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The Arrogance of Money, Still

Imagine you were going to apply for something—food stamps, for example, or, to be timely, a mortgage modification.

Imagine saying to the person responsible, “I don’t really have all the documentation proving my identity, my address, my credit, or my income. It would have taken too long to gather it all. But I signed it. I qualify. Trust me.”

The only question is how many buildings away the laughter of the person you were taking to could be heard.

When I bought my house we spent dozens of hours tracking down a mysterious supposedly unpaid doctor bill from our college clinic on my partner’s credit card. We eventually begged someone to accept the money; it was later returned to us, but in the interim her credit record was clear.

(Granted, for a while there some mortgages were being offered “no doc” or “low doc,” but those were generally part of the whole fraudulent predatory lending scheme, and generally weren’t mortgages you really would have wanted anyway.)

I figure you can tell where I’m going with this. While measly individuals get kicked off of Medicaid for not crossing a “t” or dotting an “i,” banks were hiring people with no more qualifications than a willingness to risk carpel tunnel syndrome to robosign foreclosure paperwork—hundreds of cases a day, without doing any of the required review of the documents and confirmation that the procedures had been followed.

The banks, of course, are calling it all a technicality—procedural errors conducted by overeager managers trying to get things moving. But really, all those homeowners actually haven’t paid and are overdue to be kicked out, so no biggie. Give us a few weeks and we’ll have it all straightened out.

Even if they were just being lazy, this would be inexcusable. First, that excuse never works for people coming to those same banks with problems arising because, say, they didn’t have time in their busy lives to read the sneaky fine print on their credit card bills. Second, it has led to errors—the wrong people being foreclosed upon, etc. Not a large percentage, it’s true, but there is a reason you’re supposed to go over this paperwork. As Barry Ritholtz wrote on his Big Picture blog, from a highly conservative and capitalist perspective, this shakes the foundation of property rights in this country. Want it to break up the foreclosure bottleneck? Hire more people who know what they’re doing, have them do it right, and suck it up.

But even that is a smoke screen. As has been well explained by many (see Zach Carter on Huffington Post, Oct. 13, for example), the reason they were trying to push these things through without a thorough review of the documentation is they don’t have the documentation. In a large number of cases, they can’t prove that they have the right to foreclose on these homes.

When the financial world got caught up in the frenzy of securitizing crappy, fraudulent loans, slicing and dicing them, and representing ticking time bombs as good investments, they set it up so the paperwork didn’t move along with the ownership. They created an online database to circumvent following local rules about filing change-of-ownership paperwork. They created pass-through entities that weren’t allowed to own anything. They hid the original loan paperwork from the final investors because the original loan paperwork was chock full of fraud. The robosigning was just the latest step in covering that up.

The arrogance of those involved continues to be jaw-dropping.

And the worst part is, there’s no easy answer. It’s tempting to call for a simple moratorium on foreclosures, and say the banks have to pay the price for their risky behavior, even if it means letting large numbers of people who weren’t paying their questionable mortgages stay in their homes.

Unfortunately, a large number of buildings in foreclosure are already vacant and deteriorated. Many were owned by speculators in the first place. Halting the foreclosure process on those buildings will keep them in legal limbo and prevent other people (or nonprofits or local governments) from purchasing them before they fall apart further, and they will continue to drag down their surrounding neighborhoods, attracting criminal activity along the way, as well as dampening housing market recovery. Any response to this latest twist in the crisis has to treat abandoned buildings differently from those still occupied by people who care trying to fight for their homes.

But above all, it has to stop letting bankers treat themselves as above the law.

—Miriam Axel-Lute

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