Sunday, October 17, 2010

More Details on Foreclosure Fraud

The economic collapse of 2008 was caused by Wall Street banks that fell in love with "securitization" that let them bundle debt and sell it to supposedly sophisticated investors whose eyes danced at the AAA rating stamped on these documents. But the whole system of securitization was a scam and a fraud.

But the Bush admininstration and now the Obama administration has let the miscreants off the hook. So what did these fat cat bankers do? They went back to the mill and did the same scam all over again, but not in securitizing new mortgages -- they've killed that industry and wrecked the economy because of that -- they went "back at work" creating papermills that generate foreclosure legal documents that were a scam and a fraud in their rush to unload all the bad debts racked up when they smashed the housing industry.

They did this, and no regulatory agency with oversight stepped in. This is an acid test. It proves that it wasn't just that the Bush admininstration was corrupt (it was). It isn't that suddenly corruption showed up in the Obama administration (it is equally corrupt). It demonstrates that the whole regulatory system in the US and the politicians and the whole government of the US is up to its eyeballs in corruption!

The banks have pulled the same paperwork frenzy fraud and scam again and nobody stopped them. In fact, the banks have been celebrating by giving out multi-million dollar "bonuses" for "performance" to celebrate the latest fraud and scam. Not only were bonuses at a record in 2009, they will set a new record at the end of this year. Meanwhile, the bank stocks are falling off a cliff as stockholders take it on the chin a second time, and Main Street needs to prepare itself for another round of the Great Recession (except this time it will probably be the real thing, a repeat of the 1930s Great Depression).

Here's an article in the Washington Post with some details about the current round of fraud and scam:
Millions of homes have been seized by banks during the economic crisis through a mass production system of foreclosures that was set up to prioritize one thing over everything else: speed.


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.

"The problem is when you try to fight back against this machine, well, it's a machine," said Michael Alex Wasylik, an attorney for homeowners in Dade City, Fla. "You have to be able to get your case off the mass production line and to someone who will take the time to read what they file, but in many mortgage firms that person doesn't exist."

The financial incentives show that the problems plaguing the foreclosure process extend well beyond a few, low-ranking document processors who forged documents or failed to review foreclosure files even as they signed off on them. In fact, 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.

"This was a systemic problem. It's not like a few renegade employees made mistakes," said lawyer Peter Ticktin, who defends Florida homeowners facing foreclosure. "It was industry-wide and pervasive, and everyone knew about it."
In short, the Wall Street banks used the same "hurry up and be damned with the consequences or the legality of what you are doing" approach to set everybody up for another financial meltdown!

Here is an excellent post by Barry Ritholtz on the details of the securitization fraud and now the foreclosure fraud. Here's the bit that drives me mad with fury:
The move by the United States Congress last week, to sneak by the Interstate Recognition of Notarizations Act? That was all the banking lobby. They wanted to shove down that law, so that their foreclosure mills’ forged and fraudulent documents would not be scrutinized by out-of-state judges. (The spineless cowards in the Senate carried out their master’s will by a voice vote—so that there would be no registry of who had voted for it, and therefore no accountability.)
And President Obama’s pocket veto of the measure? He had to veto it—if he’d signed it, there would have been political hell to pay, plus it would have been challenged almost immediately, and likely overturned as unconstitutional in short order. (But he didn’t have the gumption to come right out and veto it—he pocket vetoed it.)

As soon as the White House announced the pocket veto—the very next day!—Bank of America halted all foreclosures, nationwide.

Why do you think that happened? Because the banks are in trouble—again. Over the same thing as last time—the damned mortgage-backed securities!
When will Obama's government or any of his regulators finally act to axe the head of this snake and kill it. Or maybe I should say: put a stake through the heart of Wall Steet and kill these vampires for once and for all.

No comments: