Monday, November 1, 2010

Dude, Where's My Foreclosure?

How Big Banks and Big Mortgage Put the Economy Underwater:*

This chapter of the financial crisis is a self-inflicted wound. The major banks and their agents have for years taken shortcuts with their mortgage securitization documents — and not due to a momentary lack of attention, but as part of a systematic approach to save money and increase profits. The result can be seen in the stream of reports of colossal foreclosure mistakes: multiple banks foreclosing on the same borrower; banks trying to seize the homes of people who never had a mortgage or who had already entered into a refinancing program.

Banks are claiming that these are just accidents. But suppose that while absent-mindedly paying a bill, you wrote a check from a bank account that you had already closed. No one would have much sympathy with excuses that you were in a hurry and didn’t mean to do it, and it really was just a technicality.

Exactly. Instead, you would be prosecuted for check kiting by the local authorities and subsequently sued by all the creditors involved.

But if you're Big Mortgage, you just slough it off as "paperwork errors" and proceed to foreclosure. Even better, you hire unqualified personnel, such as out of work beauticians, ex-cons out of prison, and teenagers, to help perpetrate the fraud and foreclose on unsuspecting homeowners.

The most visible symptoms of cutting corners have come up in the foreclosure process, but the roots lie much deeper. As has been widely documented in recent weeks, to speed up foreclosures, some banks hired low-level workers, including hair stylists and teenagers, to sign or simply stamp documents like affidavits — a job known as being a “robo-signer.”
Dude, I'm like this cool thing called a robo-signer!

Doesn't that sound like the next Wii or Xbox for gamers? "Robo-Signers!"
Your mission: to foreclose on and dispossess as many unsuspecting homeowners as possible. Show them no mercy!

Cut to: innocent man being foreclosed upon: "Please, my kids need a roof over their head. I don't even have a mortgage with your company!"

Robo-Signer: "Tough luck, poor dude. You're outta here! Awesome!"
And where did the dunderheads in the mortgage and banking industries get the idea to commit this kind of document fraud? From the bottom-feeding industry of debt collection.

Banks have been under siege in recent weeks for widespread corner-cutting in the rush to process delinquent mortgages. The accusations have stirred outrage and set off investigations by attorneys general across the country, prompting several leading banks to temporarily cease foreclosures.

But lawyers who defend consumers in debt-collection cases say the banks did not invent the headless, assembly-line approach to financial paperwork. Debt buyers, they say, have been doing it for years.

“The difference is that in the case of debt buyers, the abuses are much worse,” says Richard Rubin, a consumer lawyer in Santa Fe, N.M.

“At least when it comes to mortgages, the banks have the right address, everyone agrees about the interest rate. But with debt buyers, the debt has been passed through so many hands, often over so many years, that a lot of time, these companies are pursuing the wrong person, or the charges have no lawful basis.”

The debt in these cases — typically from credit cards, auto loans, utility bills and so on — is sold by finance companies and banks in a vast secondary market, bundled in huge portfolios, for pennies on the dollar. Debt buyers often hire collectors to commence a campaign of insistent letters and regular phone calls. Or, in a tactic that is becoming increasingly popular, they sue.

In other words, they use these hack lawyers to help them launder the fraudulent documents, thus giving it both the appearance of legitimacy, and adding another layer of immunity for the debt buyer.

Analysts say that affidavit-signers at debt-buying companies appear to have little choice but to take at face value the few facts typically provided to them — often little more than basic account information on a computer screen.

That was made vividly clear during the deposition last year of Jay Mills, an employee of a subsidiary of SquareTwo Financial (then known as Collect America), a debt-buying company in Denver.

“So,” asked Dale Irwin, the plaintiff’s lawyer, using shorthand for Collect America, “if you see on the screen that the moon is made of green cheese, you trust that CACH has investigated that and has determined that in fact, the moon is made of green cheese?”

“Yes,” Mr. Mills replied.

LOL. I'm not even sure my first grader would fall for that anymore.

But apparently, if you work in debt collection and foreclosure, the most sought after employee quality is to have been lobotomized.

Which, if you think about it, is nothing new in the annals of organized crime. The gunmen and street thugs employed by the mafia were always the dumb galoots who would never ask why and carry out the hit without question. "Yessir, boss." The bigger and dumber the muscle, the better.

Nice to see Big Mortgage, Big Banking and Big Debt Collection carrying on the mafia way, although to be fair to the Mob, at least they would allow you a chance to pay on your debts first before having you whacked.


* h/t SocProf at Global Sociology for the heads up on the first article.

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