High Noon: Banks vs. The Law (Mortgage Foreclosures) – Part 3

Ok, continuing the series on the mortgage foreclosure crisis here. For background on the legal side of the problem see Part 1 and for a humorous look by Jon Stewart at the crisis see Part 2.

The banks are claiming that the problems are only paperwork glitches, that all the people being foreclosed on are in default and owe serious money, and that foreclosures will resume soon.  Kind of a “nothing to see here, move along” response.  This pitch is getting echoed by politicians, the Wall Street Journal (I don’t link to pay sites), and, of course, the banks.  The White House seems to be falling into line with their bosses, the banks, too.  From the New York Times (free registration may be required):

The industry has argued in response that problems should be addressed without halting all foreclosures, because a moratorium would damage the economy. “It must be recognized that the mortgage market, investors and the health of the economy are all interrelated,” Tim Ryan, president of the Securities Industry and Financial Markets Association, said Monday.

The White House shares those concerns, and it has tried to defuse the issue by arguing that problems can be addressed without imposing a moratorium.

“There are, in fact, valid foreclosures that probably should go forward,” David Axelrod, a senior White House adviser, said Sunday on CBS.

Administration officials argue in part that the problems that have emerged in recent weeks do not change the fact that lenders are seeking to foreclose on people who borrowed and then failed to repay. Most of the identified problems are best described as technicalities, not miscarriages of justice.

But we also know it’s patently false.  There are clear cases of erroneous foreclosures including, but not limited to these reported in the same Times article:

Advocates for homeowners, however, say that the pattern of sloppiness allows and encourages more serious abuses. They point to a growing number of documented cases in which lenders mistakenly seized homes.

Bank of America apologized last month for foreclosing on a home in Fort Lauderdale, Fla. The homeowner didn’t even have a mortgage. The bank had failed to notice that the previous owner had repaid the mortgage loan.

Last year the company’s contractors entered the home of a Pittsburgh woman, changed the locks, cut off the utilities and seized her pet parrot. The bank later acknowledged that the woman had not missed any mortgage payments.

Other companies including Citigroup and JPMorgan Chase also have apologized for mistaken attempts to seize homes they didn’t own.

Dozens of people have sued lenders charging that their homes were foreclosed even after the lender agreed to a loan modification or repayment plan.

I just don’t accept that foreclosing and seizing (really stealing) a house that DID  NOT HAVE A MORTGAGE is more than a “paperwork glitch”.  There’s much more to this crisis.


High Noon: Banks vs. The Law (Mortgage Foreclosures) – Part 2

So, just what is the “mortgage foreclosure crisis”?  One part, as suggested in part 1 of my “High Noon” series of posts on this issue is that the banks have lied in court in order to save money, cut corners, and rapidly foreclose on houses that they may or may not be able to prove they should be able to legally foreclose.  Part 1 suggested a political/legal crisis as we decide whether banks have to comply with laws and court procedures or not.

Now before I get into more explanation of the problems and potential risks to the economy from these foreclosure documentation problems, I want  to Jon Stewart give a quick overview of the problem. Unfortunately I can’t embed the video here (WordPress.com doesn’t have code for a Daily Show embed) so go here: http://www.thedailyshow.com/watch/thu-october-7-2010/foreclosure-crisis.

High Noon: Banks vs. The Law (Mortgage Foreclosures) – Part 1

In recent weeks a legal storm has begun to blow regarding mortgage foreclosures.  It seems that in the last decade, as banks and Wall Street rushed to push mortgages and borrowed money at any homeowner or wannabe homeowner who was breathing while simultaneously raising the money by pushing too-complex-to-understand Mortgage Backed Securities Trusts and bonds (MBS) on investors, the banks found it a bit inconvenient unprofitable to follow the detailed laws about recording mortgages and transferring notes.  Now, as homeowners have fallen behind in payments and the banks (through their mortgage servicer operations) have taken to foreclosing on properties in high volume.  Of course, there’s those nasty details about the notes not being recorded properly and the paper trail not being complete.  No problem for today’s super banks, though. They just lie.  That’s right, they’ve been caught, as in court testimony and TV interviews of their own mid-level managers.  Seems they sign and file affidavits claiming the “paper work is lost but don’t worry Mr. Judge, I know personally the facts of this case intimately and this is what they are”.  Except they sign these affidavits of “intimate knowledge” in high volume.  As in 10,000 per month or 1 every 1-2 minutes.  As Yves at Naked Capitalism recounts

Reader ella in comments provided a reminder:

An affidavit is a legal document which can substitute for live witness testimony in court. All testimony in court is governed by the rules of evidence or by statute. All testimony requires that the witness swears to tell the truth, is competent and has personal knowledge of the facts they are testifying about. An affidavit is no different, in most if not all jurisdictions; the affiant swears to tell the truth by being placed under oath by the notary, the affiant states in the affidavit that they were sworn, are competent and that they have personal knowledge of the facts in the affidavit. The notary attests to the oath of the affiant and that the affiant is who he claims to be.

If a witness lies in court or in an affidavit then they could be charged with perjury. Perjury is lying to the court.

The affidavit issue is being portrayed in the MSM at a paperwork problem. Lying to the court is not a paperwork problem. Attorneys are prohibited from making a material misrepresentation to the court of fact or law. Further, attorneys in most jurisdictions have an affirmative duty to report known perjury by their clients to the court.

The problem with the affidavits is perjury on behalf of the affiants and possibly the notaries depending on the notaries’ knowledge that the affiants had not reviewed the files, the promissory notes, the mortgages, or the records of default.

Further, you can reasonably argue that the entities pursuing foreclosure (banks or servicers) have perpetrated a fraud on the court by submitting perjured affidavits. If the attorneys representing the entities have knowledge of the fraud or are preparing questionable documents then they may also be involved and subject to penalties.

At the heart of any trial or hearing is the determination of the truth of the matter. It is the very purpose of the rules of evidence and what law and fact is presented to the court. If the affiants lied, as it appears, then the truth of whether they owned the note and held the mortgage and the borrower was in default is at issue. Courts, Attorneys General, and bar associations need to serious consider actions that will assure compliance with the rule of law.

This country cannot stand as a democracy if there is one set of law for the banks, corps, elites and another set of law for the rest of us. Perjury and fraud on the court is very serious matter. It is not a mere paperwork problem.

This doesn’t summarize all of the problems related to the growing foreclosure fraud crisis, but in my opinion, it’s one of the most significant.  These big banks have perpetrated, with intent and foreknowledge, fraud on our courts.  They have lied under oath.  They have perjured.  These are not “paperwork problems”.  These are crimes.  Not civil infractions. Not “misstatements”.  These are crimes.  Crimes that would see any individual put in jail.  The banks need to be held accountable. If not, then we do not have a viable legal system of “equal justice for all”.  If we don’t have that, we can’t have market capitalism.

More to come in future posts on this topic, because it is looming like a growing shadow over the economy.

Seems the Rich Default Even More

Well, so much for the idea that the foreclosure crisis is /was due to those “irresponsible low-income people buying stuff they can’t afford”.  It seems the rich are even less responsible:

the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.

More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.

Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.

“The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.

From the New York Times.