CommunityFDL Main Blog

Foreclosure Fraud Caused By Lenders, Not Judges

photo: taberandrew via Flickr

Here’s a particularly dumb article from the Washington Post, not because of the information it conveys about foreclosure fraud, which is accurate, but because of the subtle tone that these meddling defense attorneys will ruin everything for the banks and hurt the economy in the process. From the headline – “Judges revisiting foreclosure cases may aid homeowners but clog market” – on down, the story evinces a kind of sympathy for the mortgage lenders and their shoddy, fraudulent practices in foreclosure courts, and seems to blame judges and attorneys for the economic fallout that will result.

The lenders have acknowledged that a handful of employees signing off on hundreds of thousands of files may not have read them, but they have insisted that the problem amounts to a technical issue that can be fixed easily by replacing old documents with new ones. They say that the facts proving that borrowers missed their payments are sound and that the procedural errors might delay foreclosures but won’t change the outcome.

As the situation in Florida shows, it’s unlikely to wind up so simple.

Armies of consumer attorneys and homeowners are seizing on the paperwork issues to try to protect individual homes from foreclosure and bring into question the legitimacy of the millions of foreclosures undertaken since the housing crisis began in 2007.

Nobody has bothered to look into this claim of “technical errors,” and most media reports take it at face value. Never is the possibility broached that foreclosure fraud is a cover-up for the broader fraud at the time of the writing of the mortgages, and with securitization.

Nobody put a gun to the heads of the lenders and told them to write and trade mortgages in such a way that would confuse the question of who owned the title. Nobody forced them to hire one person to oversee tens of thousands of mortgage foreclosures a month when a staff several orders of magnitude larger was needed. I cannot fathom blaming lawyers and judges who happened to figure this out. This is like writing a story with the headline “Judges revisiting murder cases may aid innocent suspects but clog traffic with more drivers.” The implications of ruling on cases can never be the concern of the legal system. Justice is blind.

The collective decisions of judges across the country could turn a foreclosure slowdown into a far larger mess if they determine that homes were wrongly seized and resold by lenders. Foreclosed homes accounted for nearly one-fourth of all residential sales in the second quarter, according to a report by RealtyTrac released last week.

That possibility already is driving away potential buyers of bank-owned properties who don’t want to get caught in legal battles between banks and borrowers. At least one company that provides title insurance, Old Republic Title, has refused to work on homes foreclosed by Ally’s GMAC mortgage unit.

No, the collective decisions of judges won’t turn this into a mess; the collective decisions of mortgage lenders to break the rules, take shortcuts, and try to bully their way through a legal process will take care of that. The title insurance companies aren’t upset because of judicial rulings, they’re upset because the lenders have created so many blighted titles that they would be exposed if they insured the home. [cont’d.]

Does this passage not blame Judge Lynn Tepper of Pasco County, Florida?

Tepper sent a chill through law firms working for lenders this spring when she threw out a request for a foreclosure and ruled that U.S. Bank perpetrated fraud by submitting backdated documents that purported to show the lender owning the loan at the time of the foreclosure.

The homeowner, Ernest E. Harpster, got his home back despite the fact that he owed $190,000 on the loan. Tepper also ruled that U.S. Bank could not refile the case.

Oh noes! A judge found forged documents! Stupid judge!

People in the mortgage lending industry have needed to go to jail for a long time. Since we don’t have much in the way of accountability left in this country, this is as good as we’re going to get. And while it may harm the overall housing market, letting Ernest Harpster stay in his home has a defined economic benefit. To say nothing of the societal benefit of teaching that nobody is above the law.

CommunityThe Bullpen

Foreclosure Fraud Caused By Lenders, Not Judges

Here’s a particularly dumb article from the Washington Post, not because of the information it conveys about foreclosure fraud, which is accurate, but because of the subtle tone that these meddling defense attorneys will ruin everything for the banks and hurt the economy in the process. From the headline – “Judges revisiting foreclosure cases may aid homeowners but clog market” – on down, the story evinces a kind of sympathy for the mortgage lenders and their shoddy, fraudulent practices in foreclosure courts, and seems to blame judges and attorneys for the economic fallout that will result.

The lenders have acknowledged that a handful of employees signing off on hundreds of thousands of files may not have read them, but they have insisted that the problem amounts to a technical issue that can be fixed easily by replacing old documents with new ones. They say that the facts proving that borrowers missed their payments are sound and that the procedural errors might delay foreclosures but won’t change the outcome.

As the situation in Florida shows, it’s unlikely to wind up so simple.

Armies of consumer attorneys and homeowners are seizing on the paperwork issues to try to protect individual homes from foreclosure and bring into question the legitimacy of the millions of foreclosures undertaken since the housing crisis began in 2007.

Nobody has bothered to look into this claim of “technical errors,” and most media reports take it at face value. Never is the possibility broached that foreclosure fraud is a cover-up for the broader fraud at the time of the writing of the mortgages, and with securitization.

Nobody put a gun to the heads of the lenders and told them to write and trade mortgages in such a way that would confuse the question of who owned the title. Nobody forced them to hire one person to oversee tens of thousands of mortgage foreclosures a month when a staff several orders of magnitude larger was needed. I cannot fathom blaming lawyers and judges who happened to figure this out. This is like writing a story with the headline “Judges revisiting murder cases may aid innocent suspects but clog traffic with more drivers.” The implications of ruling on cases can never be the concern of the legal system. Justice is blind.

The collective decisions of judges across the country could turn a foreclosure slowdown into a far larger mess if they determine that homes were wrongly seized and resold by lenders. Foreclosed homes accounted for nearly one-fourth of all residential sales in the second quarter, according to a report by RealtyTrac released last week.

That possibility already is driving away potential buyers of bank-owned properties who don’t want to get caught in legal battles between banks and borrowers. At least one company that provides title insurance, Old Republic Title, has refused to work on homes foreclosed by Ally’s GMAC mortgage unit.

No, the collective decisions of judges won’t turn this into a mess; the collective decisions of mortgage lenders to break the rules, take shortcuts, and try to bully their way through a legal process will take care of that. The title insurance companies aren’t upset because of judicial rulings, they’re upset because the lenders have created so many blighted titles that they would be exposed if they insured the home.

Does this passage not blame Judge Lynn Tepper of Pasco County, Florida?

Tepper sent a chill through law firms working for lenders this spring when she threw out a request for a foreclosure and ruled that U.S. Bank perpetrated fraud by submitting backdated documents that purported to show the lender owning the loan at the time of the foreclosure.

The homeowner, Ernest E. Harpster, got his home back despite the fact that he owed $190,000 on the loan. Tepper also ruled that U.S. Bank could not refile the case.

Oh noes! A judge found forged documents! Stupid judge!

People in the mortgage lending industry have needed to go to jail for a long time. Since we don’t have much in the way of accountability left in this country, this is as good as we’re going to get. And while it may harm the overall housing market, letting Ernest Harpster stay in his home has a defined economic benefit. To say nothing of the societal benefit of teaching that nobody is above the law.

Previous post

Junk Government: Cases to Keep an Eye on in the New SCOTUS Term

Next post

Green Campaigns to Watch: Ben Manski for Wisconsin Assembly

David Dayen

David Dayen