Some months ago, I started collecting newspaper reports around the country on the mounting evidence of fraudulent home foreclosures sought and sanctioned by banks and shady mortgage servicers. It’s now a voluminous file on my hard drive.
We’ve all read about the robo-signers, the private contractors banks hired to prepare foreclosure documents, ensuring, oh, you know, that the bank actually owned the home or even that the home the bank thinks it may own actually has a mortgage. The robo-signers, hired straight off the unemployment lines, were given titles of vice president and signed their names upwards of 5,000 times a day on pieces of paper affirming they had verified all the information contained in the files they never looked at.
Obviously, the goal was speed, not accuracy, and the mistakes would be comical if they weren’t so tragic … and so frequent.
Take, for example, the case of Dr. Alan Schroit, in Texas. Schroit returned from vacation to find the locks on his home had been changed and the electricity had been shut off by Bank of America. Two big problems. One, Schroit didn’t have a mortgage from Bank of America or anyone else; he owned his home free and clear. And two, Schroit had 75 pounds of salmon and halibut in his refrigerator and freezer when he left for vacation. When he returned, he had one big, smelly, wet mess on his damaged flooring.
Or take the case of a Northern California woman who returned home from a ski trip to discover her home had been broken into and stripped bare. Everything gone, including the ashes of her late husband. Turns out it wasn’t a burglar at all. It was her bank, even though she was near the end of finalizing a mortgage modification program and had made all the modified payments on time.
Remember the case of the woman who called “911” on her cell phone from her bathroom, believing her home was being invaded by burglars or worse? It was just the local, friendly mortgage service crew, believing the home was unoccupied, using a screw driver to break the lock.
The examples of illegal foreclosures uncovered in virtually every state in the union are so outrageous it seems certain that civil, if not criminal, charges would be forthcoming. The flagrant violations of law and civil processes that have occurred in the last two years are so egregious that all 50 state attorneys general filed suit to recover costs and impose penalties on banks and lenders. Judges have thrown out foreclosures and awarded damages to owners whose homes were wrongly seized. Some sheriffs have refused to participate in evictions without signed affidavits from bank presidents. Several state attorneys general are pushing for criminal prosecutions.
Even the banker’s best buddy, the Federal Reserve Board of Governors, issued a report last month saying the mortgage foreclosure problems were “significant and pervasive” adding up to “a pattern of misconduct and negligence.” (Not to mention breaking and entering, mind you.)
But in the Alice-In-Wonderland world of Washington, what’s illegal for the average Joe or Jane is just a clerical error with an unfortunate result for the monied special interests. The states’ investigations are now in a settlement phase and lobbyists and their apologists in D.C. are proving once again that when it comes to regulating the financial industry, regulators work for the banks, not the public.
As details of the negotiations leak out, the emphasis is shifting away from levying penalties or punishing wrongdoers to looking for ways to build consumer confidence in the housing market. Home prices are falling again after a period of resurgence, so now is just not a good time to hold banks accountable for fraud or incompetence.
Penalties now being discussed are so anemic that Moody’s Investor Services has predicted the fines will be “sizeable” but not enough “to meaningfully impact capital.”
Deja vu. That’ll sure do a lot for consumer confidence.