Matt Taibbi’s latest Rolling Stone story is about a Florida foreclosure court that accelerates foreclosures to the benefit of banks. In addition to the gross miscarriage of justice that Taibbi details, another interesting question is why nobody else is writing in depth about this subject.
When the housing bubble first began to collapse, there was a lot of good reporting (such as the This American Life series) that detailed that there was plenty of greed to go around. Mortgage brokers pushed qualified borrowers into risky mortgages, some buyers bought and sold homes just to cash out, and others used their home equity line of credit like an ATM. But now that the inevitable foreclosures have really started to accelerate, the general attitude is that people who didn’t pay their bills are getting what they deserved. There’s little or no discussion of the role of the banks, nor is there a recognition that the reason that mortgage paperwork is screwed up is because a lot of mortgage brokers were essentially criminals.
I’m working today and so will read Matt’s article later. But I would like to say there is some unseemly haste, as well as unseemly lots-of-other-stuff. The courts are in bed with big money? No joke!
Edited because I apparently cannot spell.
The epitaph for this country: “Mistakes Were Made.”
why does it not surprise me that the court system can work with lightning efficiency when someone wants it to.
activist right wing judges, first eminent domain and now this, they will take your home, but some how your gun is sacrosanct.
what a country….
if i worked for the onion, i would write an article about how yakov smirnoff has experienced second life as a popular comedian, by going to russia and telling hammy jokes about how totalitarian america is.
It’s just the “invisible hand” of the “free market” working at peak efficiency for the people it was designed to work for and who pay top dollar to get our politicians to pass laws to hte benefit of business interests.
The Judicial system now seems to be bought off as well now–from the Supremes on down.
It’s simple: we’re approaching that paradisaical point where it’s okay for a business to do anything that makes it money. No matter who or what gets fucked up or dies, the making of money doesn’t just justify what went on, it sanctifies it.
Given that you praise This American Life’s early work describing the mess, it seems that you unfairly overlook a couple of recent follow-up shows they did, though they haven’t targeted the banks much.
If you perpetrate fraud, you get a bonus. If you fall for fraud, you’re a sucker and a deadbeat.
To be clear, I’m not arguing that a lot of homeowners were stupid and greedy and could never afford the houses they bought, the thing is those folks are getting punished for their mistakes. But the bankers who encouraged people to lie on their loan applications, who sold loans they knew were no good as AAA bonds, deliberately ripping of American municipalities and pension funds, those folks made a fortune and kept it.
And in order to protect them, America now has to shred the land registry system and the integrity of the court system. Otherwise they’d have no choice but to put some of these crooks in jail. Apparently, that’s simply not allowed to happen at any price.
and now congress and mr hopey changey are going to legalize it all for their bankster friends.
Planet Money, which has produced much of the TAL content on the housing crisis – continues to produce a podcast twice a week – npr.org/money.
J sub D
I remember the day Countrywide Finance abducted me off the street like it was yesterday.
They locked me away in a cell that looked like a cubicle, deprived me of water, left the lights on for hours on end, threatened me with water boarding and refused to release me till I signed a mortgage agreement without having my own attorney look over the loan papers.
Y’know, banks lose a shitload of money on mortgages that go bad. They have to pay a property management company to take care of the place, they have to pay property taxes, they have to pay for routine maintenance. They have to keep the lights and water on if they want to show it.
Theses are some of the reasons that foreclosure notices almost never get delivered when the borrower is one or two months behind, but instead are used as a last resort when the bank realizes that this loan is never going to be repayed and they might as well cut their losses.
Are there paperwork screwups? Yep.
At the frequency of VA screwups? Nope.
Look, if banks can’t make up documents or simply ignore the need, and even take houses and cars that aren’t theirs, what kind of class warfare society are we?
I mean, surely the banks need that stuff and that money — what, are we going to suddenly side with the parasites?
@bkny: Not saying that anything good is going to come of this bill, because I’m sure the congresscritters will be looking out for the bankers’ interests above all else, but really it is something that has to be fixed unless you prefer to have almost every house in the country with a mortgage to have a faulty title.
@J sub D: If the bank is legitimately owned the money and has lived up to its side of the bargain, which includes filing and keeping proper paperwork, then that bank should be able to foreclose without problems. No one disputes that. If, however, the bank has not lived up to its side of the bargain, which includes filing and keeping proper paperwork, then I don’t feel sorry for the bank. The bank is in the business of lending money; it should know what the rules are and be able to follow them.
@J sub D:
who held the gun to the bank’s heads and told them to write mortgages at the rate they were doing it?
look i blame the buyer and the realtor too, but the system changed from one where banks looked at your finances, and told you you could afford it, or not, in their estimation, to one where they truly didn’t care….without giving consumers a chance to signal for a fair catch…. to some people, they didn’t think any deeper than whether or not the loan got approved…
its a shabby way to live perhaps, but banks, realtors everyone knew this, and they took advantage. i hope i never have to deal with another realtor…and get this, i paid 50% down, and now own outright…the realtor of course was appalled and tried to condescend to me, and act like i was the dumbest thing that ever lived….got my fixed, got my house, didn’t overpay, or overbuy, i am happy…shitty for being made to feel like a fool but that is the price you pay for not going along and buying a mcmansion. i would be struggling to afford it and miserable…
but no, the banks wrote every bad loan, they the realtors, etc all knew the game they were playing was on borrowed time, they did it anyway…call me conservative, but let the folks with the most visibility, who acted the most avariciously, suffer the most.
To answer your question of why it’s being ignored, I will go back again to the Bennen ‘Cult Of The Savvy’ hypothesis, ’cause I’m enjoying it.
A) This is no longer News. It’s not exciting and fresh like whether or not Obama should announce he’s not going to run for reelection because the country hates him.
B) To continue following this topic would be a tacit admission that it is important, that the way government governs is important. This is a no-no. What’s important is the power struggle and the horse race between fools who think how the government governs is important. Things like whether Obama should announce he’s not going to run for reelection because the country hates him. (Yes, I’m betting this is going to be a Very Serious Topic.)
C) …hey, wait. Is THAT why they suck up so much to obnoxious conservative liars? Because someone like McConnell or McCain UNDERSTANDS that winning the next election is more important than governing and is thus more admirable than… uh, any Democrat at all?
Uhh tell me again how the government run agencies can never be as efficient as the private sector. What rank incompetence by banks, mortgage lenders& rating agencies. If these bogus loans never got securitized by GS and JP these people would still be in their homes. In the past bank and homeowner work out compromised payments. Its in the best interest of both parties. Yet Jamie Dimon and Blankfein have been paid several hundred million for making this country weaker. One big giant scam. Masters of the universe? These people will go down in history as destroyers of western civilization. They are rapacious pigs sucking the teet dry. Quick, look, look another red and blue fight. Juan williams was fired. Lindsay Lohan is in rehab again.
J sub D
And appraisers, and GSEs, and decades of government encouraging home ownership as an unalloyed good that is the best thing for everybody.
There is incompetence, good intentions gone horribly wrong, fraud (appraisers anyone?), foolish optimism and naivete woven all through the housing bubble.
I’m all for prosecuting those who committed fraud (and there were many, lenders and borrowers alike), but making a loan that goes bad is not, in and of itself, fraud. It is bad business that rightfully carries its own penalty. Taking on a mortgage that you couldn’t meet the terms of is not, in and of itself, fraud either. It is poor personal finance that carries its own penalty as well.
IMHO, the economy cannot rebound without cleaning up the housing bubble mess first and that means foreclosures, a record number of foreclosures that the system was not prepared to deal with.
The system ain’t perfect, but no system has ever been, nor will one ever be.
i’ve been reading “bailout nation” and it’s incredible how criminal the banks were…..according to barry ritholtz it was an open secret that the mortgage departments, rather than the loan applicants, were filling out the paperwork…
the one indisputable fact…..between 2000 and 2005, the banks simply threw their lending standards away…since they were selling the paper rather than keeping the accounts on their books, all they needed was the applicant to make 90 days worth of payments without defaulting…
by the endgame, there were loans that went bad on the first payment! what kind of bank would issue a loan to someone like that?
In fact Planet Money was on This American Life just this past week and dealt with the mortgage crisis, specifically all the flipping in Florida. There was one house that sold 5 times in 4 years and tripled in value. The same guy was the agent for all 5 sales. Plus, they’ve also been dealing with toxic assets via their purchase of one and following its trail. Planet Money is also on Morning Edition, at least once every other week.
Planet Money has been go-to for all kinds of information, especially for a non-specialist like me. Aside from all the sliminess they uncover, they do it and explain it in terms anyone can follow — unlike any number of economists.
@bkny: honestly, I want to slap someone every time they say “hopey-changey”. it’s like shorthand for saying “I can’t think analytically.” we don’t elect kings, you idiot. presidents don’t get everything they want, and a 80% filibuster rate is not fucking normal.
@J sub D:
You might want to click through the link before you spout off about things that are proven false in the article that was linked to.
None, I repeat, none of these things forced banks into risky lending practices. And there is absolutely no justification for the fraud regarding the securitization process.
actually there’s plenty of coverage of foreclosuregate. but most of those sites are also critical of Obama or at least his handling of the economy, ergo [sic] they are not read by a number of the inhabitants of this blog.
one reason it is difficult to explain or get people interested in it is that it is a slow-motion trainwreck revolving around obscure legal issues that could implode the US economy or its legal system.
issue #1: there are the homeowners who are being foreclosed upon by banks–fairly or unfairly. that is really only the ground-level problem, but it has exposed–
issue #2 foreclosures being rammed through the legal system and poor or fabricated documentation to support the bank assertions. this is a mix of corporate misbehavior and sloppy legal work, which in turn leads to the real issue, namely,
issue #3: what do we [bankers] do now?
their securities may literally be worthless if the documentation was done improperly.
a stark choice is coming down the road: either the US upholds the legal system and says let the chips fall where they may, in that noteholders sue and force the bank to take back the worthless paper, or, if the banks win, somehow or other the federal government issues some kind of regulation to allow the banks to essentially opt out of the legal system. that little bill about notaries that was passed in the night a while ago was probably a test balloon for this remedy.
if the banks prevail that is for all intents and purposes the end of the legal system in this country. money will be so powerful that it can screw up and then rewrite the rules so it doesn’t matter.
This. Also. Too.
J sub D followed the same due diligence of the lenders. Make up a conclusion, then use rhetoric to justify the conclusion. Facts? No, this is a fact-free forum… Oh from the article:
The fraud being committed is not in the issuance of the mortgages (also that is also alleged), the fraud is in the title and paper trail. Banks deliberately destroyed documentation with the intention of hiding malfeasance and to gain benefits of tax exemption and superior credit ratings. That. Is. Fraud.
Borrowers are being told to default on their loan to qualify for modification. Then the borrowers are forced into foreclosure. That. Is. Fraud.
Any way you slice it, the crimes being committed by the banks far, far, outweigh the few legitimate instances where people default on their mortgage. J sub D wants to punish the mugging victim who jaywalked to escape from their assailant.
John - A Motley Moose
The “blame the borrowers” meme is taking root, because that is the only way to claim the system is not broken.
Two words: Yves Smith
Two more: Naked Capitalism
J sub D
The plural of anecdote is not data.
But you knew that, right?
The Republic of Stupidity
Because we now live in a kleptocracy…
There was an episode of the Simpsons, back in the Bush years, when the kids from Springfield go on a field trip to a neighboring, far more prosperous school… at one point Principal Skinner kicks out a window in the building and jumps out w/ his arms full of microscopes and other assorted paraphernalia, and Lisa tells him ‘That’s stealing, Principal Skinner!’
It’s in the country’s DNA… the US was founded by liars, thieves and genocidal maniacs… unlike others who have attempted similar stunts, we’ve managed to win most of our wars… until of late…
J sub D
Lemmee get this straight. A grown adult signs a loan agreement. This adult is unwilling or unable to keep up his or her end of the loan agreement. He or she gets evicted and the house goes back to the people who morally and legally own it.
Enforcing the property owner’s rights is a mugging in your morality?
We refinanced in 2006 to take advantage of lower interest rates and the mortgage broker did everything she could to make us take an ARM. I told her she was nuts, even though she was convinced we would be able to refinance when the rate went up.
We live in a small western capitol city and our 1890 house sold last September for twice what we paid for it in 2003, but only because its unique and we completely restored it.
Of course the mortgage brokerage is long gone and she now works for a local bank. I saw her in the gym last month and she is a shell of her former self, full of guilt and remorse, really. What her bosses in CA told her to do was criminal and she got sucked in because of the money she was making. We haven’t had a meltdown here because its the state capitol and jobs are pretty stable, but if this is what the top criminals were trying to make their employees do in less stable markets, its clear they should be in the clink.
Where is orange faced Mozilla, for instance. Justice in this country is a f*cking joke. Black and brown kids go to jail for having a joint and a rich white (sort of) dude trips the light fantastic for having collapsed the entire economy.
The Republic of Stupidity
@J sub D:
I think you misunderstand the issue…
When the paperwork’s all in order and the chain of title is clear, that’s the way it goes…
But from what I’ve been reading, banks have been foreclosing on houses they CAN’T prove clear ownership of… and THAT is indeed a problem…
All FIFTY state AGs? Yikes… that’s more than just a case of a few folks trying to stay in houses they should have never bought…
Yves has been screaming about this on Naked Capitalism for months. Taibbi is a follower, not a leader, on writing about this story. He may be the first mainstream national news to report on this. However, Yves has linked to a lot of local press.
J sub D
@The Republic of Stupidity:
And after suspending foreclosures and looking at the problem for a week, BofA decided (paraphrasing here) “Nope. We’ve got our ducks in a row. Full speed ahead in cutting our losses”.
Anyway, it is painfully clear that the delinquent borrower is not the title holder, but a deadbeat squatter.
P.S. I only used “deadbeat squatter” to get a rise out of you. Did it work? ;-)
Has anyone checked the eminent domain laws in their state? Because New Jersey allows for municipalities to take properties that are sitting “stagnant or unproductive” if there are title issues or problems of “diverse ownership.” It seems to me there is a compelling state interest to seize any foreclosed house that is sitting around empty. They are obviously stagnant and in a lot of cases, the banks can’t actually *find* the titles to the property because they were sliced and diced so many times. So why not seize the houses, pay the banks the much reduced value of the property, and turn around and make the houses affordable housing, probably to be occupied by the same people who were just foreclosed on?
Of course, coughing up the “just compensation” would be a problem, but at least some of it would be coming back to the municipality in the form of rent/mortgage payments and reduced need for dealing with blight and homelessness.
The Red Queenhas ruled.
Off with their heads!
@J sub D:
Taibbi: Banks aren’t taking losses because they are just servicing contracts and it is clearly in their financial interest to foreclose
J sub D: Banks always take a loss when they foreclose.
Taibbi: Look, here is this entire screwed up court system to let banks rig the game because it is in their interest to foreclose.
J sub D: That is just an anecdote. My
unsupported assertionsanalytic argument clearly trump your “evidence”.
Also, Bank of America took a week to
falsify even more documentscheck their procedures and now concludes they have made no mistakes whatsoever. I think we can all agree that BoA is a completely disinterested party whose opinion should be trusted above all others in evaluating whether or not BoA is a bunch of fraudulent crooks.
J sub D
I was simplifying to save space. I give you that banks no longer hold the loans. We can thank the federal government for that, what’s the term, oh yeah, moral hazard.
I think we can all agree that if somebody has been paying their mortgage, they aren’t getting foreclosed upon. Cue someone trotting out the exception that proves the rule.
Fannie and Freddiewe taxpayers hadn’t guaranteed all of those loans, the originator would be on the hook. But the FHA, Fannie and Freddiewe did buy all of those loans without diligently checking to see if they were a good investment. Then the FHA, Fannie and Freddiewe sold them to investment banks where they were repackaged, sliced, diced financially pureed and sold again. This time to nuns, other investment banks, pension funds, foreign governments and Granny.
Now we (no need to bring the GSEs, loan originators or the FHA into this portion at all) are paying for it. We need to foreclose on these homes because we need to get these non-performing assets off the damned books.
The whole system has been fucked up for decades. Both major parties and the people who elected them are responsible for it. None of this changes the fact that if you don’t pay your mortgage, you lose the home. None of this changes the fact that free adults and corporations have a responsibility to understand the contracts they enter into. They should not get bailed ot for their irresposibilkity. People keep looking for innocents in the housing bubble and subsequent price meltdown, they are not finding any. They are finding stupidity, greed, fraud and irresponsibility everywhere they look.
End this fiasco. Get the homes back on the market and never, ever, not in a million fucking years, put the taxpayer on the hook for guaranteeing loans again. Not for students, not for home buyers (not even GI Bill home buyers), not for nuclear plants or solar arrays, not for export firms, not for failed corporations.
The right people are never going to be in charge of lending money and guaranteeing loans if they don’t have their own money at stake.
I know, I know. Good luck with getting the feds out of the “it’s for a good cause and won’t cost any tax money” loan biz.
If the bank owns a mortgage and includes that mortgage in part in a mortgage derivative, and that derivative has been payed off either by collecting on a credit default swap or indirectly from the government, haven’t they already collected on a piece of that mortgage? Aren’t they getting paid twice for some of the same equity?
@J sub D:
Try looking at the thousands of people who bought homes with Chinese drywall. They are being foreclosed upon while the homebuilders, insurers and building materials companies are dragging their heels in court. The foreclosure process happens faster than the remediation process, so many are losing their homes for doing nothing wrong but having bought from corrupt builders and suppliers.
@J sub D:
Shorter J sub B: “Okay, you were right the first time you pointed out my error, but this time I insist that all counter-examples are moot, as they simply prove that the absolute claim that they are falsifying is, in fact, true. You, in the back, with the example of people being foreclosed upon because they followed the bank’s directions for getting a settlement, STFU!”
Which is only topped by this:
Reread the thread. You started by claiming the banks were innocents that just want their money and would never foreclose without reason. I pointed out that Taibbi had clearly showed that to be wrong. You argued he hadn’t and then you gave us a side show which ended with everyone being wrong and borrowers aren’t innocent, even though several people qualified their arguments by explicitly saying that borrowers weren’t innocent. Projection much?
I guess I am glad that we all agree that mistakes were made. Now if we could get you to acknowledge that a fraudulent or nonexistent paper trail renders the phrase “the people who morally and legally own it” without referent. See The Republic of Stupidity‘s comment above, or this from draftmama.
@J sub D:
Here you go. Bank of America forecloses on a guy who paid cash for his house.
You know, it’s weird how all of these exceptions that prove the rule are all happening in Florida. Almost like there’s some kind of pattern when we keep seeing the same stories over and over again from different people who all live in the same state.
Nah, I’m sure it’s just a coincidence. After all, anecdote =/= evidence!
Unless Lindsey Lohan or Justin Bieber get into the foreclosure business, the story will not be important enough to report.