: cec@cecaust.com.au Website: http://www.cecaust.com.au

Bank of America ‘pulls the pin’ to explode financial grenade

The decision last week by Bank of America to freeze all foreclosures on its mortgages in all 50 U.S. states amounts to “pulling the pin” on the grenade that will explode the global financial system, according to U.S. physical economist Lyndon LaRouche.

Literally trillions of dollars worth of derivatives contracts based on mortgages could be found to have no asset backing at all, which will implode the inflated financial system.

In recent weeks millions of American families who were evicted from their homes as a result of the subprime crisis have discovered that their foreclosures were probably illegal—three years after leading Democrats in the U.S. Congress allied to Barack Obama, such as Barney Frank, blocked LaRouche’s proposed Homeowners and Bank Protection Act which would have protected all those homeowners from foreclosure while the financial system was sorted out.

The present scandal relates to the fact that in all of the slicing and dicing and bundling of mortgages that underpinned the derivatives speculation in mortgage backed securities (MBSs) and collateralised debt obligations (CDOs)—on which dozens of local councils in Australia lost hundreds of millions of dollars—the legal paperwork to prove title and mortgage contracts was often skipped.

[Click here to read a detailed analysis of the crisis]

Consequently, banks have been foreclosing on homes to which they held no title! This conveniently sped-up the waves of foreclosures that made many American families homeless in the past few years. In one case, a bank officer admitted to mass-processing 10,000 foreclosure notices per month, without once checking the paperwork. Among the horror stories, a man who owned his home outright, having paid for it in cash, was foreclosed on by the bank holding incorrect paperwork.

The potential for this scandal was foreshadowed in late 2007, when a Federal Judge in Cleveland, Ohio dismissed 14 home foreclosure cases, due to the doubt that the foreclosing bank, Deutsche Bank National Trust Co., actually held title to the houses on which it was foreclosing. The judge ruled that there was no proper recording with local government officers, of the property titles, mortgage contracts, and assignment of ownership. At the time, LaRouche commented it smelled of a major problem, that there is legitimate suspicion that loans, which have not been recorded in local registries, have been sold as part of a securitised package over and over again, leading to liabilities that exceed assets by enormous amounts. Even the smell of such a situation could blow the system out, he noted at the time.

The smell is now a sickening stench, in the face of which four major banks have had no choice but to suspend foreclosures, three of them in 23 states, and in the case of the Bank of America in all 50 states.

However, due to the nature of the financial system, this foreclosure freeze will be the catalyst to bring down what is left of it—worldwide.

The trillions of dollars in bailout funds pumped into the banks by the U.S. Federal Reserve and other central banks have shored up securities that were assumed to be backed by assets, i.e. physical houses. The banks foreclosed on millions of those houses to recoup the value of those assets. The freeze will start to reveal that many of the assets claimed by the banks either aren’t real, or aren’t theirs.

In turn, the bailout funds exchanged for those assets will be proved to be worthless, which will set off a global chain-reaction meltdown.

There is only one way to fix this crisis: Lyndon LaRouche’s call for a Glass-Steagall reorganisation to support only what is real and write off what is fraudulent, combined with the Homeowners and Bank Protection Act to keep people in their homes.

Underscoring why LaRouche has called for Obama to be ousted from office under Section 4 of the 25^th Amendment to the U.S. Constitution, White House adviser David Axelrod yesterday announced Obama was pushing for foreclosures to resume as quickly as possible.

To find out how LaRouche’s plan would have prevented the current foreclosure crisis, click here for a free copy of the CEC’s feature DVD, the Homeowners & Bank Protection Bill—the only solution.

To buy a copy of What Australia Must Do to Survive the Depression, click here.