Has there been a single case in the past five years of a homeowner who was current on his mortgage being foreclosed through fraud?
January 8, 2013
"Finding Little Evidence Of Foreclosure Fraud..."
"... Feds Give Up."
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The fraud is the banks short-circuiting the required process. This short-circuiting led to some homeowners who were current on mortgages being foreclosed upon.
You could say this was inadvertent but since they knowingly and intentionally didn't follow the required judicial process, even if a particular result was unintended it is still a form of fraud.
Of course, people who didn't pay their mortgage took advantage of this as well to delay the foreclosure.
Regardless, the banks have continually displayed egregious behavior in both their lending, securitization, and foreclosure practices.
The idea that banks would do this to the people who are paying more than they have to is a silly concept. But if you want to shift the blame for your own disastrous policies to some one else like evil bankers, then it's worth sending up a little smoke.
The lesson our leaders have learned is that class warfare works, and there is no form of it that is too ridiculous to fool a lot of people over and over.
Don't blame me, I voted for Bush, and he tried to stop it, but being an evil Republican, he was probably just faking it to help his friends or something.
Who would have thought that banks like to make money rather than lose money and foreclosing on a home is almost always a loss for the bank? Who would have thought that it would typically not be in a banks best interest to loan money to people who have no hope of paying it back (unless the Government forces them too that is).
Oh... that's right... any person capable of applying rational thought to such questions.
Forbes correctly points out banks have no financial incentive to foreclose on homeowners current on their payments. The fraud was fabricated by liberals ignorant of the process to support mortgage delinquents and perpetuate squatter activism.
This short-circuiting led to some homeowners who were current on mortgages being foreclosed upon.
So how about an example, just one little link? Local media have been inundated with foreclosure sob stories for six years now. Surely there is something out there.
The fraud is the banks short-circuiting the required process. This short-circuiting led to some homeowners who were current on mortgages being foreclosed upon.
You could say this was inadvertent but since they knowingly and intentionally didn't follow the required judicial process, even if a particular result was unintended it is still a form of fraud
You keep using that word, I don’t think it means what you think it means.
Here's a decent conceptual breakdown of the five types of foreclosure problems.
http://www.propublica.org/blog/item/primer-what-is-a-wrongful-foreclosure
Anytime a party submits a knowingly false affidavit to a court it is fraud on the court. Instead of actually verifying the amount owed and default with the records, the banks just robo-signed. It saved them money, just like MERS. But they got caught. Instead of a court issuing a $5,000 fine for contempt for each instance of a robo-signing or other form of lying to the court, the banks settled up and are giving the money to the borrowers. Maybe they should give it to the court.
Plenty of good complaints about banks, but the number of people damaged by wrongful foreclosures is minimal.
Sloopy, or even deliberately shortcutting, procedures, doesn't change the fact that most foreclosed simply are NOT PAYING what they knowingly agreed to AFTER actually taking the money.
Why would a bank want to take back a property worth less than what the current mortgage holders are on the hook for, especially if they are paying? Are they so evil they even want to rip off themselves?
Also I think that a lot of the alleged misdeeds were committed by mortgage companies which were about to go defunct after the crash, and the government essentially blackmailed the banks into taking them over while promising to recompense the banks for any losses incurred if they played along.
So, now you get a lot of headlines about the terrible "banks" that the liberals have done a lot to demonize, while avoiding the fact that the bad loans wactually were made by the more benign sounding mortgage firms connected to the Democrats' pet institutions, Faniie Mae and freddie Mac.
Sloopy, or even deliberately shortcutting, procedures, doesn't change the fact that most foreclosed simply are NOT PAYING what they knowingly agreed to AFTER actually taking the money.
So in your world reneging on a contract (not paying your mortgage) justifies committing a felony (knowingly signing legal documents where you make factual assertions that you have no knowledge of).
Are they so evil they even want to rip off themselves?
Not evil, but certainly stupid. They made loans in the first place that they should have known the borrower had no hope in paying off. How smart can they be?
The traditions for recording mortgages didn't keep up with modern mortgage securities methods, as to who owned the mortgage and the like.
Bypassing the paperwork refers to the difficulty of determining where the mortgage was, at no risk to the home dweller.
The lawsuits pretended it was somehow working to the disadvantage of the home dweller, when it wasn't.
Any time Uncle Sugar goes to shoveling out money, Freder, the scavengers are going to gather around.
The mortgage companies were doing exactly what Barney Frank and Chris Dood and their committees wanted them to do. The banks are now just stuck with trying to clean up the after the consequences.
Freder; Try again. If the borrower is paying his mortgage there is no incentive for the bank to foreclose particularly if the asset is worth less than the mortgage. It is math, not stupid.
Freder Frederson said...
Sloopy, or even deliberately shortcutting, procedures, doesn't change the fact that most foreclosed simply are NOT PAYING what they knowingly agreed to AFTER actually taking the money.
So in your world reneging on a contract (not paying your mortgage) justifies committing a felony (knowingly signing legal documents where you make factual assertions that you have no knowledge of).
My point is, and you knew this, they were not damaged in any way. For most (almost all), they did not pay their mortgage. Not only weren't most damaged, many people who've had their house foreclosed, continued to live in them for several years during the foreclosure process without paying the mortgage, taxes or insurance. Now they're going to get a nice case reward for being deadbeats.
Oops, a nice CASH reward.
mccullough said...
The fraud is the banks short-circuiting the required process. This short-circuiting led to some homeowners who were current on mortgages being foreclosed upon.
You could say this was inadvertent but since they knowingly and intentionally didn't follow the required judicial process, even if a particular result was unintended it is still a form of fraud.
Of course, people who didn't pay their mortgage took advantage of this as well to delay the foreclosure.
Regardless, the banks have continually displayed egregious behavior in both their lending, securitization, and foreclosure practices.
1/8/13 2:26 PM
Everyone one of those banks was a regulated bank the the regulators blessed the loans. Open your eyes, the problem lies elsewhere.
Only in bizzaro liberal land would a bank want to foreclose. Why would they want to foreclose on a performing loan? What is there to gain? They sell the house for more than the mortgage balance which gets them nothing since the homeowner is then due the difference. As for underwater mortgages, seriously, really? The banks want to deal with tenants and toilets? Pay HOA fees and property taxes and insurance and take a hit to their reserves? Which means then raising even more capital? The real problem is the banks aren't foreclosing fast enough and clearing the bad loans. The real problem is too many people who can pay scamming the banks. The real problem is Freddie and Fannie and the full faith and credit of the US. No one would have bought those mortgage packages but for the guarantee. No one had a gun put to their heads to borrow the money. They should be made to pay.
mccullough said...
Here's a decent conceptual breakdown of the five types of foreclosure problems.
http://www.propublica.org/blog/item/primer-what-is-a-wrongful-foreclosure
Anytime a party submits a knowingly false affidavit to a court it is fraud on the court. Instead of actually verifying the amount owed and default with the records, the banks just robo-signed. It saved them money, just like MERS. But they got caught. Instead of a court issuing a $5,000 fine for contempt for each instance of a robo-signing or other form of lying to the court, the banks settled up and are giving the money to the borrowers. Maybe they should give it to the court.
1/8/13 2:47 PM
Whats good for the goose is good for the gander, stick the borrower's as well for their false declarations of income in their mortgage application.
Robosigning ocurred when the loans were issued, not when they were forclosed upon. As rhhardin notes such action did not result in harm to the mortgagee.
The bank has every financial incentive to short-circuit the required process.
In doing so, they committed fraud on the court and ended up foreclosing on some people who were current on their mortgages even if the vast number of borrowers foreclosed upon were delinquent.
The disregarded the rule of law and are now paying for it. If they want to change foreclosure procedures, they should lobby state and federal governments to change the rules. Lobbying $$ would have been the cheapest way to go. Instead, they tried to save money on that.
Freder Frederson said...
Are they so evil they even want to rip off themselves?
Not evil, but certainly stupid. They made loans in the first place that they should have known the borrower had no hope in paying off. How smart can they be?
1/8/13 3:02 PM
Smart enough to get the loans blessed by the various banking regulators and smart enough to peddle them to Freddie and Fannie.
Marshal,
Robosigning occurred during the foreclosure process. The person who claimed to verify the bank's information didn't verify it. Instead the robot signed their signature. If they want to change the process, they are free to petition the government for redress. They didn't. They got caught and are now paying.
Has there been a single case in the past five years of a homeowner who was current on his mortgage being foreclosed through fraud?
Well, here's a case where a woman was dispossessed of her house despite having documented proof that she had paid off her mortgage in full. If someone can show me that restitution was made, that would be good. Otherwise I'm forced to conclude that the Obama adminsitration didn't look very hard.
mccullough said...
Robosigning occurred during the foreclosure process. The person who claimed to verify the bank's information didn't verify it.
In a set of transactions numbering in the millions a few ridiculous things are bound to happen. The banks should be held liable for their errors and I expect they will be. But the erroneous foreclosures are not the result of robosigning.
Robosigning has a specific meaning in the banking crisis context. It refers specifically to loan officers approving hundreds of loans a day - so many they could not possibly evaluate each one. It does not include all erroneous signings of certifications or filings.
Whoo boy! Two minutes of Google searching brought me to this web site. Plenty of examples to pick and choose from here.
Click away, all of you who imagine that the Obama administration actually cares about mortgage fraud victims.
mccullough said...
Marshal,
Robosigning occurred during the foreclosure process. The person who claimed to verify the bank's information didn't verify it. Instead the robot signed their signature. If they want to change the process, they are free to petition the government for redress. They didn't. They got caught and are now paying.
1/8/13 3:19 PM
You did read the article. So why do you harp on the non existing fraud?
You are looking for technicalities to avoid dealing with the fact that millions of people who can pay are scamming the banks and ultimately the taxpayers in addition to otherwise depressing property values and for liberals what is heresy, lowering the local property tax base.
1. "They made loans in the first place that they should have known the borrower had no hope in paying off. How smart can they be?"
Smart enough to package and sell those loans while misrepresenting their value.
2. "Plenty of good complaints about banks, but the number of people damaged by wrongful foreclosures is minimal."
Everyone who was foreclosed based on fradulently processed documents was damaged. If I have something that legitimately belongs to you, there is a legal process for your recovery. You have to follow that process. The banks didn't. The settlement let the banks off the hook for the robosigning fraud in return for a multi-billion dollar payout.
3. "The agreement ensures that more than 3.8 million borrowers whose homes were in foreclosure in 2009 and 2010 with the participating servicers will receive cash compensation in a timely manner.
Eligible borrowers are expected to receive compensation ranging from hundreds of dollars up to $125,000,depending on the type of possible servicer error."
The independent review turned into another scam at 20 hours per review at $250 per hour. So they are going to simply make payments to all foreclosed homeowners based on ... what exactly? Unsubstantiated claims not subject to review?
Are these irregularities occuring at the former mortgage companies now doing business under the banks' letterheads?
Marshal said...
mccullough said...
Robosigning occurred during the foreclosure process. The person who claimed to verify the bank's information didn't verify it.
In a set of transactions numbering in the millions a few ridiculous things are bound to happen. The banks should be held liable for their errors and I expect they will be. But the erroneous foreclosures are not the result of robosigning.
Robosigning has a specific meaning in the banking crisis context. It refers specifically to loan officers approving hundreds of loans a day - so many they could not possibly evaluate each one. It does not include all erroneous signings of certifications or filings.
I can tell you that, in NJ where I do foreclosure work for a living, this is not what it meant.
Rabel
Suffering legal damages means that you lost money somehow. If a certification or affidavit was robosigned and said that you missed 15 monthly payments, instead of the actual 12 monthly payments you actually missed, you were not damaged.
Hagar has the right idea.
If the Feds want to investigate somebody, the Friend of Angelo and Slobbering Barney are the place to start.
There is still an issue of distinguishing between cause and effect, but there is no reason to believe that the federal government is either capable or interested to provide oversight. In fact, they both enabled, facilitated, and forced the real estate crisis. In particular, Obama profited from its progress, both as a lawyer/activist and politician.
The issue appears to be MAD (mutually assured destruction). The federal government does not have the leverage, other than democratic, to deny its involvement and complicity in causing the crisis.
The important thing is that regulators were funnel billions of dollars to cronies this way.
@Tank, see my comment at 3:34. It seems to me that if one is evicted from their home despite having paperwork that showed they paid their mortgage in full then of course they have been harmed. How not?
In fact I would go farther that that. Even if sanity prevailed and the eviction never took place -- and I gather that it did -- there is a cost to the homeowner in lawyers fee and plain old stress.
It seems to me that if one is evicted from their home despite having paperwork that showed they paid their mortgage in full then of course they have been harmed. How not?
Certainly. But that only appears to have happened in a relative handful of cases, which weren't necessarily caused by robosigning in the first place.
What the review found was that virtually everybody who was a "victim" of robosigning really was behind on payments. The law was broken, yes, but the delinquent borrowers weren't harmed by it.
But that only appears to have happened in a relative handful of cases ...
One is too many by about 50. A bank president forced to make restitution out of his own pocket would be a small start.
A friend of mine, a well-off lawyer, had a significant SNAFU when his mortgage company failed to transfer him to automatic wire payments, as he requested they do. He didn't discover the problem until they had failed to take out a couple of payments, and then a tidal wave of stupidity and automatic pilot took over as the bank began to refuse to take his money, and eventually started to foreclose on him. At one point, he spoke to one of their lawyers, who acknowledged (verbally) to him that each and every point he made was accurate, and that the company had no legal basis to do what it was demanding their lawyers do, but nevertheless said he was going to go ahead anyway. My friend ultimately won, but thank heavens he was a lawyer and could defend himself.
I've heard several individual stories of banks refusing to work with people who had funds, had a job, were TRYING to get current, but they would basically refuse to take payments until the mortgage was somehow magically brought current, with massive penalty fees, even though many of the months that were late paid were only late because the bank refused to accept the payments to begin with.
So this is hardly "class warfare" to complain about the banks. Nor is the absence of actual "foreclosure fraud" a stamp of approval for the banks' actions.
Bagoh20, personal responsibility works both ways. A lot of banks made a LOT of stupid decisions in handling of mortgages, and now want to be let off the hook for their own responsibility. If a bank bought and chopped up and sold a mortgage 2 or 3 (or 10) times and now can't adequately prove that it is the owner of the mortgage, that's the bank's problem, not the owner of the property.
It is true that banks have little incentive to foreclose... except that they foreclose anyway, and before doing so rack up a great many charges that they tack on to the principal owed, far out of proportion to what is actually owed by the homeowner, in at least several cases with which I am personally familiar.
And there ARE some incentives to foreclose, even when they lose money. Doing so serves as a deterrent to others. If a bank gets a reputation for not foreclosing, that encourages others to not pay, costing the bank more in the long run. Further, individual bank managers may have incentives that are not in the long-term best interests of the bank, if the bank has poorly designed incentive pay programs. Some banks are so large, it can take some significant period of time before those making the big-picture decisions realize what's actually going on in the trenches.
This need not be an ideological issue. I have no sympathy for those who over-bought and over-financed, and want to be let out of their obligations. But I have a great deal of sympathy for those, and I know them personally, who have done what they can, met a set-back that delayed them a bit, and then did everything they could to make it right with the bank and meet their obligations, in full, only to have the bank constantly change the goal-line with burdensome bureaucracy and absurd charges.
Being certified as 15 months behind rather than 12 months behind is a financial damage equal to three monthly mortgage payments.
If you pay $1k/mo, that's $3k of damage.
Incidentally, "robo signing" most certainly DOES refer to signing documents related to the foreclosure (such as certifications to the court, under oath) without reading them. The term was popularized in a Wall Street Journal article, archived here:
http://web.archive.org/web/20110125060735/http://online.wsj.com/article/SB10001424052702304410504575560072576527604.html
The democrat party and the blind faithful who follow them with out question, really do think banks are to blame. The entire mess, according to the blind faithful, has nothing to do with corrupt politicians with bad ideas.
'bagoh20' said, "Why would a bank want to take back a property worth less than what the current mortgage holders are on the hook for, especially if they are paying?"
Perhaps the real question is, why- after cram-downs and CRA compliance audits and mortgage "modifications"- would any private lender want to make these loans in the future?
Of course, - they don't. At least, not unless the federal government will accept the downside risk. As the NYT notes, "Nearly all mortgages that banks make right now are transferred to the government, which guarantees that they will be repaid."
And even then private lenders are exiting the market.
The idea of contract "modification" sounds great when you're an underwater borrower, but the possibility of more in the future makes it tough to get a new loan (even if Uncle Sam plays patsy).
So, the Golden Goose is dead. But look at what was extracted from it!
http://dealbook.nytimes.com/2013/01/07/bank-of-america-extends-retreat-from-mortgages/
Lying to a court is not a technicality, it is fraud.
The banks didn't want to go through the trouble of petitioning the state governments to change their foreclosure procedures. Instead, they took shortcuts by committing perjury.
Also, the other type of wrongful foreclosure was the banks who agreed to participate in HAMP and then foreclosed on people while the modification process was underway. Compensation for these borrowers is warranted.
If foreclosing isn't in the bank's financial interest, why wouldn't most banks try hard to work with the customer to modify the terms of the loan, voluntarily on both sides, to make them work?
I have ZERO sympathy for most of the banks here. They made speculative, risky loans in reliance on Fannie and Freddie backing them up. They chopped up the mortgages into parcels and bundles, and sold them off wholesale. The banks that bought these bundles didn't do any real due diligence or risk analysis, and in many cases didn't take much care to do the paperwork right (paperwork is very important, legally, when it comes to land and mortgages). They and their shareholders SHOULD lose money, because they made bad decisions. Alas, they were bailed out instead, many of them.
Again, I don't support folks not paying their mortgages, avoiding their obligations, or trying to get something for nothing. But I apply that principle in BOTH DIRECTIONS here.
I spent over thirty years in the mortgage and real estate business and this conversation is so stupid that this will be my only comment.
Cheers
Chuck, you have no interest in trying to improve our understanding of this, you being an expert?
I'm all for personal responsibility all around:
1)Pay your dammed obligations whether you bought at a bad time or not. Nobody forced you to sign it. You begged for that loan. Pay or go bankrupt.
2)Banks that made bad loans and end up with bankrupt non-paying customers are just screwed. That's the business they are in, and if they can't do it right, then go broke, but don't ask un-involved taxpayers to bail you out.
3)Politicians who pushed this crap sandwich all the way until the moment it crashed should have been run out of office rather than reelected like they were overwhelmingly.
Everybody at fault at all levels from politicians to banks to deadbeats are all being rewarded for doing the wrong thing, and those of us who did none of it are being punished.
That is the opposite of personal responsibility.
The safeguard against this all is supposed to be reasonably intelligent voters informed by a vigorous unbiased press. We have neither, not to mention that I doubt many even really believe in personal responsibility unless it's painless, in which case what's the point.
All problems come back to the voters, and enough of them are suckers for the class warfare peddled by the politicians and their allies in the press to guarantee this crap will continue, albeit in a new form, every few years.
Blog advertising Blog advertising
One is too many by about 50.
I'm sorry, but that's an idiotic attitude to take. There are tens of millions of mortgages; some will be handled incorrectly by ANY system.
Maybe you suffer from the delusion that no mistakes would have been made if the process had been human-handled instead of computer-handled. You're wrong; *different* mistakes would have been made.
If foreclosing isn't in the bank's financial interest, why wouldn't most banks try hard to work with the customer to modify the terms of the loan, voluntarily on both sides, to make them work?
Because millions of greedy idiots bought homes they cannot possibly afford to stay in, that's why. The home-flipping fad always depended on there being a bigger sucker than you. When the bubble popped, these people found out the bigger sucker didn't exist.
Banks will bend over backwards to avoid foreclosing on you, especially the the housing market in the state it is in. But when a person needs their mortgage "modified" from, say, $3000 a month to $600, what's there to talk about?
Lying to a court is not a technicality, it is fraud.
The word you're grasping for is "perjury", not "fraud".
Fraud is when you obtain something you are not entitled to via deception. If you're one of the millions of deadbeat borrowers in America an a bank robosigned a document to foreclose on you, you aren't a victim of fraud. You're not a victim of anything. You're just an asshole who doesn't pay his bills. The bank broken the law, certainly, but the victim in that case wasn't you. It wasn't anybody; violating a regulation to foreclose on someone you are legally allowed to foreclose on is a victimless crime.
Now, that handful of people who DID pay their mortgages on time and got robo-foreclosed on: THOSE people were defrauded. THEY are entitled to restitution, and the people who defrauded THEM should see jail time. But the empirical evidence is that most robosigners had no such victims.
PatHMV
"But I apply that principle in BOTH DIRECTIONS here."
Actually you don't. The bank loaned the money to people who then spent it on a house or a bass boat or a new car. The bank gets a piece of paper which it sells in various pieces to investors. The investors don't have a house or a car or a bass boat, only a piece of paper. They want their money, they want the borrower to do what the borrower promised to do which is to make timely payments. Why is that such a hard concept to get to ? Why are there any "buts" at all?
Because millions of greedy idiots bought homes they cannot possibly afford to stay in, that's why.
Giving out loans to people that couldn't possibly afford to pay them back, in retrospect, was pretty dumb, eh?
Rev,
Since perjury can be punished by contempt of court, and there were millions of instances of perjury, what's the big deal about the settlement.
My only problem with the settlement is that the money should go directly to the government, except for the people who were wrongly foreclosed upon in that they were either timely or were undergoing the modification process the bank agreed to participate in.
As for the irresponsible borrowers who are getting bailed out, I suppose they have as much claim to a bailout as the TARP banks have.
Giving out loans to people that couldn't possibly afford to pay them back, in retrospect, was pretty dumb, eh?
Yes, indeed. Of course, lots of people thought it was a great idea at the time. Including Barack Obama.
But he had the best of intentions, so it's all good, eh?
I'm sorry, but that's an idiotic attitude to take. There are tens of millions of mortgages; some will be handled incorrectly by ANY system.
I design computer systems for healthcare applications. I have spent years working under the assumption that one mistake is fifty too many. There is no reason why financial systems cannot be made as robust. Hitting banks as hard in the pocket as doctors can be hit via malpractice suits is a small step in the right direction.
Let me annunciate a principle that right-thinking people should get behind. When banks wrongly foreclose on mortgages that are current -- or paid in full! -- their victims must be made whole, including full reimbursement for legal fees and for palliation of stress. Nothing less is acceptable.
According to, for example, the Missouri AG and a grand jury, the robosigning constituted forgery and making a false declaration.
This is from before the original settlement.
Jefferson City, Mo. – Attorney General Chris Koster today announced that a Boone County grand jury has handed down 136-count indictments against DOCX, LLC and its founder and former president, Lorraine Brown, for forgery and making a false declaration related to mortgage documents processed by DOCX.
“The grand jury indictment alleges that mass-produced fraudulent signatures on notarized real estate documents constitutes forgery,” Koster said. “Today’s indictment reflects our firm conviction that when you sign your name to a legal document, it matters,” Koster said."
"Forgery is a Class C felony and False Declaration is a Class B misdemeanor. If convicted on the most serious count, Brown could face up to seven years in prison for each count. DOCX could be fined up to $10,000 for each forgery conviction and $2,000 for each false declaration conviction."
Giving out loans to people that couldn't possibly afford to pay them back, in retrospect, was pretty dumb, eh?
Oh, sure, the banks were dumb as well.
But borrowing money carries an ethical burden with it. You should never, ever borrow money you can't pay back. Doing so is wrong; if you know you can't really pay it back, it is little more than outright theft.
I would summarize the situation as "thousands of idiots lending to millions of scumbags".
I design computer systems for healthcare applications.
Then you're probably encountered the expression "garbage in, garbage out". Also, "problem exists between keyboard and chair". There is no such thing as an error-free system that involves people.
I would also note that I've never yet met a software designer who paid customers out of his own pocket when they encountered bugs in his software. Although under your logic is should, I guess, be your boss who has to personally pay for your mistakes. :)
Since perjury can be punished by contempt of court, and there were millions of instances of perjury, what's the big deal about the settlement
Where did I complain about the settlement? I complained about the investigation -- and rightly so, given that it cost billions and produced nothing. It was a jobs program for politically-connected financial experts.
The only problem I have with the *settlement*, other than that it didn't happen years ago, is that most of it goes to helping people who weren't harmed and who, in fact, are largely responsible for our national economic problems in the first place: delinquent homeowners.
If they took that $8 billion and divided it up among the people who were wrongly foreclosed on, you'd hear no complaints from me.
Forbes sez:
With the $8.5 billion settlement with Bank of America, Citi and other lenders, the government abandoned the Independent Foreclosure Review and switched to a system of direct grants to foreclosed borrowers, details to come.
Settlement for what?
. . . and the wealth redistribution goes on and on and on . . .
Further irony, the longer we delayed foreclosure the longer we maintained a large "shadow inventory" that inhibited the market moving forward AND HELPING BOTH BUYERS AND SELLERS.
This was a GREAT program for lawyers and bureaucrats.
The Great Mortgage Origination Bubble was tweaked and carefully demanded by the Federal Government.
The Banks that would not play along were told their profitability was too low to keep their charters and increasing their loan loss reserves for bad loans was a tax avoidance device delaying the IRS's share of the loot in the wild system to a certain crash.
The GOP and the Dems were equally in on the jubilee of cheap money and all got their cuts.
The public's demand for a blameworthy scoundrel to go after led The Federal Government into the invention of the FRAUD found in some minor document issues and having nothing to do with the Bubble and its certain disaster.
The processing of a flood of 100%+ loans with NO mortgage insurance requirement was the only game in town from 1999 to 2008. It was intentional financial suicide.
garage mahal said...
Because millions of greedy idiots bought homes they cannot possibly afford to stay in, that's why.
Giving out loans to people that couldn't possibly afford to pay them back, in retrospect, was pretty dumb, eh?
In a heavily regulated industry like banking, what do you suppose happened to compel the banks to make such loans?
Keeping in mind that the primary concern of any bank is risk avoidance.
@Revnant, here's my favorite book. You can't make it impossible for a dimwit to screw up, but you can build in checks to make it so that a lot has to go wrong before something bad happens.
I regard your callous attitude, as expressed in your 3:54 comment and backed up by your comments since then, as being utterly unprofessional. You must work for one of my company's competitors.
If robo-signing is bad form, someone should tell Obama.
Michael... it's simple. Both parties to the loan transaction took a risk. The borrower took a risk that the value of his purchase would fall, and the lender took a risk that the borrower would fail to repay. Both are responsible for their own risks.
Many of you are attributing moral failings on behalf of the borrowers. In some cases, that is no doubt true. In others, however, borrowers assumed that they would continue to be employed, and then the economy tanked and many people lost their jobs. Not everybody who got behind on their mortgage was a speculator or a greedy SOB buying a house far beyond their means. The debt is owed in either case, I don't want the debt forgiven in either case, but there is certainly a moral difference. The greedy bastard deserves moral condemnation. The guy who could make his payments until he got laid off because of the economy deserves some measure of sympathy, I think.
As for modifying the terms of the loan, I'm just trying to pin down the group here. Some have said that it can't possibly be true that banks are trying hard to foreclose except where absolutely necessary, because the bank loses money on the foreclosure. But if that's the case, then it would likely be in the bank's financial best interest to modify the terms to prevent that (not from $3000 a month to $600, but something). But the people claiming that the banks lose money on foreclosure seem to think that option is morally outrageous, without discussing whether it's in the bank's best interests or not.
The banks really did screw up. They did a crappy job of record keeping, and didn't process the paperwork properly in a great many instances. The individual borrowers were certainly entitled to insist that the bank, in a foreclosure proceeding, PROVE that the individual owed the money to THAT BANK. It's not enough to prove that the borrower owes money to somebody, but to the specific legal entity that is trying to foreclose on him. Otherwise, that borrower would be at risk of being sued by more than one entity.
Suppose 2 different banks each thought they had bought my mortgage (and would you put it past AIG or Countrywide to sell those mortgages more than once). Isn't it appropriate, and legally required, for me to insist that they prove which one of them I actually owe money to?
For those of you saying that there's an ethical, as well as legal, obligation attached to the borrowing of money, do you not think there's is any ethical misconduct in loaning money to someone you believe is unlikely to be able to pay it off? There are many stories of banks, or at least mortgage brokers, telling borrowers to lie on applications, falsify income, or just plain encourage borrowing above their means. Are those not also ethical failings?
The root cause of all this was Fannie and Freddie's interference with the normal market. By guaranteeing a huge quantity of mortgage loans, and virtually creating a new practice of wide-spread mass selling of mortgages, they created perverse incentives for banks to take on too much risk. The lending decisions were made by banks who knew they would be selling the mortgage almost immediately. So the bank had no incentive to look that closely at the borrower's ability to pay.
And Fannie and Freddie, and the private big mortgage buyers, did essentially no due diligence in evaluating the individual loans before buying them en masse. Those were major "ethical" failings up and down the chain.
The root cause of all this was Fannie and Freddie's interference with the normal market.
An artificial manipulation of the marketplace.
There are people doing hard time for just that.
Another liberal masturbation fantasy shot down by facts. Don't expect to see it reported it the MSM ever.
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