Friday, October 1, 2010

Foreclosure: The New White-Collar Crime

You knew it was only a matter of time before we found this out: Foreclosures Slow as Criminal Conduct Emerges.

The foreclosure machinery that has forced millions of Americans out of their homes is beginning to seize up as some lenders and their lawyers are accused of cutting corners in their pursuit of rapid home repossessions.

Evictions are expected to slow sharply, housing analysts said, as state and national law enforcement officials shine a light on questionable foreclosure methods revealed by two of the country’s biggest home lenders in the last two weeks.
Well, well. How about that? After two years of hearing about surging foreclosures, delinquent home owners, and people "walking away" en masse from their debt obligations (essentially blaming the individual and never the corporation), now we're discovering that the foreclosure crisis is a criminal problem, being perpetrated by criminals in the mortgage and banking industries upon unsuspecting homeowners.

It's gotten so bad that law enforcement agencies and several states attorneys general are pursuing investigations with possible criminal charges.
Apparently alarmed about such [developments], one of the major title insurance companies, Old Republic National Title, has sent a bulletin to agents saying that “until further notice” it would not insure title to properties foreclosed upon by GMAC Mortgage, the country’s fourth-largest home lender and one of the two big lenders at the center of the current controversy.

GMAC declined to comment, and Old Republic representatives did not return calls.

GMAC has acknowledged legal missteps in processing mortgages, and JPMorgan Chase has acknowledged the possibility of missteps, and both have suspended all foreclosures in the 23 states where they need a court’s approval. That’s 56,000 in the case of Chase alone; GMAC declined to provide a number.

Attorneys general in half a dozen states are demanding action or opening investigations. The Treasury Department said Thursday it was asking regulators to look into “these troubling developments.”

It seems somewhat sophomoric in hindsight to assume that the foreclosure crisis was a result of unemployment. With more than 8 million people thrown out of work since 2007, and 2.5 million homes in foreclosure during the same time frame, the logical assumption would be the 2.5 million who lost their homes were part of the unemployed.

Except now the evidence is mounting that these mortgage lending companies and other big banks were merely taking advantage of distressed homeowners (who may or may not have lost jobs) to make yet another quick buck by foreclosing, evicting, and then short-selling the properties to new owners.

The possible white-collar crimes that come to mind include fraud, collective embezzlement, price-fixing, and restraint of trade. But to return to the theme of an earlier post, I see good old fashioned street crime and confidence cons more than anything else. From my previous post:
[It] illustrates how old confidence cons such as The Big Store ("popularized in movies such The Sting"), The Pig in the Poke (bait and switch, and its attendant "letting the cat out of the bag"), The Rumanian Box (counterfeiting money), The Big Mitt (rigged poker games), and The Reload (repeatedly scamming the same victim over and over until the victim is sucked dry) all resurfaced in the investment banking and mortgage industries during the go-go 00's and directly led to the misery of today.
And it's still going on today, even from the wreckage of the previous heist. I guess we shouldn't be too surprised. Wasn't the cockroach supposed to be able to survive a nuclear holocaust?

The article suggests the upside of the immediate cessation of foreclosure will be to stabilize the real estate market, possibly leading to a recovery.

But with the mortgage and banking industries still rife with corruption and graft, I have my doubts. As I also noted, from a previous post:
I'm beginning to think Jeffrey Reiman's over-the-top analogy, comparing white collar criminals to pedophiles, is true. Look at the similarities: it's never a one-time crime; the incident for which they are caught is usually the last in a string of years of abuse; the lengths to which they try and pass themselves off as upstanding citizens, great; the deception of the victim, total. And the recidivism rate, the rate at which they will repeat the molesting (in this case, of the economy) if given the chance, staggering.

No comments: