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Let’s Not Start Lionizing the Real Foreclosure Fraud Deadbeats – the Banks

photo: luckfotostream via Flickr

Lost in the frenzy surrounding a potential foreclosure moratorium is the fact that foreclosures just hummed along at a record clip in September, before the “troubles” began.

Foreclosure filings were reported on 347,420 U.S. properties in September, an increase of nearly 3 percent from the previous month and an increase of 1 percent from September 2009. A record total of 102,134 bank repossessions were reported in September, the first time bank repossessions have surpassed the 100,000 mark in a single month.

“Lenders foreclosed on a record number of properties in September and in the third quarter, taking a bite out of the backlog of distressed properties where the foreclosure process was delayed by foreclosure prevention efforts over the past 20 months,” said James J. Saccacio, chief executive officer of RealtyTrac. “We expect to see a dip in those bank repossessions — and possibly earlier stages of the foreclosure process — in the fourth quarter as several major lenders have halted foreclosure sales in some states while they review irregularities in foreclosure-processing documentation that has been called into question in recent weeks.”

I know that we’re being conditioned to believe that stopping foreclosures would damage the economy, but 100,000 home repossessions in a month are quite a drag in their own right. They drop property values for all the homes around them, they cost the banks in upkeep, and they disrupt the lives of the people evicted. In a normal functioning market, banks would want to avoid foreclosures, as they lose money in the long-term over modifying the loans to make them affordable and closer to market rates. But servicers want to collect fees and banks want to cover up the fraud riddled throughout the system, so we end up with the lightning round of foreclosures that we saw in September, with all the associated robo-signers and forgeries and false affidavits.  . . .

We now have evidence that this illegal process extends to Wells Fargo, one of the remaining major lenders yet to admit problems or suspend their processes:

In a sworn deposition on March 9 seen by the FT, Xee Moua, identified in court documents as a vice-president of loan documentation for Wells, said she signed as many as 500 foreclosure-related papers a day on behalf of the bank.

Ms Moua, who was deposed as part of a foreclosure lawsuit in Palm Beach County, Florida, said that the only information she verified was whether her name and title appeared correctly, according to the document.

Asked whether she checked the accuracy of the principal and interest that Wells claimed the borrower owed – a crucial step in banks’ legal actions to repossess homes – Ms Moua said: “I do not.”

Ms Moua nevertheless signed affidavits that said she had “personal knowledge of the facts regarding the sums of money which are due and owing to Wells Fargo”. The affidavits were used by the bank in foreclosure proceedings.

I want to again stress that this is downright illegal and incredibly damaging to the rule of law. The improper affidavits were the tip of the iceberg, but even if they weren’t, the chain of so-called clerical errors that would get a servicer to foreclose on a home that didn’t even have a mortgage would involve so much fraud at so many stages that it makes a mockery of the notion of private property altogether. The smug cheerleaders who want to make this about borrowers and not criminal fraud really make me sick to my stomach.

It’s actually a bit sickening to hear defaulted borrowers describing the misdeeds of banks as “mortgage fraud.” What some banks have done might well be fraud—but the fact of that fraud doesn’t erase the other fact that the borrower agreed to make payments or face the penalty of losing her home.

Actually, it does erase that fact. That’s how the law works. In the individual case that John Carney cites, the borrower claims that CitiMortgage is trying to foreclose upon her without owning the mortgage. That would mean that Citi has no legal right to evict this woman from her home, period. She didn’t force Citi to sell her mortgage to Fannie Mae, and then use the faulty MERS system to cloud the title. I don’t have the right to foreclose on the woman’s house either, but under Carney’s logic, I might as well try, since what matters is that she didn’t keep up with her payments. The fact that some bank is going around taking possession of homes they don’t own should scare the living daylights out of people, even pretend financial reporters like Carney.

By the way, these same banks knew about this criminality for years, fostered it, and ignored the consequences. Sounds a lot like those “deadbeats” Carney is so fond of castigating for knowing the risks when they signed the papers on the mortgage. Banks knew them too.

As an aside, I don’t know if Carney’s actually talked to anyone who’s fallen behind on mortgage payments in this economy, but classifying them as “deadbeats” just seriously mischaracterizes them. Almost everyone I’ve talked to with a mortgage problem either lost their job, saw their hours and salary cut, or found their home deeply underwater through the accident of buying at the wrong time. In almost all of those cases, they were simply less responsible for their situation than the bank trying to foreclose on them with false documents. And every single one of these people are willing to pay to stay in their homes – they’ve spent months or sometimes years going through the nightmare that is the loan modification process, and frequently had it chew them up and spit them out, with the banks gouging them and then forcing them to choose between a balloon payment with tacked-on fees or eviction. Whether they just got overwhelmed by the mass of troubled borrowers, fell subject to constant tweaking by the Treasury Department that disabled their efforts or screwed their customers as a matter of policy, the results were the same.

To borrow from Alan Grayson, we need to stop these illegal foreclosures, not to give so-called deadbeats a break but to protect the rule of law in this country. The banks who caused the problem are not likely to solve it: heck, they’re not even following their own self-imposed moratoria:

Two giant lenders who said they’re freezing foreclosures nationwide are conducting business as usual at the Lee County Courthouse.

JPMorgan Chase & Co. and Bank of America Corp., along with some smaller lenders, have announced that they were holding off on court-based foreclosures until they could sort out issues with them, such as whether attorneys actually read all the paperwork.

But in Lee County, court records show both of those banks have continued to get court judgments allowing the sale of mortgages on foreclosed houses at public auction.

That’s despite statements from both banks that they stopped doing that about two weeks ago.

What exactly have banks done in the past decade to earn anyone’s trust? It’s time to end this charade that acts as a lead weight on the economy.

CommunityThe Bullpen

Let’s Not Start Lionizing the Real Foreclosure Fraud Deadbeats – the Banks

Lost in the frenzy surrounding a potential foreclosure moratorium is the fact that foreclosures just hummed along at a record clip in September, before the “troubles” began.

Foreclosure filings were reported on 347,420 U.S. properties in September, an increase of nearly 3 percent from the previous month and an increase of 1 percent from September 2009. A record total of 102,134 bank repossessions were reported in September, the first time bank repossessions have surpassed the 100,000 mark in a single month.

“Lenders foreclosed on a record number of properties in September and in the third quarter, taking a bite out of the backlog of distressed properties where the foreclosure process was delayed by foreclosure prevention efforts over the past 20 months,” said James J. Saccacio, chief executive officer of RealtyTrac. “We expect to see a dip in those bank repossessions — and possibly earlier stages of the foreclosure process — in the fourth quarter as several major lenders have halted foreclosure sales in some states while they review irregularities in foreclosure-processing documentation that has been called into question in recent weeks.”

I know that we’re being conditioned to believe that stopping foreclosures would damage the economy, but 100,000 home repossessions in a month are quite a drag in their own right. They drop property values for all the homes around them, they cost the banks in upkeep, and they disrupt the lives of the people evicted. In a normal functioning market, banks would want to avoid foreclosures, as they lose money in the long-term over modifying the loans to make them affordable and closer to market rates. But servicers want to collect fees and banks want to cover up the fraud riddled throughout the system, so we end up with the lightning round of foreclosures that we saw in September, with all the associated robo-signers and forgeries and false affidavits.

We now have evidence that this illegal process extends to Wells Fargo, one of the remaining major lenders yet to admit problems or suspend their processes:

In a sworn deposition on March 9 seen by the FT, Xee Moua, identified in court documents as a vice-president of loan documentation for Wells, said she signed as many as 500 foreclosure-related papers a day on behalf of the bank.

Ms Moua, who was deposed as part of a foreclosure lawsuit in Palm Beach County, Florida, said that the only information she verified was whether her name and title appeared correctly, according to the document.

Asked whether she checked the accuracy of the principal and interest that Wells claimed the borrower owed – a crucial step in banks’ legal actions to repossess homes – Ms Moua said: “I do not.”

Ms Moua nevertheless signed affidavits that said she had “personal knowledge of the facts regarding the sums of money which are due and owing to Wells Fargo”. The affidavits were used by the bank in foreclosure proceedings.

I want to again stress that this is downright illegal and incredibly damaging to the rule of law. The improper affidavits were the tip of the iceberg, but even if they weren’t, the chain of so-called clerical errors that would get a servicer to foreclose on a home that didn’t even have a mortgage would involve so much fraud at so many stages that it makes a mockery of the notion of private property altogether. The smug cheerleaders who want to make this about borrowers and not criminal fraud really make me sick to my stomach.

It’s actually a bit sickening to hear defaulted borrowers describing the misdeeds of banks as “mortgage fraud.” What some banks have done might well be fraud—but the fact of that fraud doesn’t erase the other fact that the borrower agreed to make payments or face the penalty of losing her home.

Actually, it does erase that fact. That’s how the law works. In the individual case that John Carney cites, the borrower claims that CitiMortgage is trying to foreclose upon her without owning the mortgage. That would mean that Citi has no legal right to evict this woman from her home, period. She didn’t force Citi to sell her mortgage to Fannie Mae, and then use the faulty MERS system to cloud the title. I don’t have the right to foreclose on the woman’s house either, but under Carney’s logic, I might as well try, since what matters is that she didn’t keep up with her payments. The fact that some bank is going around taking possession of homes they don’t own should scare the living daylights out of people, even pretend financial reporters like Carney.

By the way, these same banks knew about this criminality for years, fostered it, and ignored the consequences. Sounds a lot like those “deadbeats” Carney is so fond of castigating for knowing the risks when they signed the papers on the mortgage. Banks knew them too.

As an aside, I don’t know if Carney’s actually talked to anyone who’s fallen behind on mortgage payments in this economy, but classifying them as “deadbeats” just seriously mischaracterizes them. Almost everyone I’ve talked to with a mortgage problem either lost their job, saw their hours and salary cut, or found their home deeply underwater through the accident of buying at the wrong time. In almost all of those cases, they were simply less responsible for their situation than the bank trying to foreclose on them with false documents. And every single one of these people are willing to pay to stay in their homes – they’ve spent months or sometimes years going through the nightmare that is the loan modification process, and frequently had it chew them up and spit them out, with the banks gouging them and then forcing them to choose between a balloon payment with tacked-on fees or eviction. Whether they just got overwhelmed by the mass of troubled borrowers, fell subject to constant tweaking by the Treasury Department that disabled their efforts or screwed their customers as a matter of policy, the results were the same.

To borrow from Alan Grayson, we need to stop these illegal foreclosures, not to give so-called deadbeats a break but to protect the rule of law in this country. The banks who caused the problem are not likely to solve it: heck, they’re not even following their own self-imposed moratoria:

Two giant lenders who said they’re freezing foreclosures nationwide are conducting business as usual at the Lee County Courthouse.

JPMorgan Chase & Co. and Bank of America Corp., along with some smaller lenders, have announced that they were holding off on court-based foreclosures until they could sort out issues with them, such as whether attorneys actually read all the paperwork.

But in Lee County, court records show both of those banks have continued to get court judgments allowing the sale of mortgages on foreclosed houses at public auction.

That’s despite statements from both banks that they stopped doing that about two weeks ago.

What exactly have banks done in the past decade to earn anyone’s trust? It’s time to end this charade that acts as a lead weight on the economy.

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David Dayen

David Dayen