Saturday, October 16, 2010

The Details of the Great Foreclosure Crisis

Here's the start of an interesting article in the NY Times that gives you gritty details on the latest round of fraud from Wall Street and the big banks:
From a Maine House, a National Foreclosure Freeze

Published: October 14, 2010

DENMARK, Me. — The house that set off the national furor over faulty foreclosures is blue-gray and weathered. The porch is piled with furniture and knickknacks awaiting the next yard sale. In the driveway is a busted pickup truck. No one who lives there is going anywhere anytime soon.

Nicolle Bradbury bought this house seven years ago for $75,000, a major step up from the trailer she had been living in with her family. But she lost her job and the $474 monthly mortgage payment became difficult, then impossible.

It should have been a routine foreclosure, with Mrs. Bradbury joining the anonymous millions quietly dispossessed since the recession began. But she was savvy enough to contact a nonprofit group, Pine Tree Legal Assistance, where for once in her 38 years, she caught a break.

Her file was pulled, more or less at random, by Thomas A. Cox, a retired lawyer who volunteers at Pine Tree. He happened to know something about foreclosures because when he worked for a bank he did them all the time. Twenty years later, he had switched sides and, he says, was trying to make amends.

Suddenly, there is a frenzy over foreclosures. Every attorney general in the country is participating in an investigation into the flawed paperwork and questionable methods behind many of them. A Senate hearing is scheduled, and federal inquiries have begun. The housing market, which runs on foreclosure sales, is in turmoil. Bank stocks fell on Thursday as analysts tried to gauge the impact on lenders’ bottom lines.
Go read the article to get a sense of this next wave of craziness that threatens to sink the banking system and then, consequently, push Main Street back under for a double dip and turn the Great Recession into The Great Depression 2.0.

From this article you can get a sense of the people whose lives have been swept up in the maelstrom the Wall Street unleashed on America with its "bright idea" of structured finance applied to homes using corrupt credit rating agencies and corrupt brokers to sign up unqualified home "owners" that the banks then did the same "quality" of paperwork on to create the bankrupt MBSs (mortgage-backed securities) and CDOs (Collateralized Debt Obligations) that imploded and swept up the whole world in a financial crash that two years later the world is trying to crawl back out of. I've bolded the key bit:
The tragedy of foreclosure is that some homeowners may be able to stay where they are if their lenders are more interested in modification than eviction. Without a job, Mrs. Bradbury is not one of them. Her family, including her 14-year-old daughter and 16-year-old son, lives on welfare and food stamps.

“A lot of people say we just want a free ride,” Mrs. Bradbury said. “That’s not it. I’ve worked since I was 14. I’m not lazy. I’m just trying to keep us together. If we lost the house, my family would have to break up.”

It has been two years since she last paid the mortgage, which surprises even her lawyers.

“Had GMAC followed the legal requirements, she would have lost her home a long time ago,” acknowledged Geoffrey S. Lewis, another lawyer handling her case.

GMAC, which began as the financing arm of General Motors, has received $17 billion from taxpayers in an effort to keep it from failing and is now majority-owned by the federal government. A spokeswoman for the lender declined to comment on Mrs. Bradbury’s case because it was still being litigated.
So taxpayer money is helping to create this mess by allowing a fraudlent, incompetent, and corrupt company like GMAC to continue in business.

And here is the insanity of how "crony capitalism" works in the US. I've bolded the key bit:
Fannie Mae and GMAC, which serviced the loan for Fannie, have now most likely spent more to dislodge Mrs. Bradbury than her house is worth. Yet for all their efforts, they are not only losing this case, but also potentially laying the groundwork for foreclosure challenges nationwide.
This may be a big waste of money, but it has uncovered crony capitalism in spades in the US. The system is rife with winks and nods that stacks the deck so that the big rich guy gets all the breaks and the little person is left to carry the load. Again, I've bolded the key bits:
Mr. Cox vowed to a colleague that he would expose GMAC’s process and its limited signing officer, Jeffrey Stephan. A lawyer in another foreclosure case had already deposed Mr. Stephan, but Mr. Cox wanted to take the questioning much further. In June, he got his chance. A few weeks later, he spelled out in a court filing what he had learned from the robo-signer:

“When Stephan says in an affidavit that he has personal knowledge of the facts stated in his affidavits, he doesn’t. When he says that he has custody and control of the loan documents, he doesn’t. When he says that he is attaching ‘a true and accurate’ copy of a note or a mortgage, he has no idea if that is so, because he does not look at the exhibits. When he makes any other statement of fact, he has no idea if it is true. When the notary says that Stephan appeared before him or her, he didn’t.”

GMAC’s reaction to the deposition was to hire two new law firms, including Mr. Aromando’s firm, among the most prominent in the state. They argued that what Mrs. Bradbury and her lawyers were doing was simply a “dodge”: she had not paid her mortgage and should be evicted.

They also said that Mr. Cox, despite working pro bono, had taken the deposition “to prejudice and influence the public” against GMAC for his own commercial benefit. They asked that the transcript be deleted from any blog that had posted it and that it be put under court seal.

In a ruling late last month, Judge Powers said that GMAC, despite its expensive legal talent and the fact that it got “a second bite of the apple” by filing amended foreclosure papers, still could not get this eviction right.

Even the amended documents did not bother to include the actual street address of the property it was trying to seize — reason enough, the judge wrote, to reject the request for immediate foreclosure without a trial.

The court’s ruling on GMAC’s “bad faith” is already being taken up by foreclosure defense lawyers around the country. Mr. Cox “did a remarkable job of proving the lenders not only rubber-stamped these loans on the front end, but they rubber-stamped them on the back end,” said Mr. Saunders of the legal aid group.
When the big shots can't be bothered to get the names right or even have a human-in-the-loop in their crony capitalism "fake" legal process, then you have a country in extremis.

What really bothers me... while Obama was supposedly "working hard" to bring health care to America (which it desperately needs), he did nothing about the corruption and the stench and the raw cruelty of the financial system in the US. So now the US faces "round two" of financial crisis and this time it may go "down for the count" unless taxpayers feel like giving billionaire Wall Street types and fat cat bankers another trillion dollars for them to pocket as "record profits" while the rest of the economy slides into black depression like the worst of the 1930s.

For other details... Here an article from The New York Observer:
"The first thing that needs to happen, I think, is to get these people out of their homes," a man wearing a bespoke blue-striped shirt, a Herm├ęs tie patterned with elephants and Ferragamo loafers said recently. "Correct! I'll explain," the veteran member of a bank restructuring and advisory team said.

Amid evidence of sham documents and widespread paperwork gaffes, if not systemic fraud that increasingly looks like it may be terrifically deep, Bank of America recently halted all foreclosure proceedings around the country. That followed similar announcements from the home-loan giants JPMorgan Chase and GMAC.

But Wall Street does not sympathize. "You had people putting zero down to get massive houses they couldn't afford to be in," he said Monday morning, "but now they want to stay.
Read the whole thing so you can enjoy the irony of the over-paid sleazebags who created the problem complain about the down-and-out who are paying for the fraudulent mortgage scams of the past decade.

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