Mortgage Fraud

Today's post is not about options. I am so upset by what has been going on in the mortgage foreclosure scene that I thought I'd share some information for readers who have not been following the news.

I've taken the time to write to a financial reporter and to my Congresswoman in an attempt to get something done.  It's probably futile because action requires that Congress have the balls to stand up to the banks.  Yes, those very same banks we, the taxpayers, saved from bankruptcy and allowed to remain in business. 

Barry Ritholtz quotes Matt Taibbi and continues his barrage of blog posts against what is being done to the American homeowner. [Yes, some who are behind on their mortgages truly deserve what they get for buying more house than they could afford.  But those represent a small minority of people who are suffering incredible harm by the unethical, illegal foreclosure process]

Taibbi's article appears in the Nov 11, 2010 issue of Rolling Stone and bears this delicious title:

Courts Helping Banks Screw Over Homeowners

“The foreclosure lawyers down in Jacksonville had warned me, but I was skeptical. They told me the state of Florida had created a special super-high-speed housing court with a specific mandate to rubber-stamp the legally dicey foreclosures by corporate mortgage pushers like Deutsche Bank and JP Morgan Chase. This “rocket docket,” as it is called in town, is presided over by retired judges who seem to have no clue about the insanely complex financial instruments they are ruling on — securitized mortgages and labyrinthine derivative deals of a type that didn’t even exist when most of them were active members of the bench. Their stated mission isn’t to decide right and wrong, but to clear cases and blast human beings out of their homes with ultimate velocity. They certainly have no incentive to penetrate the profound criminal mysteries of the great American mortgage bubble of the 2000s, perhaps the most complex Ponzi scheme in human history — an epic mountain range of corporate fraud in which Wall Street megabanks conspired first to collect huge numbers of subprime mortgages, then to unload them on unsuspecting third parties like pensions, trade unions and insurance companies (and, ultimately, you and me, as taxpayers) in the guise of AAA-rated investments. Selling lead as gold, shit as Chanel No. 5, was the essence of the booming international fraud scheme that created most all of these now-failing home mortgages.

The rocket docket wasn’t created to investigate any of that. It exists to launder the crime and bury the evidence by speeding thousands of fraudulent and predatory loans to the ends of their life cycles, so that the houses attached to them can be sold again with clean paperwork. The judges, in fact, openly admit that their primary mission is not justice but speed. One Jacksonville judge, the Honorable A.C. Soud, even told a local newspaper that his goal is to resolve 25 cases per hour. Given the way the system is rigged, that means His Honor could well be throwing one ass on the street every 2.4 minutes.”

Taibbi, and Ritholtz (in prior posts) mince no words.  They believe, as do I, that the big banks committed outright fraud and have so far, escaped by being rewarded with hundreds of billions in bailout money and zero punishment for serious crimes.  To me, jail is too good for the entire board of directors at each of these banks.

The fact that these acts are being performed in broad daylight, with no attempt at secrecy, tells us that the banks feels so secure in their outright ownership of Congress that they can get away with anything. First they go belly-up, but instead of being forced to go out of business, you and I saved them.  Then, they are immediately back into the high-risk business, earn lots of money, and instead of offering a portion to the taxpayers, they just give themselves big bonuses. 

As Taibbi noted, first they cheat selling the mortgages, now they cheat foreclosing on those same mortgages.  Is there no justice?  [Sorry.  Silly question. Obviously there's no justice]

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12 Responses to Mortgage Fraud

  1. larry macdonald 11/12/2010 at 5:00 AM #

    Perhaps we won’t see the real healing until those who perpetrated the mess face retribution.

  2. Mark Wolfinger 11/12/2010 at 7:48 AM #

    Sounds right to me.
    Sadly it’s going to be up to Congress to get the ball rolling.

  3. rluser 11/13/2010 at 3:21 AM #

    Not only have the big banks committed outright fraud (and probably continue) but the small banks have. Is not this part of what drives small banks into large ones via the FDIC? The bluff is being called.
    That consolidation is most dangerous.
    I must take issue with the idea that the home “owner” is being excessively screwed by a roughshod foreclosure practice. What is happening in Florida (what about Nevada or California?) is almost certainly benefiting the wrong party, but I do not believe for a moment that the delinquent mortgager is the wronged party (except perhaps in an extreme minority of cases). If you fail to abide by your contract, you lose. It doesn’t matter that you were wrong (in your ideas/predictions) when you initiated the contract. Room for education always exists.
    There is plenty to be mad about amongst the banks (large and small), the other loan originators, the borrowers (yes), the ratings agencies, the congress critters (past and present), the fed, and the adminstrative branch (mostly past, but the present — such as it’s changed — fails to impress as well). I think the call to congress is premature: the Florida judiciary and then the Florida legislature can handle this particular issue. Nothing prevents Bill McCollum from getting the ball rolling.

  4. Mark Wolfinger 11/13/2010 at 7:54 AM #

    The homeowner who made a bad decision, bought more than he/she can afford, lied on the loan application or otherwise contributed to the fraud – is entitled to due process.
    I’m not suggesting they be allowed to keep their homes. But they should not be foreclosed upon without due process. This was once the land of the free and the home of the brave. And at one time, people and business conducted themselves ethically.
    I’m angry that these banks brought this country to its financial knees, escaped unscathed, and are back in business. That business includes taking unethical, against the law steps to make even more money. I resent that. I want to see every last person who is responsible for this to be in prison, but it’s not going to happen.
    Thanks

  5. Dave 11/14/2010 at 12:16 PM #

    There’s a lot of moving parts here. Personally I’m convinced that most people were offered mortgages that shouldn’t have existed… and that more often than not they lied to get them. Both sides of the transaction did wrong– and need to take responsibility for an unhappy ending.
    It’s terribly disappointing that “our” government is siding with big business instead of it’s citizens, or worse yet– that it even jumped into this mess to start with.
    But what really boils my blood is the head-in-the-sand attitude of the weak nipple suckling American that continues through their day seemingly oblivious to how this is all really unfolding. They seemed happy enough breaking the rules to get into a nice house– but are now frozen by the rules to let one of the biggest and most serious crimes ever perpetrated against them attempt to crawl under a rug– at their (and their children’s!) expense.
    Mark I applaud you for going OT with this on your blog. Until enough unhappy people stand up and say “bullshit on this” and stop being herded around like stupid sheep, we’re in r-e-a-l-l-y big trouble. And they have NO ONE to blame but themselves.

  6. Mark Wolfinger 11/14/2010 at 4:06 PM #

    Dave,
    Both sides did wrong. No disagreement there. Both lied on the application. Both were unethical.
    The homeowner is losing the house. Unless this was an interest only mortgage, the homeowner has lost all his/her equity. However, some were defrauded and not everyone lied on the mortgage application.
    The banks made money on the mortgage application and high interest rates. And now, they are taking a beating on the value of the home. However, they do not have to break the law to foreclose. I don’t see how Congress or the administration can watch this and do nothing – of yes. I forgot. Congress is owned by, and works for, the banks.
    I’m bitter that we bailed out the banks. I’m angry that failed businesses did not go out of business, as all failed enterprises must. I’m pissed that I must mark to the market, but the banks get excluded by those rules.
    Let’s face it. Most Americans are unwilling, perhaps even unable, to understand finances. They get into trouble. But banks are professionals. They knew the risks they were taking and this time they lost. That should be the end of the line for them.

  7. Dave 11/14/2010 at 4:50 PM #

    Yup. So what can we do? What should we do? What MUST we do? Vote? HAHAHA. I’m angry make that f’ing pissed off. And growing more cynical by the moment.
    The system is broken/ the patient is in very dire condition and, sadly, not even aware of it. Wanna fix it? How do you even imagine where to start? By making them aware? Nobody wants to hear it!
    There’s “public servants” running this country that were put in place by strong and special interests read big money. The only folks that could or might ever rise up (because they have so little to lose) are under heavy sedation with large government pacifiers jammed in their mouths.
    It’s a bitch, huh?

  8. Mark Wolfinger 11/14/2010 at 6:57 PM #

    Dave,
    In real terms, I see no possible solution.
    Banks are doing what they can to make money. That’s the American way. But now they got caught cheating. They’ve been caught before and rewarded – not punished. There is no lesson in that.
    My solution: Obama to recognize the truth and dump Geithner for an anti-Goldman Sachs treasury secretary. There is no chance of that.
    Alternative: Congress to refuse to partner these crooks any longer. No chance of that either.
    I must stop politics on this blog. There is nothing to be gained.

  9. chrisboerema@hotmail.com 11/15/2010 at 2:58 PM #

    Dear Mark,
    May I recommend the following book on the subject:
    “Freefall” by Joseph Stiglitz
    (the Nobelprice Laureate)
    Chapters 4 & 5 are heartwrenching.
    Thanks for your work Mark,
    Chris-O
    Holland.

  10. Mark Wolfinger 11/15/2010 at 3:24 PM #

    Chris,
    You may.
    Thanks

  11. best mortgage deals 12/01/2010 at 10:51 AM #

    The great part with this blog is it shows that a bank is always ready to help to the borrower and giving another option to their debts.

  12. Mark Wolfinger 12/01/2010 at 2:11 PM #

    I assume you mean the bank finds another way to overcharge the customer and steal his/her money