With 2 million homes in foreclosure and another 2.3 million seriously delinquent on their mortgages - the biggest logjam of distressed properties the market has ever seen - companies involved in the foreclosure process were paid to move cases quickly through the pipeline.
Law firms competed with one another to file the largest number of foreclosures on behalf of lenders - and were rewarded for their work with bonuses. These and other companies that handled the preparation of documents were paid for volume, so they processed as many as they could en masse, leaving little time to read the paperwork and catch errors.
And the big mortgage companies overseeing it all - including government-owned Fannie Mae - were so eager to get bad loans off their books that they imposed a penalty on contractors if they moved too slowly.
The system was so automated and so inflexible that once a foreclosure process began, homeowners and consumer advocates say, there was often no way to stop it.
Which is usually what happens once a white-collar criminal racket clanks into motion: victims have no idea what is happening, and no way of organizing to push back against the goons in suits and ties.
And remember, these weren't "errors" being made because of the onslaught of delinquent mortgage borrowers: this was foreclosure as a form of graft and fraud, being perpetrated on homeowners in good standing as well.
In one case in Fort Lauderdale in July, for instance, Bank of America foreclosed on a man after a computer glitch and resold his home even though he had paid his mortgage in full.
Virtually everyone involved - loan servicers, law firms, document processing companies and others - made more money as they evicted more borrowers from their homes, creating a system that was vulnerable to error and difficult for homeowners to challenge.
Law firms were rewarded with additional bonuses from document processing companies if they met deadlines for preparing and filing foreclosures in courts. One of the nation's major processors, Lending Processing Services in Jacksonville, Fla., confirmed that it had paid such bonuses but said it no longer offers them.
To keep up with the crush of foreclosures, document processors and mortgage service firms rushed to hire anyone they could - hair stylists, Wal-Mart clerks, assembly-line workers who made blinds - and gave them key roles in their foreclosure departments without formal training, according to court papers.
A number of these employees have testified that they did not really know what a mortgage was, couldn't define "affidavit," and knew they were lying when they signed documents related to foreclosures, according to depositions of 150 employees for mortgage companies.
I'd insert a cryptic "LMAO" here were this not such a web of malcontents and other bottom-feeders in the lending and legal worlds.
As I predicted in my first post on this, the scandal itself is reaching well beyond Big Banking and Big Mortgage. Much of the illegal paperwork processing had to pass through the hands of lawyers, and now we're seeing evidence that hundreds, perhaps thousands of lawyers chose to participate in illegal and criminal conduct in order to make a quick buck in recessionary times, even if it meant putting mortgage holders in good standing out on the street. Let's hope the appropriate punishment for this is both disbarment and imprisonment.
With all 50 state attorneys general now investigating this mass pinch, a crime, if you think about it, that goes to the very American ideal of home ownership, the idea of "settlement" should be off the table. We don't settle burglary. We don't settle cases of robbery. We don't settle home invasions and violent crimes which involve, at the point of a gun, removing you from your home.
And we shouldn't entertain the idea now.