This is Rep. Alan Grayson of Florida explaining the crisis of foreclosure fraud and how it links to the entire securitization chain of Wall Street.
What is Foreclsoure Fraud?
Foreclosure fraud is when lenders foreclose on a property without the proper legal right to do so. It can involved using fraudulent documents like falsified affidavits or forged documents. In Florida, foreclosure fraud has made use of kangaroo foreclosure courts which streamlined the foreclosure process and denied homeowners due process when their home was being seized.
The basics of the fraud are explained in Foreclosure Fraud For Dummies by Mike Konczal on Rortybomb. Mike is a former financial engineer and is a fellow at the Roosevelt Institute. There are five parts to the series.
Foreclosure Fraud For Dummies:
1: The Chains and the Stakes
2: What is a Note, and Why is it So Important?
3: Why Are Servicers So Bad At Their Job?
4: How Could This Explode into a Systemic Crisis?
5: The Necessity of Government Action and Ways Out of The Crisis
Latest Developments in Foreclosure Fraud Scandal
One interesting development is that the banks are trying to sweep the foreclosure fraud scandal under the rug by releasing press releases stating that they are already putting it behind them. The mortgage industry just wants this to be perceived as a procedural issue and not one of fraud. See this article on CNBC Is Foreclosure-Gate Over? Then read the comments to see if anybody thinks it’s over yet.
Another writer who thinks this is much ado about nothing is Paul Jackson at housingwire.com. In this article he writes “‘robo-signing’ is a procedural issue. Period.” Read A little bit of sanity, please
But Paul Jackson article is countered by Zach Carter at altnernet.org: Don’t Believe The Bank Lobby: Foreclosure Fraud Is Bad For Homeowners And The Economy
But this article in the New York Times by Gretchen Morgenson and Andrew Martin indicates that the banks’s worst problems lie ahead of them, not behind them: Battle Lines Forming in Clash Over Foreclosures
The Wall Street Journal, meanwhile, has decided to take the side of thee banks by choosing to downplay the significance of the fraud scandal. In this article Niche Lawyers Spawned Housing Fracas writer Robbie Whelen seems to blame defense lawyers for all the problems, when he writes “foreclosure defense [that] has sown confusion and turmoil in the housing market”. Telling, the word “fraud” is never used in the article. Instead euphemisms like “paperwork mess” and “technical problems” are used. But in the rest of the article, where he traces the use of depositions of robo-signers by attorneys defending clients against foreclosure, the activities of the foreclosure mills sound an awful lot like perjury and fraud to a layman.
This article on businessweek.com Mortgage Mess: Shredding the Dream, writes about Joseph Lents, an accountant who has been living in his home since 2002 without making payments because the bank lost Lents’ promissory note. The article also writes about, Lender Processing Systems (LPS) of Jacksonville, Florida which is the nation’s biggest mortgage and foreclosure outsourcing firm. LPS has been described by U.S. Representative Alan Grayson (D-Fla.) as company “who allegedly has created the means to systemize fraud.”
Finally this post on Barry Ritholtz’s blog The Big Picture has a lot of interesting links: Mortgage Madness Linkfest
No End In Sight
This foreclosure fraud scandal is not going away any time soon. Will it end with free houses for everyone? Or will the so-called deadbeats all be kicked to the curb? We’ll just have to see over the fullness of time.