It looks like mortgage foreclosure fraud has become a thing, and it’s about damn time:
Given that the IMF and others believe a large part of the “structural unemployment” in our country is related to the struggling housing market and underwater and barely-hanging on homeowners, what is to be done? One option is to allow for options like lien-stripping in bankruptcy courts, reseting mortgages by zip code, etc. Another option is for courts to accelerate foreclosures by ignoring due process, proper documentation and legal process in order to kick people out of their homes and preserve the value of senior tranches of RMBS [residential-mortgage-backed securities — Lex] while giving mortgage servicers a nice kickback.
What option do you think our country is taking?
We should all be very concerned about the foreclosure situation in Florida. If you are a homeowner or potential homeowner, you should find it offensive that people’s property rights are being violated in such a flagrant way. If you are an investor, either as “bond vigilante” or someone with a generic 401(k), you should be worried that servicers have gone rogue and the incentive structure to maximize value instead of fees associated with foreclosures has broken down.
And if you care about basic Western liberalism — the classical kind, with a Lockean understanding of freedom to own property along with freedoms of speech and religion — you should be pissed off. This is a clear-cut instance of the rich and powerful decimating other people’s property rights, rights that are supposed to protect the weak from the strong, in order to preserve their wealth and autonomy. Unless you think property rights are mere placeholders for whatever the financial sector demands are, this should be resisted. This should be viewed as a problem an order of magnitude larger than Kelo v. City of New London.
Funny, of course how you don’t seem to hear any of the people who were screaming so loudly about property rights after Kelo screaming about this. Well, except for me. Still …
The short problem is that banks are foreclosing without showing clear ownership of the property. In addition, “foreclosure mills” are processing 100,000s of foreclosures a month without doing any of the actual due diligence or legal legwork required for the state to justify the taking of property and putting people on the street. Even worse, many are faking documentation and committing other fraud in the process. The government is allowing this to happen both by not having courts block it from going forward, but also through purchasing the services of these mills. As Barney Frank noted: “Why is Fannie Mae using lawyers that are accused of regularly engaging in fraud to kick people out of their homes?”
And the worst part is the lack of conversation about this. Thanks to Yves Smith at naked capitalism for following this story from the get-go; her blog has become the place for anyone interested in this topic (that link is a catch-up post). The rest of the media is starting to catch up to where she was weeks ago.
Zero Hedge has been following this, too, although to nowhere near the depth of Smith. ZH reported that the Ohio Secretary of State has made a foreclosure-fraud referral to the U.S. Attorney for the Northern District of Ohio, seeking a criminal investigation and that Sen. Al Franken, D-Minn., has written to Fed chair Ben Bernanke, SEC chair Sheila Bair, and Attorney General Eric Holder, seeking same.
But that won’t have nearly as much effect, anywhere near as quickly, as this: companies that insure titles to property are getting the hell away from this stuff just as fast as they can.
This story cries out for a write-through. I may or may not have time to do one anytime soon. But if you don’t get it here, get it somewhere, because apparently bankster fraud has entered a whole new dimension.