America's Housing Fraud
American Homeowners Resource Center writes to President Obama, complaining that government is not responding to millions of homeowner complaints

By American Homeowners Resource Center, 06/01/2010 (Sent via email and White House Website)http://www.ahrc.se/new/index.php/src/news/sub/article/action/ShowMedia/id/5608

Washington, District of Columbia

Dear President Obama:

Please investigate America's housing fraud.

Millions of homeowners, who have been scammed by banking, political and judicial interests, believed your message of change and voted for you. Many are now reporting that no one in your government is responding to housing fraud complaints.

With so many millions burdened with foreclosures, subject to illegal mortgage contracts and judgments especially in California, it is time for you, Mr. President to give some attention to the plight to the millions who have been scammed.

Attached is a letter we sent to the European Union Parliament.

Sincerely,

AHRC News Services Staff

From: AHRC News

Date: June 1, 2010 1:37:42 AM PDT

To: "Dr. Jerzy Buzek"

Subject: Reform of the U.S. Mortgage

Dr. Jerzy Buzek,

President of the European Parliament

Brussels, Belgium

Dear President Buzek,

All societies have their flaws and strengths. But history shows that the most powerful societies have the biggest flaws. For the last 100 years, the U.S. has been the dominant world power. Its flaws have matched the size of its power.

On June 1, 2010, you are meeting with Eric Holder, the head of the U.S. Department of Justice. As it was the fraud with sub-prime mortgages that caused the devastating financial crisis around the world over the past 2 years, we believe it is important that you engage in substantive discussions with Mr. Holder about taking action to ensure that this does not happen again.

We at the American Homeowners Resource Center have been studying and reporting on the U.S. housing market for more than 20 years. We have seen firsthand how the foundations for this marketing fraud were laid and thrust on the world. While we obviously cannot lay out the entire story here, we would like to briefly delineate some of the essential building blocks so that you can see the depth and breadth of the problem.

After World War II, when the U.S. was the only economic power in the world, and when the millions of returning G.Is needed homes, the U.S. housing industry realized that by marrying mass production techniques to the building of houses, vastly greater profits could be achieved.

As such housing tracts needed vast swathes of land and as crowded cities did not have such land, the housing industry moved away from the cities. They created the suburbs.

The housing industry quickly realized that as these suburbs did not have any recreational facilities, these had to be built in the suburbs. They also recognized that these facilities had to be built in the housing developments themselves. They then realized that some organizational structure needed to be erected to run these facilities, and thus the homeowner association concept was born.

These private governments would run all the common areas of the development, including the recreational facilities. Coupled with the desire to keep out "undesirables", these private governments were given unprecedented powers to govern every aspect of the development, including such things as what flowers to plant, and whether a family could have a basketball hoop on their garage.

Four groups saw great potential in these developments for themselves.

1.    The first were local governments. As these homeowner associations maintained their own streets, lighting etc., there was an increased tax base and simultaneously less drain on the use of taxes. As a result, gradually, many municipalities mandated that all new housing developments contain homeowner associations.

2.    The second were the lawyers. As homeowner associations were corporations and as corporations under U.S. laws require representation by a lawyer, these lawyers saw a rich gold mine for themselves. In addition, they saw a golden opportunity for further wealth by enforcing the homeowner association regulations, and generously fining homeowners who breached them. For example, they used the threat of nonjudicial foreclosure to extort thousands of dollars from homeowners who may have missed an association dues payment for as little as $5.

3.    The third group were the state politicians. The politicians now saw an additional source of "revenue" for themselves in the form of the "campaign contribution" (aka bribes) from the homeowner association lawyers, who asked them to pass laws mandating such things as nonjudicial foreclosure.

4.    The fourth group were the judges. Almost uniformly, judges have ruled in favor of homeowner associations against homeowners. One of the reasons for this is that judges have a financial interest in the "success" of homeowner associations. There are an estimated 60 million Americans living in homeowner associations. The taxes and tax savings generated by them provide the base for higher judicial salaries. Furthermore, in some states such as California, a percentage of all fines etc. levied by a court go into a fund to build new court houses.

You may ask "This is interesting history, but what does it mean to me and the rest of the world?"

The answer in brief form is simple. The above is the infrastructure which made the housing scam possible. The majority of sub-prime mortgages were for homes in homeowner associations. Banks, in an incestuous relationship with the above entities, created toxic loans for homes where citizens would be deprived of their constitutional rights, and which the banks knew would ultimately create a financial crisis. [HOT: It was the large and vertically-integrated volume homebuilders that taught banks and mortgage companies the art of predatory lending. See below.]

And what a crisis it has been for the ordinary citizen! In 2009 alone, there were almost 4 million foreclosure filings on American homes - the worst since the Great Depression of 1933. There have been more than 11 million foreclosure filings since 2005. Some states have seen an increase in foreclosure filings for 2009 alone above the 1000% percentile level - e.g. South Dakota 3,087%, Maine 1011%. With over 7.2 million jobs lost since 2007, this is not surprising.

For Europe and the world, the result has been catastrophic for countless millions of people. As you well know, it was these sub-prime mortgages that the gnomes of Wall Street packaged into worthless securities and sold to the world.

We realize that you may have many things to discuss with Mr. Holder. But if future scams are not to be foisted on the world, the U.S. has to reform those structures within it which make such scams possible. As a start, you might want to suggest to him that he form a commission made up of homeowners to investigate the entire situation dealing with homeowner associations. Many homeowners in the U.S. have lost hundreds of thousands of dollars because of the scams perpetrated on them. Millions around the world have lost billions because of this scam.

Mr. Holder heads the Department of Justice. He should be held to do justice. As always, injustice causes untold pain and suffering. We all gain by following the requirements of justice.

We would appreciate your using your good efforts in this regard, and would appreciate your response.

Attached are Letters to Eric Holder that were not acted on.

Sincerely,

AHRC Staff

Attachment 1: Letter to Eric Holder from AHRC News Services: Request For Criminal Investigation for Violation of the Implied Right of Honest Services By California Judges - Judicial corruption is driving the current economic crisis and making Americans homeless -February 10, 2009

Attachment 2: Letter to Eric Holder: from Rep. Kaptur to the U.S. Department of Justice demanding an investigation of Goldman Sachs - April 29, 2010

Attachment 3: Ex-lawyer jailed 14 months, but not charged with a crime- Richard Fine was a U.S. Federal Prosecutor and worked in the U.S. Department like Eric Holder. He has been the Honorary Consul General for Norway since 1995.

Related Links:

• Example: Lawsuit charges KB Home of national price-inflation scheme to defraud consumers
• CtW Investment Group sent letters to the boards of directors of 11 big homebuilders in 2007 warning about improperly using their vertically integrated entities like Ponzi schemes. Their continued actions put these builders at the center of the global financial collapse.
• From "Texas Homebuilding and the Global Collapse":

Vertically-integrated Building Conglomerates and their Associates

The “vertical integration” of homebuilding and finance is a serious conflict of interest made worse when owned by the same corporation. Texas has more than its fair share of such companies. In our informal survey of large out-of-state volume homebuilders operating in Texas, we found that ALL of them owned their own finance companies. But the builder influence doesn’t stop there. It also includes subcontractors, material suppliers, home inspectors, realtors and politicians.

Using favored real estate appraisers, the large volume builders have been known to artificially inflate appraised home values as a way of selling more homes. And with home inspectors beholden to them for repeat business, they often overlooked and intentionally concealed serious construction defects and building code violations. The result was a mixture of substandard homes and subprime loans.

OUT-OF-STATE VOLUME BUILDERS OPERATING IN TEXAS
HOMEBUILDER	HQ LOCATION	BUILDER-OWNED MORTGAGE COMPANIES
Beazer Homes	Atlanta	Beazer Mortgage
Capital Pacific Homes	Newport Beach, CA	Capital Pacific Mortgage
Drees  Homes	Kentucky	First Equity Mortgage
KB Home	Los Angeles	KB Home Mortgage
Lennar Homes	Miami	Universal American Mortgage Company (UAMC) is part of Lennar Financial Services and specializes in supporting the financing needs of Lennar homebuyers. UAMC also operates as Universal American Mortgage Company of California.
Mercedes & Newmark Homes	Florida	Parent, TOUSA Inc. filed bankruptcy (1/29/09)
Pulte Homes	Bloomfield Hills, MI	Pulte Mortgage
Ryland Homes	Calabasas, CA	Ryland Mortgage
Standard Pacific Homes	Irvine, CA	Standard Pacific Mortgage
Toll Brothers	Horsham, PA	TBI Mortgage