Voices: Having a mortgage doesn’t make you safer

We are nearing the end of the eviction and foreclosure moratorium passed into law at the beginning of the COVID-19 pandemic, and things are looking more dire than ever. Nationwide, an average of one third of tenants and mortgage holders could not pay their rents or mortgages, and the legal protections extended to them are set to expire at the end of the month.

This will result in an estimated twenty-eight million people removed from their homes and dumped unceremoniously on the streets amid a worsening global pandemic. In response, an unprecedented wave of rent strikes has rocked the country, including here in Missoula. It truly looks to be a long hot summer, in every sense of the phrase.

Now, if you’re watching CNN, Fox, or MSNBC, you probably won’t hear too much about this. Our beloved corporate media has done the journalistic equivalent of sticking their fingers in their ears and shouting “LA LA LA, I’M NOT LISTENING!” in response to the growing rent strike movements in the United States. They’ve opted instead to exhaustively cover the now-debunked "Bountygate" story, drum up more conflict with China, and pointedly ignore the ongoing protests against the police murder of George Floyd in Minneapolis.

But in spite of Jake Tapper’s apparent inability to look out the window of the limousine that delivers him to work every morning, the ground is shaking underneath the pundits’ and plutocrats’ feet.

This is the fifth month in which many renters have been unable to pay rent due to COVID-related unemployment. In spite of many states’ premature lifting of shutdown restrictions, many laid-off workers will still have no job to return to or heavily reduced hours.

Homeowners might be breathing a private sigh of relief, but they would be wise not to. Like putting a smoking section on the Hindenburg, it’s just not a good idea.

In fact, “homeowner” is a somewhat misleading term; after all, what is it these people really “own”? In order to answer this question, we have to take a closer look at how mortgages work and what has happened with them.

Okay, let’s say you’re interested in a piece of property. You go to the bank and express your interest. The bank checks your credit, consults with your lawyer, draws up terms, and lends you the money to buy the house. The result is a mortgage, generally paid out over thirty years, at either a fixed or variable rate, depending upon the amount of risk the bank is taking. Now, the bank does not own the house, but because they are offering a loan to pay for the house, the property essentially becomes collateral. If an individual defaults on the mortgage, the bank takes the house. Simple, right?

Not so fast. Where is the bank getting the money to pay for the house, anyway? Are they running back to the vault to fill a duffel bag with hundred-dollar bills and priceless emeralds from Colombia? Nope. They’re creating the value with a few keystrokes. The banker punches in the amount of the mortgage on the balance sheet, and voilà, you have your mortgage!

Now you have to schlep yourself out into the cold, cruel world and fight to take money away from other people to repay the debt the bank just created for you. The bank has essentially created money out of thin air. Yes, there are issues around bank assets, leveraging, and monetary policy, but if you get a mortgage for $200,000, all that happens is that the bank just types it into the balance sheet, and you’re responsible for the debt they created. This is finance capitalism: using money to create money. Money is debt owed to the central bank, and banks use consolidated debt to create…hold onto your hats…more debt!

Since the Clinton-era repeal of the Depression-era Glass-Steagall Act, which prohibited commercial banks speculating with individual clients’ money, banks are routinely insolvent. Speculation involves high-risk investments for high-reward payouts, which don’t always work in favor of the guy placing the bet.

We saw as a result of this recklessness the kind of financial chicanery that led to the 2008–09 collapse, in the form of credit default swaps, lumping together toxic assets with safe investments like Treasury bonds so they would pass muster with the regulators, and the inflating of a real-estate bubble that, when it burst, ended with millions kicked out of their homes and onto the street because the banks made dumb decisions with other people’s money. And the bank keeps the house they were essentially speculating on anyway.

So much for “ownership”. A mortgage-holder doesn’t really “own” the house; they’re just renting it from the bank that’s servicing the mortgage with the debt the bank created that the mortgage-holder has to repay or get thrown out on his keister. But in exchange for all this, the bank will permit you to put up whatever wallpaper your heart desires.

So you own a tranche of debt to the bank. Big deal. That and a buck will get you on the bus.

We’ve established that mortgages are slippery little creations aided largely by speculation, but what does this have to do with the rent strikes? I’m glad you asked. In the wake of the pandemic and economic depression, there has been no comprehensive relief for either tenants or mortgage-holders.

Here in Montana, Gov. Bullock placed a hold on evictions and foreclosures, but if you don’t pay your rent or mortgage, the monthly payments will pile up and you’ll owe several months of either when the hold expires, plus the current month’s payment. If you’re out of a job and can’t pay the mortgage, you’re in deep trouble. And some parasitic bank will have no compunction about kicking you out of your home, even in the middle of a pandemic.

If you don’t believe me, we’ll turn to recent history. In 2008 and 2009, some 5.5 million families were foreclosed upon after banks offered usurious, dishonest mortgages. The mortgage-holders got shafted, and the criminal bankers got bailed out. These foreclosed properties were now assets the bank held, in spite of not earning them, and if they stood vacant, the bank could write them off as a loss and have the government pay them for the inconvenience of holding derelict property they just seized from the mortgage-holder. Neat, huh?

As a result, the rental market was flooded with new tenants, so the banks, along with property management companies and private equity firms, decided to really cash in on human misery. Private equity firms like Blackstone began purchasing properties and converting them into apartments, as well as purchasing the property management companies to manage the properties they just stole from mortgage-holders. Rents went up, property management companies could do no wrong, landlord-tenant laws were ignored, and neighborhoods gentrified, which has led us to our current crisis and the wave of rent strikes hitting the country as we speak.

Since banks gamble with your money, they are routinely insolvent. Thus, they depend on handouts and infusions of cash every few years from the taxpayers and the Federal Reserve, which knows that if the banks fail, so does the global financial system. Because banks are so rarely solvent, one way they maintain solvency is by seizing assets like, say, your house, laws be damned.

Steve Mnuchin, current head of the Treasury and former head of California’s OneWest bank, illegally foreclosed on tens of thousands of California homeowners in the last financial meltdown. When the heat was on OneWest, Mnuchin donated munificently to Kamala Harris’s campaign for Attorney General of California. After Harris won her election, by some strange coincidence, Mnuchin was never prosecuted for his crimes. And now, he runs the Treasury Department. I guess once you prove your sociopath cred, the sky’s really the limit.

Yeah, this guy is in charge of the Treasury now. Do you think he’ll lose sleep over letting the bank kick your family out of your house? Folks with mortgages are just as vulnerable as tenants are; the mortgage-holder’s landlord is the bank, who can swoop in and take property that never belonged to them. We need to stand in solidarity to fight both evictions and foreclosures. Your claim to ownership of a house can be rescinded at a moment’s notice for failure to pay your mortgage, just as we can be thrown out for a missed rent check. We are in the same boat, and the banks are the ones holding us both hostage.

A housing market is supposed to provide housing to people, not deprive it from people. If the bank can make money leaving a property derelict while homelessness continues to increase, there is something seriously wrong with how the housing market is run. If renters and mortgage-holders unite, we can beat the banks at their own dirty game and prevent them from cannibalizing the sliver of our country that doesn’t belong to Jeff Bezos and the Disney corporation.

Oh, I almost forgot. The Dodd-Frank Act of 2009 was enacted during former President Obama's first time, and it offered some milquetoast regulation of the banks and Wall Street. Dodd-Frank has a convenient clause stating that banks experiencing insolvency will receive direct assistance from the Federal Reserve, bypassing Congress completely. And you can see their point.

If the leeches in Congress had to go through the big 2008 con game again, explaining to the American public that they’re losing their houses and jobs while the banks get their money, then the American public would opt to “Make the Guillotines Red Again”. Especially with the current, historically unpopular occupant of the Oval Office.

Karl Marx predicted this stage in capitalism, where the capitalists would abuse the middle class exactly as they abuse the workers. The coming wave in foreclosures represents precisely this stage. The banks don’t care about you or your children or your well-being, and they will kick you out of your house in a pandemic without crying a single tear into their oak barrel-aged cognac. You are only a vehicle for further profit for them, and they will ditch you at the first sign of trouble. The only way to fight back is by uniting.

Renters and mortgage-holders are over the same barrel because of the greedy, parasitic banking class. But their grasp on power is slipping. If we unite against the powers of finance, we can win. But we need to stand together to make it happen. We need to do things like in the Depression, where throngs of people would gather in front of foreclosed property, bar the sheriff's entrance, and make it impossible to evict or foreclose. We all have phones that record video, so word will spread about these actions pretty quickly.

Support the rent strike in your area, and we can work together to beat back the bankers and keep one another safe.